SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)................. March 31, 1999
Aquis Communications Group, Inc.
(formerly known as Paging Partners Corporation)
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(Exact name of registrant as specified in its charter)
Delaware 1-13002 22-3281446
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1719A Route 10, Suite 300, Parsippany, NJ 07054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 560-8000..............
Paging Partners Corporation, Freehold Office Plaza, 4249 Route 9 North,
Building 2, Freehold, NJ 07728
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(Former name or former address, if changed since last report.)
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Item 1. Changes in Control of Registrant
On March 31, 1999, Paging Partners Merger Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Registrant, merged (the
"Merger") with and into Aquis Communications, Inc., a Delaware corporation
("Aquis"). The purpose of the Merger was to consolidate and combine the
respective businesses of the Registrant and Aquis in order to provide
their customers with a more complete product line, expand each company's
geographic area and realize efficiencies and economies of scale resulting
from the integration of the two companies' operations. The Registrant is a
provider of transmission services to resellers of paging services and
products in the Northeast. Aquis is a provider of paging services,
products and equipment to retail customers, as well as resellers, in the
mid-Atlantic region. As a result of the Merger, the former stockholders of
Aquis collectively acquired approximately 58.5% of the outstanding voting
securities of the Registrant and the Registrant amended its Certificate of
Incorporation to change its name from "Paging Partners Corporation" to
"Aquis Communications Group, Inc." Also in connection with the Merger, all
of the members of the Registrant's Board of Directors resigned and the
stockholders of the Registrant elected a new Board of Directors at a
Special Meeting of Stockholders (the "Special Meeting") held on March 29,
1999 for the purpose, among other things, of approving the Merger. As a
result of such election, the size of the Registrant's Board was increased
from five members to seven members. The Registrant's Board remains divided
into three classes as before the Merger. The following persons were
elected as Directors for the following terms:
Name Term
---- ----
Patrick M. Egan Three years
Leonard D. Fink Three years
Robert Davidoff Three years
Michael Salerno Two years
Monte Engler Two years
John X. Adiletta One year
John B. Frieling One year
In addition, as of the effective time of the Merger, all of the
executive officers of the Registrant resigned and Messrs. John X. Adiletta
and D. Brian Plunkett were appointed as President and Chief Executive
Officer and as Chief Financial Officer, Vice President, Treasurer and
Assistant Secretary, respectively.
Item 2. Acquisition or Disposition of Assets
See Item 1 above for a description of the transaction in which the
Registrant acquired all of the issued and outstanding capital stock of
Aquis Communications, Inc., a privately-owned Delaware corporation which
is now a wholly-owned subsidiary of the Registrant ("Aquis").
In connection with the Merger, Aquis entered into a First Amendment
to Loan Instruments (the "Amendment"), amending a certain Loan Agreement
(the "Loan Agreement") between Aquis, as Borrower, and FINOVA Capital
Corporation, as Agent for the various lenders ("FINOVA"), which Loan
Agreement provides for a credit facility in the total amount of
$30,000,000 (the "Credit Facility"). Concurrently with the Merger, Aquis
and FINOVA entered into an Equipment Lease pursuant to which Aquis
conveyed certain listed equipment to FINOVA and FINOVA leased said
equipment back to Aquis, and the Registrant executed a Guaranty
guarantying Aquis' obligations under the Equipment Lease. The Registrant
used the proceeds it received from FINOVA in connection with the Equipment
Lease to pay off approximately $1,400,000 of secured indebtedness owed by
the Registrant to Motorola, Inc. In addition, the Registrant executed a
Security Agreement granting a security interest in
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favor of FINOVA with respect to substantially all of the Registrant's
assets, a Pledge Agreement granting a pledge in favor of FINOVA with
respect to all of the capital stock of Aquis and executed a guaranty
guaranteeing Aquis' obligations under the Loan Agreement. As of the date
hereof, approximately $20,500,000 of the Credit Facility has been drawn
down and approximately $9,500,000 remains available.
Item 6. Resignations of Registrant's Directors
See Item 1 above. There were no disagreements between any of the
resigning directors and the Registrant on any matter relating to the
Registrant's operations, policies or practices.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Aquis. Incorporated by reference to
the Registrant's Proxy Statement, dated March 11, 1999, filed
with the Commission and included in Exhibit 99.1.
(b) Pro Forma Financial Information. Incorporated by reference to
the Registrant's Proxy Statement, dated March 11, 1999, filed
with the Commission and included in Exhibit 99.1.
99.1 Agreement and Plan of Merger, dated as of November 6, 1998, among
BAP Acquisition Corp. (now known as Aquis Communications, Inc.),
Paging Partners Corporation and Paging Partners Merger Corporation.
Incorporated by reference to the Registrant's Proxy Statement, dated
March 11, 1999, filed with the Commission and included herewith.
99.2 Loan Agreement, dated as of December 31, 1998, by and between Aquis
Communications, Inc. and FINOVA Capital Corporation as Agent.
99.3 Note, dated December 31, 1998, of Aquis Communications, Inc. in the
original principal amount of $30,000,000.
99.4 First Amendment to Loan Instruments, dated as of March 31, 1999, by
and between Aquis Communications, Inc. and FINOVA Capital
Corporation.
99.5 Guaranty (Equipment Lease), dated as of March 31, 1999, of Aquis
Communications Group, Inc.
99.6 Guaranty, dated as of March 31, 1999, of Aquis Communications Group,
Inc.
99.7 Security Agreement, dated as of March 31, 1999, executed by Aquis
Communications Group, Inc.
99.8 Pledge Agreement, dated as of March 31, 1999, executed by Aquis
Communications Group, Inc.
99.9 Equipment Lease, dated as of March 31, 1999, between Aquis
Communications, Inc. and FINOVA Capital Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AQUIS COMMUNICATIONS GROUP, INC.
(Registrant)
By: /s/ John X. Adiletta
--------------------------------------------
Name: John X. Adiletta
Title: President and Chief Executive Officer
PAGING PARTNERS CORPORATION
FREEHOLD OFFICE PLAZA
4249 ROUTE 9 NORTH, BUILDING 2
FREEHOLD, NEW JERSEY 07728
March 11, 1999
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of Paging Partners Corporation (the "Company") which will be
held at the Sheraton Parsippany in Parsippany, New Jersey on Monday, March 29,
1999 at 10:00 a.m. The attached Notice of Special Meeting of Stockholders and
Proxy Statement describes the business to be transacted at the Special Meeting.
You will be asked to vote on a number of matters, including but not limited
the approval of a merger agreement (the "Merger Agreement") with BAP Acquisition
Corp. (now known as Aquis Communications, Inc.) ("Aquis"). If the merger is
effected, then pursuant to the terms of the Merger Agreement, Aquis will become
a subsidiary of the Company and the stockholders of Aquis will own approximately
58.5% of the then outstanding shares of common stock of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN YOUR BEST INTERESTS
AND THE BEST INTERESTS OF THE COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT YOU VOTE "FOR" THE
ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL OF THE TRANSACTIONS
CONTEMPLATED THEREBY. A copy of the Merger Agreement is set forth as Exhibit A
to the Proxy Statement accompanying this letter.
It is important that your shares be represented at the Special Meeting
whether or not you are present. Please be sure to sign, date and mail the
enclosed Proxy Card in the postage-paid envelope provided -- even if you plan to
attend in person. If you sign, date and mail your proxy card without indicating
how you wish to vote, your proxy will be counted as a vote FOR the merger. If
you fail to return a properly executed proxy card, it will have the same effect
as a vote AGAINST the merger. YOUR VOTE IS VERY IMPORTANT.
If you attend the Special Meeting, you may vote in person even if you have
already mailed in your Proxy Card. For those of you who may wish to attend the
Special Meeting, the Sheraton Parsippany is located at Exit 41-A on I-287.
On behalf of the Board of Directors and all the employees of the Company, I
wish to thank you for your continued support.
Cordially,
/s/ Leonard D. Fink
Leonard D. Fink
Chairman of the Board
EVERY STOCKHOLDER'S VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR
PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
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PAGING PARTNERS CORPORATION
FREEHOLD OFFICE PLAZA
4249 ROUTE 9 NORTH, BUILDING 2
FREEHOLD, NEW JERSEY 07728
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of Paging Partners Corporation (the "Company") will be held at 10:00
a.m., local time, on Monday, March 29, 1999 at the Sheraton Parsippany in
Parsippany, New Jersey, for the following purposes:
1. To consider and vote upon a proposal to approve the merger (the
"Merger") of Paging Partners Merger Corporation, a wholly-owned subsidiary
of the Company ("Merger Sub"), with and into BAP Acquisition Corp. (now
known as Aquis Communications, Inc.) ("Aquis"), to adopt the Agreement and
Plan of Merger, dated as of November 6, 1998, relating thereto (the "Merger
Agreement"), and to approve the transactions contemplated by the Merger
Agreement. A copy of the Merger Agreement is set forth as Exhibit A to the
Proxy Statement accompanying this notice.
APPROVAL OF THE MERGER IS CONTINGENT UPON THE APPROVAL OF EACH OF PROPOSALS
1 THROUGH 7 (COLLECTIVELY, THE "MERGER PROPOSALS").
2. To approve a change of the Company's name to Aquis Communications
Group, Inc., in the event the Merger is approved.
3. To approve an increase in the number of authorized shares of the
Company's common stock, in the event the Merger is approved.
4. To approve up to a potential one-for-eight reverse stock split, in
the event the Merger is approved, pursuant to which up to every eight
shares of the Company's common stock issued and outstanding will become and
be exchanged for one share of the Company's common stock.
5. To approve certain amendments to the Company's 1994 Incentive Stock
Option Plan, in the event the Merger is approved.
6. To elect to the Board of Directors of the Company, the directors
set forth in the Merger Agreement, in the event the Merger is approved.
7. To approve the transfer of substantially all of the Company's
assets to the surviving corporation of the Merger, in the event the Merger
is approved.
8. To approve up to a potential one-for-four reverse stock split, in
the event the Merger is not approved, pursuant to which up to every four
shares of the Company's common stock issued and outstanding will become and
be exchanged for one share of the Company's common stock.
9. To elect two Class 1 directors, two Class 2 directors and one Class
3 director to the Board of Directors of the Company (the "Board of
Directors"), in the event the Merger is not approved, to serve for terms of
one year, two years and three years, respectively.
10. To ratify the selection by the Board of Directors of Berenson &
Company LLP as independent public accountants for the Company for the
fiscal year ending December 31, 1998.
11. To consider and act upon any other business that may properly come
before the Special Meeting or any adjournment or postponement thereof.
If the Merger Proposals are approved and the Merger is consummated, Merger
Sub will merge with and into Aquis, whereby Aquis will become a wholly-owned
subsidiary of the Company, and the stockholders of Aquis will own approximately
58.5% of the then outstanding shares of the Company's common stock. In
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accordance with the terms of the Merger Agreement, the Merger Proposals must be
adopted and approved by the affirmative vote of the holders of a majority of the
outstanding shares of the Company's common stock entitled to vote thereon at the
Special Meeting.
The Board of Directors has fixed the close of business on Wednesday,
February 17, 1999 as the record date for the determination of stockholders
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Shares of the Company's common stock can be
voted at the Special Meeting only if the holder is present at the Special
Meeting in person or by valid proxy. A copy of the Company's Annual Report on
Form 10-KSB is being mailed with this Notice and Proxy Statement on or about
March 15, 1999 to all stockholders of record on the record date.
By Order of the Board of Directors
/s/ Jeffrey M. Bachrach
Jeffrey M. Bachrach, Secretary
Freehold, New Jersey
March 11, 1999
<PAGE>
PAGING PARTNERS CORPORATION
FREEHOLD OFFICE PLAZA
4249 ROUTE 9 NORTH, BUILDING 2
FREEHOLD, NEW JERSEY 07728
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement (this "Proxy Statement") is being furnished to holders
(the "Company's Stockholders") of shares of common stock, par value $0.01 per
share (the "Company's Common Stock"), of Paging Partners Corporation (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company (the "Board of Directors") to be voted at a special
meeting of stockholders of the Company (the "Special Meeting"), which will be
held at 10:00 a.m., local time, on Monday, March 29, 1999 at the Sheraton
Parsippany in Parsippany, New Jersey. The purposes of the Special Meeting are as
follows:
1. To consider and vote upon a proposal to approve the merger (the
"Merger") of Paging Partners Merger Corporation, a wholly-owned subsidiary
of the Company ("Merger Sub"), with and into BAP Acquisition Corp. (now
known as Aquis Communications, Inc.) ("Aquis"), to adopt the Agreement and
Plan of Merger, dated as of November 6, 1998, relating thereto (the "Merger
Agreement"), and to approve the transactions contemplated by the Merger
Agreement. A copy of the Merger Agreement is attached hereto as Exhibit A
and is incorporated herein by reference.
APPROVAL OF THE MERGER IS CONTINGENT UPON THE APPROVAL OF EACH OF PROPOSALS
1 THROUGH 7 (COLLECTIVELY, THE "MERGER PROPOSALS").
2. To approve a change of the Company's name to Aquis Communications
Group, Inc., in the event the Merger is approved.
3. To approve an increase in the number of authorized shares of the
Company's common stock, in the event the Merger is approved.
4. To approve up to a potential one-for-eight reverse stock split, in
the event the Merger is approved, pursuant to which up to every eight
shares of the Company's common stock issued and outstanding will become and
be exchanged for one share of the Company's common stock.
5. To approve certain amendments to the Company's 1994 Incentive Stock
Option Plan, in the event the Merger is approved.
6. To elect to the Board of Directors of the Company, the directors
set forth in the Merger Agreement, in the event the Merger is approved.
7. To approve the transfer of substantially all of the Company's
assets to the surviving corporation of the Merger, in the event the Merger
is approved.
8. To approve a potential one-for-four reverse stock split, in the
event the Merger is not approved, pursuant to which every four shares of
the Company's Common Stock issued and outstanding will become and be
exchanged for one share of the Company's Common Stock (the "Reverse Split
Proposal").
9. To elect two Class 1 directors, two Class 2 directors and one Class
3 director to the Board of Directors of the Company (the "Board of
Directors"), in the event the Merger is not approved, to serve for terms of
one year, two years and three years, respectively (the "Director
Proposal").
10. To ratify the selection by the Board of Directors of Berenson &
Company LLP as independent public accountants for the Company for the
fiscal year ending December 31, 1998 (the "Accountants Proposal").
<PAGE>
11. To consider and act upon any other business that may properly come
before the Special Meeting or any adjournment or postponement thereof.
If the Merger Proposals are approved and the Merger is consummated, Merger
Sub will merge with and into Aquis, whereby Aquis will become a wholly-owned
subsidiary of the Company, and the stockholders of Aquis will own approximately
58.5% of the then outstanding shares of the Company's Common Stock. In
accordance with the terms of the Merger Agreement, the Merger Proposals must be
adopted and approved by the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock entitled to vote thereon at the
Special Meeting.
THE BOARD OF DIRECTORS HAS ADOPTED AND APPROVED EACH OF THE MERGER
PROPOSALS, THE REVERSE SPLIT PROPOSAL, THE DIRECTOR PROPOSAL AND THE ACCOUNTANTS
PROPOSAL, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE (i) FOR EACH OF
THE MERGER PROPOSALS, (ii) FOR THE REVERSE SPLIT PROPOSAL (IF THE MERGER
PROPOSALS ARE NOT APPROVED), (iii) FOR THE DIRECTOR PROPOSAL (IF THE MERGER
PROPOSALS ARE NOT APPROVED) AND (iv) FOR THE ACCOUNTANTS PROPOSAL.
ALL INFORMATION PERTAINING TO THE COMPANY CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT HAS BEEN FURNISHED BY THE COMPANY, AND ALL
INFORMATION PERTAINING TO AQUIS CONTAINED IN THIS PROXY STATEMENT HAS BEEN
FURNISHED BY AQUIS.
This Proxy Statement and the accompanying form of proxy are first being
mailed to the Company's Stockholders on or about March 15, 1999.
The date of this Proxy Statement is March 11, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SPECIAL MEETING
Date, Time, Place and Purpose............................. 1
Record Date; Voting Rights; Proxies....................... 1
Solicitation of Proxies................................... 2
Quorum.................................................... 2
Required Vote............................................. 2
PROPOSAL NO. 1: THE MERGER.................................. 3
Background of the Merger.................................. 3
Bell Atlantic Acquisition................................. 4
Recommendation of the Board of Directors; Reasons for the
Merger................................................. 5
Effects of the Merger on the Company's Financial Condition
and Results of Operations.............................. 5
Terms of the Merger Agreement............................. 6
Certain Federal Income Tax Consequences................... 12
Accounting Treatment of the Merger........................ 13
Appraisal Rights.......................................... 13
The Voting and Cooperation Agreement...................... 13
Interests of Certain Persons in the Merger................ 13
Federal Securities Law Consequences....................... 14
Amendments to the Company's Certificate of
Incorporation.......................................... 14
Information Incorporated by Reference..................... 15
Market Price of the Company's Common Stock................ 15
Vote Required............................................. 15
BUSINESS OF AQUIS........................................... 16
General................................................... 16
Properties................................................ 16
Legal Proceedings......................................... 17
AQUIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF BAPCO'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 17
COMPARATIVE RIGHTS OF THE COMPANY'S STOCKHOLDERS AND AQUIS
STOCKHOLDERS.............................................. 23
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS....... 26
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS................................................ 29
PROPOSAL NO. 2: COMPANY NAME CHANGE......................... 31
PROPOSAL NO. 3: INCREASE OF AUTHORIZED SHARES OF COMMON
STOCK..................................................... 31
PROPOSAL NO. 4: REVERSE STOCK SPLIT......................... 32
PROPOSAL NO. 5: AMENDMENTS TO THE 1994 INCENTIVE STOCK
OPTION PLAN............................................... 34
PROPOSAL NO. 6: ELECTION OF DIRECTORS....................... 36
PROPOSAL NO. 7: TRANSFER OF THE COMPANY'S ASSETS............ 38
PROPOSAL NO. 8: THE REVERSE SPLIT PROPOSAL.................. 39
</TABLE>
i
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<TABLE>
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PAGE
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PROPOSAL NO. 9: THE DIRECTOR PROPOSAL....................... 40
Nominees for Election to the Board........................ 40
Vote Required............................................. 41
Information Concerning the Board of Directors and its
Committees............................................. 42
Compensation of Directors................................. 42
Section 16(a) Beneficial Ownership Reporting Compliance... 42
COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS............ 43
Executive Officers........................................ 43
Executive Compensation.................................... 43
Repricing of Options...................................... 44
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements......................... 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 50
PROPOSAL NO. 10: ACCOUNTANTS PROPOSAL....................... 50
OTHER MATTERS............................................... 50
STOCKHOLDER PROPOSALS....................................... 50
INDEX TO FINANCIAL STATEMENTS............................... F-1
EXHIBIT A -- Agreement and Plan of Merger................... A-1
EXHIBIT B -- Company's Form 10-KSB for the Year Ended
December 31, 1998......................................... B-1
</TABLE>
ii
<PAGE>
SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
The Special Meeting will be held on Monday, March 29, 1999 at 10:00 a.m.,
local time, at the Sheraton Parsippany in Parsippany, New Jersey, or at any
postponement or adjournment thereof, to consider and vote upon each of the
Merger Proposals, the Reverse Split Proposal (if the Merger Proposals are not
approved), the Director Proposal (if the Merger Proposals are not approved) and
the Accountants Proposal.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS ADOPTED AND APPROVED EACH OF
THE MERGER PROPOSALS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR"
EACH OF THE MERGER PROPOSALS AT THE SPECIAL MEETING. THE APPROVAL OF THE MERGER
IS CONTINGENT UPON THE APPROVAL OF ALL OF THE MERGER PROPOSALS. IN THE EVENT
EACH OF THE MERGER PROPOSALS ARE NOT APPROVED, THE BOARD OF DIRECTORS HAS
ADOPTED AND APPROVED THE REVERSE SPLIT PROPOSAL AND THE DIRECTOR PROPOSAL AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" THE REVERSE SPLIT PROPOSAL
AND THE DIRECTOR PROPOSAL. IN ANY EVENT, THE BOARD OF DIRECTORS HAS ADOPTED AND
APPROVED THE ACCOUNTANTS PROPOSAL AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
VOTE "FOR" THE ACCOUNTANTS PROPOSAL.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors has fixed the close of business on Wednesday,
February 17, 1999 as the record date (the "Record Date") for determining holders
entitled to notice of and to vote at the Special Meeting.
As of the Record Date, there were 6,326,804 shares of the Company's Common
Stock issued and outstanding, each of which entitles its holder to one vote. All
shares of the Company's Common Stock outstanding as of the Record Date
represented by properly executed proxies, unless such proxies have been
previously revoked, will be voted in accordance with the instructions indicated
in such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF THE COMPANY'S
COMMON STOCK WILL BE VOTED IN FAVOR OF (1) APPROVAL OF EACH OF THE MERGER
PROPOSALS, (2) APPROVAL OF THE REVERSE SPLIT PROPOSAL (IF THE MERGER PROPOSALS
ARE NOT APPROVED), (3) APPROVAL OF THE DIRECTOR PROPOSAL (IF THE MERGER
PROPOSALS ARE NOT APPROVED) AND (4) APPROVAL OF THE ACCOUNTANTS PROPOSAL. The
Company does not know of any matters other than as set forth herein that are to
come before the Special Meeting. If any other matter or matters are properly
presented for action at the Special Meeting, the persons named in the enclosed
form of proxy will have the discretion to vote on such matters in accordance
with their best judgment, unless such authorization is withheld. A stockholder
who has given a proxy may revoke it at any time prior to its exercise by giving
written notice of revocation bearing a later date to the Secretary of the
Company, by signing and returning a later-dated proxy with respect to the same
shares, or by attending and voting in person at the Special Meeting. However,
mere attendance at the Special Meeting will not in and of itself have the effect
of revoking the proxy.
If the Special Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Special Meeting all proxies (except for any
proxies that have theretofore effectively been revoked or withdrawn) will be
voted in the same manner as such proxies would have been voted at the original
convening of the Special Meeting, notwithstanding that such proxies may have
been effectively voted on the same or any other matter at a previous meeting.
Votes cast by proxy or in person at the Special Meeting will be tabulated
by the election inspectors appointed for the meeting who will determine whether
or not a quorum is present. Shares represented by proxies that are marked
"abstain" will be counted as shares present for purposes of determining the
presence of a quorum on all matters. Brokers holding shares for beneficial
owners in "street name" must vote those shares according to specific
instructions they receive from the owners. However, brokers have discretionary
1
<PAGE>
authority to vote on "routine" matters. Absent specific instructions from the
beneficial owners in the case of "non-routine" matters, the brokers may not vote
the shares. "Broker non-votes" result when brokers are precluded from exercising
their discretion on certain types of proposals. Other than the Merger Proposals
and the Reverse Split Proposal, all of the matters being proposed at the Special
Meeting are "routine" matters. Shares that are voted by brokers on some but not
all of the matters will be treated as shares present for purposes of determining
the presence of a quorum on all matters, but will not be treated as shares
entitled to vote at the Special Meeting on those matters as to which
instructions to vote is not provided by the owner. Pursuant to the Company's
Bylaws, abstentions and "broker non-votes" are counted only for the purpose of
determining whether a quorum is present. Therefore, a properly executed proxy
marked "ABSTAIN" (or an abstention at the Special Meeting) and shares
represented by "broker non-votes" will be counted for purposes of determining
whether there is a quorum at the Special Meeting but will have no effect on the
approval of the Reverse Split Proposal, the Director Proposal or the Accountants
Proposal. However, pursuant to the terms of the Merger Agreement, with respect
to the Merger Proposals, abstentions and "broker non-votes" will have the effect
of a vote against the approval of such proposals.
SOLICITATION OF PROXIES
The cost of solicitation of proxies for the Special Meeting will be paid by
the Company. In addition to solicitation by mail, proxies may be solicited in
person by directors, officers and employees of the Company or the Company's
financial advisors, without additional compensation, and by telephone, telegram,
teletype, facsimile or similar method. The Company will reimburse brokers,
fiduciaries, custodians and other nominees for reasonable out-of-pocket expenses
incurred in sending this Proxy Statement and other proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners of the
Company's Common Stock.
The Company will bear the cost of solicitation of proxies and has retained
Georgeson & Co., to aid in the distribution of the proxy materials at an
estimated cost of $6,500 plus reimbursement of reasonable out-of-pocket
expenses. The Company will reimburse brokers, banks and others who are record
holders of the Company's Common Stock for reasonable expenses incurred in
obtaining voting instructions from the beneficial owners thereof.
QUORUM
The presence in person or by properly executed proxy of holders
representing a majority of the issued and outstanding shares of the Company's
Common Stock entitled to vote is necessary to constitute a quorum for the
transaction of business at the Special Meeting.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock entitled to vote is required to approve the Merger
Proposals. In the event each of the Merger Proposals are not approved, the
Merger will not be approved but the Company's Stockholders will nevertheless be
asked to consider and vote on the Reverse Split Proposal and the Director
Proposal. Approval of the Reverse Split Proposal requires the affirmative vote
of a majority of the outstanding shares of Common Stock cast at the Special
Meeting. Approval of the Director Proposal requires the affirmative vote of a
plurality of the votes cast at the Special Meeting. The Company's Stockholders
will also, in any event, be asked to consider and vote for the Accountants
Proposal. Approval of the Accountants Proposal requires the affirmative vote of
a majority of the outstanding shares of Common Stock cast at the Special
Meeting.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE COMPANY'S STOCKHOLDERS. ACCORDINGLY, THE COMPANY'S STOCKHOLDERS ARE URGED
TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
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PROPOSAL NO. 1
THE MERGER
BACKGROUND OF THE MERGER
In early 1998, Leonard Fink, the Chairman of the Board of Directors,
learned from contacts in the industry that Bell Atlantic was considering a sale
of its paging business. In March 1998, John Adiletta, one of the principals of
Aquis, informed Mr. Fink that Mr. Adiletta was putting together a group who
would be interested in providing equity to fund an acquisition of the paging
business of Bell Atlantic. He mentioned that if his group were successful in
consummating such acquisition, they would be interested in exploring the
feasibility of a strategic business combination with the Company. Mr. Fink
indicated a general interest in exploring the possibility of such a transaction
and agreed to meet at a future date to discuss the same.
At a meeting later in March, Mr. Adiletta told Mr. Fink that the equity
funding sources were committed, that he had arranged for long-term financing and
that he believed he was near an agreement with Bell Atlantic to purchase its
paging business. Mr. Adiletta suggested that if possible he would like to
consummate the merger transaction with the Company concurrently with the closing
of the Bell Atlantic transaction. Mr. Fink expressed his belief that it was
premature to enter into any confidentiality agreements or merger discussions
with Mr. Adiletta's group until Aquis' agreement with Bell Atlantic was
finalized. Mr. Fink asked Mr. Adiletta to keep him informed of any progress made
on the Bell Atlantic deal.
On June 16, 1998, at a meeting between Messrs. Fink and Adiletta, Mr.
Adiletta stated that he was very close to signing an agreement with Bell
Atlantic to purchase its paging business. At that point, Mr. Adiletta briefly
described the transaction, who his equity partners were and what his financing
commitments were. After his description, they briefly discussed the possible
terms of a merger with the Company.
On July 6, 1998, the Board of Directors of the Company met to discuss the
possibilities of merging with Aquis. Monte Engler recused himself from these
discussions in light of the possible conflicts of interest arising out of his
recent legal representation of Aquis, on the one hand, and his long term legal
representation of the Company and membership on the Board of Directors of the
Company, on the other hand. At that meeting, Mr. Adiletta, Patrick Egan and John
Frieling, as representatives of Aquis, made a detailed presentation concerning
Aquis' acquisition of Bell Atlantic and Aquis' objectives. As a result of this
meeting, the parties concluded that there was sufficient mutual interest to
discuss further the possibility of a transaction. In furtherance of such
objective, the Board of Directors formed a negotiations committee, consisting of
Robert Davidoff and Rochelle King, to enter into more formal discussions with
Aquis.
On July 13, 1998, the Board of Directors met to discuss the offer made by
Aquis to merge the two companies. At that meeting it was agreed that continuing
discussions with Aquis were in the best interests of the Company and that
further discussions need to be had regarding the terms of the transaction, such
as the equity split, transition issues and the equity infusion assured by Aquis.
Over the next several months, discussions were held between the
representatives and advisors of the Company and Aquis regarding the structure
and terms of the transaction until an acceptable merger agreement was agreed to.
On October 5, 1998, at a meeting of the Board of Directors, the negotiation
committee described to the entire Board what the terms of the tentative
agreement with Aquis were. After much deliberation and due consideration, the
Board of Directors (with Mr. Engler abstaining) approved the basic terms of the
Merger and authorized the transaction on such terms. The Board of Directors also
authorized the Company's officers to finalize the terms of the transaction and
to execute the Merger Agreement.
On November 4, 1998, the Board of Directors held a telephonic meeting, at
which time the Board (with Mr. Engler abstaining) approved and ratified the
final terms of the Merger Agreement.
On November 6, 1998, the Merger Agreement in the form attached as Exhibit A
to this Proxy Statement was executed by the respective parties.
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BELL ATLANTIC ACQUISITION
The following is a brief summary of certain provisions of the Bell Atlantic
Acquisition Agreement (as defined below), which summary is qualified in its
entirety by the actual text of such agreement. The Company will make available
for review a copy of such agreement and exhibits thereto to any of the Company's
Stockholders upon receipt from any such person of a written request to do so.
Such requests should be sent to the Company at Paging Partners Corporation,
Freehold Office Plaza, 4249 Route 9 North, Building 2, Freehold, New Jersey
07728, Attention: Jeffrey Bachrach. The Bell Atlantic Closing (as defined below)
occurred on December 31, 1998.
Pursuant to the Asset Purchase Agreement, dated as of July 2, 1998 (the
"Bell Atlantic Acquisition Agreement"), by and among Aquis and the sellers named
therein (the "Bell Atlantic Subsidiaries"), Aquis acquired the licenses and
other assets and assumed certain liabilities relating to the paging business of
the Bell Atlantic Subsidiaries (the "Bell Atlantic Paging Business"), upon the
terms and subject to the conditions specified in the Bell Atlantic Acquisition
Agreement (such acquisition being hereinafter referred to as the "Bell Atlantic
Acquisition").
The purchase price for the Bell Atlantic Paging Business was $28,020,495
(the "Purchase Price"), which is subject to minor adjustments. $1,400,000 of the
Purchase Price is being held in an escrow account in connection with certain
indemnification obligations of the Bell Atlantic Subsidiaries. Aquis financed
the Purchase Price by (i) a loan from Finova Capital Corporation in the
principal amount of $18,535,095 (the "Finova Note"), (ii) cash equity in the
amount of $5,335,400 and (iii) notes delivered to holders designated by the Bell
Atlantic Subsidiaries in the aggregate principal amount of $4,150,000 (the
"Aquis Notes"). The Finova Note is for a term of five years and has an interest
rate equal to the corporate base rate published by Citibank, N.A. plus a margin
rate equal to one and three quarters percentage points. Such base rate and
margin rate are subject to change depending on Aquis' operating cash flow. The
Aquis Notes are for a term of five years and have an interest rate of one
percentage point above the base rate published by Chase Bank or other bank
agreed to by Aquis and the Bell Atlantic Subsidiaries.
Pursuant to the terms of the Bell Atlantic Acquisition Agreement, (i) Aquis
was obligated to and did offer employment to at least 90% of the employees of
Bell Atlantic Paging, Inc. ("BAPCO"), excluding certain specified employees
retained by BAPCO, on terms and conditions substantially comparable to their
respective terms of employment as of the closing of the Bell Atlantic
Acquisition (the "Bell Atlantic Closing"), (ii) Aquis is obligated to maintain
agreed upon benefits which are substantially comparable to the benefits which
were available to such employees when employed by BAPCO for at least 18 months
following the date of the Bell Atlantic Closing, (iii) except as permitted under
a reseller agreement entered into between Aquis and Bell Atlantic Mobile
("BAM"), for a period of 18 months after the date of the Bell Atlantic Closing,
BAPCO is obligated not to and will cause BAM not to directly solicit paging
business from any of the customers whose accounts are being transferred to
Aquis, and (iv) Aquis is obligated to remove the Bell Atlantic mark and logo
from all pagers in inventory within 60 days of the Bell Atlantic Closing and
shall use commercially reasonable efforts to remove such marks and logos from
all leased pagers. Aquis is not receiving any right, title or interest
whatsoever in or to the Bell Atlantic mark.
Pursuant to the terms of the Bell Atlantic Acquisition Agreement, the Bell
Atlantic Subsidiaries agreed to indemnify Aquis and its directors, officers and
employees (collectively, the "Aquis Indemnitees") against losses as a
consequence of or relating to or arising out of certain acts, omissions or
occurrences, including the failure or breach of a representation, warranty,
covenant or agreement made by the Bell Atlantic Subsidiaries or certain
liabilities retained by the Bell Atlantic Subsidiaries. Aquis agreed to
indemnify the Bell Atlantic Subsidiaries, their affiliates, and their respective
directors, officers and employees against losses as a consequence of or relating
to or arising out of (i) the failure or breach of a representation, warranty,
covenant or agreement made by Aquis, (ii) certain liabilities assumed by Aquis,
(iii) certain claims made by transferred employees and (iv) the conduct of the
Bell Atlantic Paging Business after the Bell Atlantic Closing. The Bell Atlantic
Subsidiaries are not required to indemnify the Aquis Indemnitees until the
amount of the losses exceeds $400,000 (in which case the Bell Atlantic
Subsidiaries will be liable for all losses to the extent they are in excess of
$400,000), and in no event will the liability be greater than the Purchase
Price.
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RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors has carefully considered the terms of the proposed
Merger, has determined that the Merger is in the best interests of the Company
and the Company's Stockholders, has approved the Merger, and recommends that the
Company's Stockholders vote "FOR" the approval of the Merger. For a discussion
of the interest of the members of the Board of Directors in the Merger, see
"-- Interests of Certain Persons in the Merger."
The Board of Directors believes that the Merger provides the Company's
Stockholders with an opportunity to participate in a business enterprise
covering a larger geographic area with a more diverse customer base and a more
complete product line than either the Company or Aquis has standing alone. The
Company's and Aquis' businesses strongly complement one another. In particular,
the Company believes that Aquis' established base of customers, particularly in
the direct sales segment of the market, and experienced sales and customer
service staff will complement the business of the Company.
The Board of Directors believes that the Merger offers significant
opportunities to accelerate the respective business plans of the Company and
Aquis, to realize efficiencies and economies of scale by integrating the
operations of the Company and Aquis and to create an enterprise with the added
competitive strength required by the increasing consolidation of the paging
industry. The Board of Directors believes that the combined entity will be able
to provide customers with a more complete product line and will be better
positioned to take advantage of new opportunities and to meet competitive
challenges than either the Company or Aquis would on a stand-alone basis.
In reaching its decision to approve the Merger and to recommend that the
Company's Stockholders vote to approve the Merger Proposals, the Board of
Directors considered a number of factors, including, without limitation, the
following: (i) current industry, economic and market conditions, (ii)
information concerning the Company's and Aquis' respective businesses, assets,
management, competitive position and prospects; (iii) the different geographic
coverage of and potential cross-selling of services with Aquis' customer base;
(iv) the potential efficiencies, elimination of redundancies, economies of scale
and other synergies that may be realized as a result of the combination of the
Company's and Aquis' operations; (v) the terms of the Merger Agreement; and (vi)
the enhancement of the strategic and market position of the Company beyond that
achievable by the Company alone.
The foregoing discussion of the information and factors considered by the
Board of Directors is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Board of
Directors did not find it practicable to, and did not quantify or otherwise
assign relative weights to, the specific factors considered in reaching its
determination. In addition, individual members of the Board of Directors may
have given different weights to different factors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE MERGER. NOTWITHSTANDING THE VOTE ON THIS PROPOSAL, HOWEVER,
APPROVAL OF THE MERGER IS CONTINGENT ON THE APPROVAL OF EACH OF THE MERGER
PROPOSALS.
EFFECTS OF THE MERGER ON THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company believes that the interest expense on Aquis' debt and the
increased depreciation and amortization on the combined entity's fixed and
intangible assets arising from the purchase accounting step-up will, in the
near-term, have a negative impact on the Company's results of operations
post-Merger. Nevertheless, management expects that the overall financial
condition of the Company should improve as a result of the Merger for a number
of reasons.
The combined company will have more than twice the number of paging units
and three times the service revenue of the Company's present business. Second,
as the paging industry matures and consolidates (both of which trends have been
accelerating the past few years), larger providers have many opportunities to
combine and centralize previously widespread operations, thereby driving their
costs down and spreading the remaining costs over a larger number of paging
units.
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In addition, by utilizing the Company's existing paging networks and
interconnection arrangements, the combined entity will be able to reduce its
costs paid to other carriers for services which Aquis cannot presently provide
due to geographic coverage limitations or frequency incompatibility. Management
also believes that Aquis' existing organization can absorb responsibility for
many functions, particularly senior management, currently performed by the
Company's employees.
Furthermore, in connection with the Company's highest-margin service,
alphanumeric (text) paging, the Company competes with an increasing number of
inexpensive wireless phone services with advanced features. While the market for
alphanumeric paging service is still expanding, management believes that
corporate customers derive the most value-added from this service and are more
likely to purchase paging services (and other data transmission services) from a
paging carrier that sells the services directly (such as Aquis) than from the
resellers who comprise the Company's present customer base.
Management also believes that financial analysts, who influence equity
valuations and the availability of debt, base their analyses on earnings before
interest, taxes, depreciation and amortization (EBITDA), a common financial
benchmark in the wireless industry, which excludes items discussed above which
are expected to decrease the Company's reported results of operations. Thus,
such financial analysts may look favorably at the combined company's financial
position. Additionally, if Aquis consummates further acquisitions as it plans,
the benefits described above will be accelerated.
TERMS OF THE MERGER AGREEMENT
The following discussion summarizes the material terms of the Merger
Agreement but does not purport to be a complete statement of all provisions of
the Merger Agreement and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement as Exhibit A and
incorporated herein by reference. Stockholders are urged to read the Merger
Agreement carefully as it is the legal document that governs the Merger.
The Merger. Subject to the terms and conditions of the Merger Agreement,
Merger Sub will merge with and into Aquis at the Effective Time. Following the
Merger, the separate corporate existence of Merger Sub will cease, and Aquis
will continue as the Surviving Corporation under the name "Aquis Communications,
Inc."
Conversion of Aquis Common Stock in the Merger. At the Effective Time by
virtue of the Merger and without any action on the part of the holder thereof,
each share of common stock of Aquis ("Aquis Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares of Aquis
Common Stock owned by the Company or its subsidiaries or held by Aquis in its
treasury, all of which shall be canceled, or as to which appraisal has been
properly demanded) will be converted into the right to receive 88.92076 (the
"Conversion Number") shares of the Company's Common Stock, subject to adjustment
(the "Merger Shares").
Closing. The closing of the Merger (the "Merger Closing") will take place
at a mutually agreed upon time, but in any event within five business days,
after the satisfaction or waiver of the conditions (excluding conditions that,
by their terms, cannot be satisfied until the date of the Merger Closing (the
"Closing Date")) set forth in the Merger Agreement.
Effective Time of the Merger. As soon as practicable following the
satisfaction (or waiver) of all of the conditions to the Merger, the Company and
Aquis will file a certificate of merger in such form as is required by and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law ("DGCL") and make all other filings or recordings required under
the DGCL. The Merger will become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware or at
such subsequent time as the Company and Aquis agree and specify in the
certificate of merger (the "Effective Time").
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
Merger Agreement provides that the certificate of incorporation and bylaws of
Aquis, as in effect at the Effective Time, will be the
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certificate of incorporation and bylaws, respectively, of the surviving
corporation of the Merger (the "Surviving Corporation").
Directors and Officers of the Surviving Corporation. The Merger Agreement
provides that the directors and officers of Aquis immediately prior to the
Effective Time shall resign effective as of the Effective Time and shall be
replaced by the individuals specified in the Merger Agreement, who shall serve
as directors and officers of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
Exchange of Certificates. At or prior to the Effective Time, the Company
will deposit with an exchange agent to be selected (the "Exchange Agent"), in
trust for the benefit of the stockholders of Aquis (the "Aquis Stockholders"),
certificates representing the Merger Shares. Any certificates of the Company's
Common Stock deposited with the Exchange Agent are referred to as the "Exchange
Fund."
After the Effective Time, each Aquis Stockholder will surrender his
certificates representing shares of outstanding Aquis Common Stock ("Aquis
Certificates") duly endorsed in proper form for transfer to the Exchange Agent,
together with his federal taxpayer identification number, and the holder of such
Aquis Certificates will be entitled to receive in exchange therefor shares of
the Company's Common Stock representing, in the aggregate, the whole number of
shares that such holder has the right to receive pursuant to the Merger
Agreement.
No dividends or other distributions declared or made with respect to shares
of the Company's Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Aquis Certificate with respect to the
shares of the Company's Common Stock that such holder would be entitled to
receive upon surrender of such Aquis Certificate, until such holder shall
surrender such Aquis Certificate in accordance with the exchange procedures set
forth in the Merger Agreement. Subject to the effect of applicable laws,
following surrender of any such Aquis Certificate, there shall be paid to such
holder of Merger Shares, without interest, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such Merger Shares.
Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Aquis Certificates for one year after
the Effective Time will be delivered to the Surviving Corporation and any
holders of the Aquis Certificates will thereafter look only to the Surviving
Corporation for the Merger Shares.
No Fractional Shares. No certificates or scrip representing fractional
shares of the Company's Common Stock will be issued upon the surrender for
exchange of Aquis Certificates. Each Aquis Stockholder will receive (after
taking into account all Aquis Certificates delivered by such holder), in lieu of
fractional shares, a number of shares of the Company's Common Stock rounded to
the nearest whole number (with any fraction greater than or equal to one-half
being rounded up).
Registration Rights. Pursuant to the Merger Agreement, the Company will
provide the holders of the Merger Shares (and certain Company Stockholders) with
certain rights to register the resale of such shares under the Securities Act of
1933, as amended (the "Securities Act"), as set forth in the registration rights
agreement attached as an exhibit to the Merger Agreement (the "Registration
Rights Agreement"). See "-- Federal Securities Law Consequences."
Representations and Warranties. The Merger Agreement contains various
representations and warranties of Aquis, the Company and Merger Sub. In the
Merger Agreement, Aquis represents and warrants to the Company and Merger Sub as
to, among other things: (i) due organization, standing and power; (ii) due
authorization, (iii) capital structure; (iv) no prior activities; (v) to the
best of Aquis' knowledge the representations and warranties of the Bell Atlantic
Subsidiaries in the Bell Atlantic Acquisition Agreement; (vi) commitments for
financing; (vii) consents and approvals; (viii) non-contravention with
organizational documents, contracts and laws; (ix) brokers' or finders' fees and
(x) certain information supplied by Aquis for inclusion in this Proxy Statement.
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In the Merger Agreement, the Company and Merger Sub represent and warrant
to Aquis as to, among other things: (i) due organization, standing and power;
(ii) due authorization; (iii) capital structure; (iv) no prior activities by
Merger Sub; (v) consents and approvals; (vi) non-contravention with
organizational documents, contracts and laws; (vii) financial statements; (viii)
FCC licenses; (ix) material contracts; (x) brokers' or finders' fees; (xi)
compliance as to form of this Proxy Statement with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (xii) the information in this Proxy
Statement.
All representations, warranties, covenants and agreements of Aquis, the
Company and Merger Sub expire at the Effective Time, other than covenants and
agreements that by their terms contemplate performance after the Effective Time.
Certain Covenants of the Parties. Pursuant to the Merger Agreement, Aquis
has agreed, subject to the limitations and qualifications stated in the Merger
Agreement, among other things, that between the date of the Merger Agreement and
the Effective Time it will (i) carry on the Bell Atlantic Paging Business in the
ordinary and usual course consistent with past practice, (ii) not make any
material changes in its business, management or operations, (iii) not sell,
pledge, dispose of or encumber any of its assets, except in connection with
financing the Bell Atlantic Acquisition (the "Aquis Financing") or to Motorola,
a creditor of the Company, (iv) not acquire any material assets or properties
other than in connection with the Bell Atlantic Acquisition, (v) not release or
assign any indebtedness owed to it, (vi) not incur or assume any indebtedness
other than indebtedness incurred or assumed in the ordinary course of business
consistent with past practice (provided such indebtedness does not relate to
borrowed money) or relating to the Aquis Financing in an amount not to exceed
$25,500,000, (vii) not make, declare or pay any dividends, (viii) not make any
capital investments, except in the ordinary course of business consistent with
past practice, (ix) not enter into, terminate or amend any material contracts,
except for agreements entered into in connection with the Bell Atlantic
Acquisition, certain agreements specified in the Merger Agreement and except in
the ordinary course of business consistent with past practice, (x) not increase
the compensation of any of its officers, directors, agents, representatives,
independent contractors or consultants, except for commitments in connection
with the Bell Atlantic Acquisition, (xi) not amend its charter or bylaws, except
in connection with the Aquis Financing, (xii) not change its methods of
accounting, (xii) not make any tax elections and (xiii) cause each Aquis
Stockholder to execute an investment letter in the form attached to the Merger
Agreement.
Pursuant to the Merger Agreement, the Company and Merger Sub have agreed,
subject to the limitations and qualifications stated in the Merger Agreement,
among other things, that between the date of the Merger Agreement and the
Effective Time they will (i) carry on their business in the ordinary and usual
course consistent with past practice, (ii) not make any material changes in its
business, management or operations, (iii) not sell, pledge, dispose of or
encumber any of their assets, (iv) not acquire any material assets or
properties, (v) not release or assign any indebtedness owed to them, (vi) not
incur or assume any indebtedness, (vii) not make, declare or pay any dividends,
(viii) not make any capital investments, (ix) not enter into, terminate or amend
any material contracts, (x) not increase the compensation of any of their
officers, directors, agents, representatives, independent contractors or
consultants, (xi) not amend its charter or bylaws, (xii) not change its methods
of accounting; and (xii) not make any tax elections.
In addition, subject to the terms and conditions of the Merger Agreement,
each of the parties has agreed (i) to keep confidential all information
furnished in connection with the Merger, (ii) not to entertain, solicit,
initiate or encourage any proposals or participate in any discussions regarding
the sale or acquisition of their respective capital stock or assets, (iii) to
promptly inform the other parties of the occurrence of certain events, including
but not limited to (x) any event which would be reasonably likely to cause a
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate in any respect, (y) any material adverse change to its financial
condition, results of operations, business or assets and (z) any litigation,
claim or contingent liability that might reasonably be expected to become the
subject of litigation which if adversely determined could have a material
adverse effect on such party, (iv) to prepare and file this Proxy Statement, (v)
to use all commercially reasonable efforts to effectuate the Merger as promptly
as possible after the closing of the Bell Atlantic Acquisition, (vi) to consult
each other before issuing any press release with respect to the Merger, (vii) to
make all necessary filings as soon as reasonably practicable, (vii) to confer on
a regular
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and frequent basis with the other parties to report on its ongoing operations,
(viii) to seek the necessary consents from its lenders, (ix) that if an employee
of the Company at the Effective Time is terminated without cause (as defined in
the Merger Agreement) within 90 days following the Effective Time, then the
Company or the Surviving Corporation will pay to such employee the greater of
such employee's salary for 90 days following his termination or the proceeds of
any retention bonus offered to such employee prior to the Effective Time and (x)
that at the Effective Time, each outstanding option to acquire shares of Aquis
Common Stock (the "Aquis Options") will become an option to acquire a number of
shares of the Company's Common Stock equal to the product of (A) the number of
shares of Aquis Common Stock issuable upon the exercise of such Aquis Option
immediately prior to the Effective Time and (B) the Conversion Number.
Pursuant to the Merger Agreement, the Company has agreed (i) to use its
best efforts to cause the Merger Shares to be approved for quotation on The
Nasdaq Stock Market's SmallCap Market ("Nasdaq"), (ii) that until the tenth
anniversary of the Effective Time, it will indemnify current and former
directors and officers of Aquis and the Company for any losses in connection
with any claims arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time to the fullest extent permitted, (iii) that at
the Effective Time it will assume the obligations of Aquis under certain
employment agreements, and (iv) to amend its employment agreements as set forth
in the Merger Agreement.
Conditions to the Merger. The obligations of Aquis, the Company and Merger
Sub to effect the Merger are subject to the satisfaction or waiver on or prior
to the Effective Time of a number of conditions, including but not limited to
the following:
(a) The Company's Stockholders will have taken all necessary action to
authorize, approve and adopt the Merger and the transactions contemplated
thereby.
(b) No laws shall have been enacted or promulgated, and no judicial
actions shall have been taken, in either case which prohibit or restrict
the consummation of the Merger.
(c) All approvals and consents required to be obtained prior to the
Merger have been obtained.
(d) The Bell Atlantic Acquisition shall have been consummated.
(e) The Company's Common Stock shall have been approved for quotation
on Nasdaq upon notice of issuance.
(f) Each of the representations and warranties of Aquis, the Company
and Merger Sub, as applicable, set forth in the Merger Agreement that is
qualified as to materiality shall have been true and correct on the date of
the Merger Agreement and as of the Effective Time, and each of the
representations and warranties of Aquis, the Company and Merger Sub, as
applicable, set forth in the Merger Agreement that is not so qualified
shall have been true and correct in all material respects on the date of
the Merger Agreement and as of the Effective Time, except for changes
expressly permitted by the Merger Agreement or where they are expressly
limited by their terms to a prior date.
(g) Aquis, the Company and Merger Sub, as applicable, shall have
performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions,
contained in the Merger Agreement to be complied with by such party prior
to or at the Effective Time.
(h) Aquis, on the one hand, and the Company and Merger Sub, on the
other hand, shall have delivered to the other party a certificate, dated
the Effective Time, certifying that the conditions set forth above (as they
relate to such party) have been fulfilled.
(i) From the date of the Merger Agreement, there has been no material
adverse change in the condition, properties or assets, liabilities,
business or operations of the parties, the parties have not sustained any
loss or damage that materially and adversely affects its ability to conduct
its business, and the other parties shall have received a certificate to
this effect.
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(j) The Company and Merger Sub shall have complied with necessary
federal and state securities or laws in connection with the issuance of the
Merger Consideration and they shall have received duly executed investment
letters from each of the Aquis Stockholders receiving Merger Shares.
(k) Immediately prior to the Effective Time, all outstanding shares of
preferred stock of Aquis shall have converted into shares of Aquis Common
Stock.
(l) Immediately prior to the Effective Time, all of the directors and
officers of Aquis, the Company and Merger Sub shall have resigned and the
respective parties shall have taken the necessary actions to elect the
officers and directors set forth in the Merger Agreement.
(m) In connection with the Bell Atlantic Acquisition, Aquis shall have
obtained debt financing in an aggregate principal amount of at least
$20,350,000 in addition to the Aquis Notes and equity financing in an
aggregate amount of at least $6,000,000.
(n) The Company shall have executed and delivered the Registration
Rights Agreement.
(o) Prior to or at the Effective Time, the Company shall have taken
all necessary corporate action so that at or immediately after the
Effective Time the charter of the Company will be as set forth in the
Merger Agreement.
(p) The Company shall have assumed the obligations of Aquis under
certain employment agreements and shall have taken all necessary action to
authorize, approve and adopt the Aquis Notes, the credit agreement entered
into by Aquis in connection with the Bell Atlantic Acquisition, and the
transactions contemplated thereby.
(q) Prior to or at the Effective Time, the Company shall have taken
all necessary corporate action so that at or immediately after the
Effective Time, the Aquis Options shall be "rolled over" under the
Company's 1994 Incentive Stock Option Plan, as amended (the "Option Plan").
(r) At the Effective Time, the outstanding indebtedness of the Company
under its credit agreement with Motorola, Inc. shall not exceed
$1,654,189.98.
(s) All employment agreements with the Company shall have been amended
as provided in the Merger Agreement.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the Aquis Stockholders and the Company's
Stockholders:
(a) By mutual written consent of Aquis, the Company and Merger Sub;
(b) By either Aquis or the Company and Merger Sub, if without fault of
the terminating party the Effective Time shall not have occurred on or
before June 30, 1999 (the "Termination Date");
(c) By either Aquis or the Company and Merger Sub, if a governmental
body shall have issued, enacted, entered, promulgated or enforced an order,
judgment, decree, injunction, restraining order or ruling or taken any
action restraining, enjoining or otherwise prohibiting the Merger, and such
judgment, order, decree, injunction restraining order, ruling of other
action shall have become final and unappealable (collectively,
"Governmental Disapproval").
(d) By either Aquis or the Company and Merger Sub, if the Company's
Board of Directors shall have withdrawn, suspended, modified or amended in
a manner adverse to Aquis its approval or recommendation of the Merger, the
Merger Agreement and the related transactions or promulgates any
recommendation with respect to a competing transaction (other than
rejecting such transaction) or shall have resolved to do any of the
foregoing (collectively, "Company Board Disapproval").
(e) By either Aquis or the Company and Merger Sub, if the approval by
the Company's Stockholders of the Merger and related transactions shall not
have been obtained ("Company Stockholder Disapproval").
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(f) By Aquis, on the one hand, or the Company and Merger Sub, on the
other hand, if the other party shall have failed to comply in any material
respect with any of its material covenants or agreements contained in the
Merger Agreement or if any representation or warranty of the other party
made in the Merger Agreement fails to be true and complete in any material
respect when given and at any time thereafter, except for (i) changes
permitted by the Merger Agreement and (ii) those representations and
warranties that address matters only as of a particular date (which shall
remain true and complete when given and at any time thereafter as of such
date), provided, however, that if any such failure is curable, notice of
such failure had been given and it was not cured within 30 days of such
notice, and provided further that the terminating party shall not be in
material breach of any of its covenants, agreements or representations or
warranties in the Merger Agreement (collectively, "Merger Agreement Non-
Compliance").
Effect of Termination. In the event of termination of the Merger Agreement
as provided under "-- Termination," the Merger Agreement will become void and
there will be no liability or obligation on the part of the parties, except with
respect to certain provisions of the Merger Agreement regarding maintaining the
confidentiality of non-public information, the payment of expenses, and making
public announcements.
Termination Fees. On the date of the Merger Agreement, Aquis deposited
$1,000,000 into an interest bearing escrow account in the name of the Escrow
Agent. Such amount, together with all interest and income thereon and other
proceeds thereof, is referred to as the "Pre-Closing Escrow Fund."
Pursuant to the terms of the Merger Agreement, the Escrow Agent delivered
the Pre-Closing Deposit to the Bell Atlantic Subsidiaries at the Bell Atlantic
Closing. Immediately after the Bell Atlantic Closing, Aquis deposited $250,000
(the "Post-Closing Escrow Fund") with the Escrow Agent. If the Merger Agreement
is terminated prior to the Effective Time (i) due to mutual consent of all the
parties, then the Post-Closing Escrow Fund shall be returned to Aquis and the
parties agree that the termination of the Merger Agreement will be covered by
this provision if the FCC or a state regulatory authority does not give their
approval of the Merger; (ii) due to the expiration of the Termination Date or
the receipt of a Governmental Disapproval, then the Post-Closing Escrow Fund
shall be returned to Aquis; (iii) due to Company Board Disapproval, then (A) the
Post-Closing Escrow Fund shall be returned to Aquis, (B) the Company shall pay
Aquis $1,000,000 and (C) upon the closing of any competing transaction within
one year from the date of termination of the Merger Agreement, the Company will
pay Aquis an additional $1,000,000; (iv) due to Company Stockholder Disapproval,
then the Post-Closing Escrow Fund shall be returned to Aquis and the Company
will pay to Aquis $1,000,000; (v) due to Merger Agreement Non-Compliance by
Aquis, then the Post-Closing Escrow Fund shall be released to the Company and
Aquis shall pay to the Company the difference between $1,000,000 and the amount
of the Post-Closing Escrow Fund; or (vi) due to Merger Agreement Non-Compliance
by the Company or Merger Sub, then the Post-Closing Escrow Fund shall be
returned to Aquis and if the failure relied upon for termination was as a result
of an intentional act or failure to act by the Company then the Company shall
pay Aquis $1,000,000.
Amendments and Waivers. The Merger Agreement may be amended by the parties
thereto at any time prior to the Effective Time before or after approval of the
matters presented in connection with the Merger by the Company's Stockholders,
but, after any such approval, no amendment may be made which increases or
changes the form of consideration to be received by the Aquis Stockholders in
the Merger or otherwise adversely affects the Company's Stockholders without
further approval. The parties may not amend the Merger Agreement except by an
instrument in writing signed on behalf of each of the parties thereto. At any
time prior to the Effective Time, the parties to the Merger Agreement may, to
the extent legally allowed, waive compliance with any of the obligations,
covenants, agreements or conditions contained therein. Any agreement on the part
of a party to the Merger Agreement to any such waiver will be valid only if set
forth in a written instrument signed on behalf of such party. The failure of any
party to the Merger Agreement to assert any of its rights under the Merger
Agreement or otherwise will not constitute a waiver of those rights.
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APPROVAL OF THE MERGER AND EACH OF THE MERGER PROPOSALS BY THE COMPANY'S
STOCKHOLDERS AT THE SPECIAL MEETING WILL CONFER ON THE BOARD THE POWER,
CONSISTENT WITH ITS FIDUCIARY DUTIES, TO ELECT TO CONSUMMATE THE MERGER WITHOUT
ANY FURTHER ACTION BY, OR RESOLICITATION OF, THE COMPANY'S STOCKHOLDERS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX CONSEQUENCES OF THE MERGER. THE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR STOCKHOLDER SUBJECT TO A SPECIAL TREATMENT UNDER CERTAIN FEDERAL
INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS, STOCKHOLDERS WHO DO NOT
HOLD THEIR SHARES OF COMPANY COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING
OF SECTION 1221 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED ("THE CODE"),
AND STOCKHOLDERS WHO ACQUIRED SHARES OF COMPANY COMMON STOCK PURSUANT TO THE
EXERCISE OF OPTIONS OR OTHERWISE AS COMPENSATION, NOR ANY CONSEQUENCES ARISING
UNDER THE LAW OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION IS
BASED UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS
AND COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
Neither the Company nor Aquis has requested a ruling from the Internal
Revenue Service (the "IRS") with regard to any of the federal income tax
consequences of the Merger.
The Merger should be treated as a tax-free reorganization so that no gain
or loss will be recognized by the Aquis Stockholders, the Company or Aquis. As a
result of the Merger qualifying as a reorganization within the meaning of
Section 368(a)(1) of the Code, the federal income tax consequences that will
result to the Company, Merger Sub, Aquis and the Aquis Stockholders will include
the following:
(a) No gain or loss will be recognized by an Aquis Stockholder upon
the exchange of his or her shares of Common Stock for Merger Shares.
(b) The aggregate tax basis of the Company's Common Stock received by
an Aquis Stockholder in the Merger will be the same as such stockholder's
aggregate tax basis of the Aquis Common Stock surrendered in exchange
therefor.
(c) The holding period of the Merger Shares will include the period
during which the Aquis Common Stock surrendered in exchange therefor was
considered to be held.
(d) Aquis will not recognize gain or loss solely as a result of the
Merger.
(e) Neither the Company nor Merger Sub will recognize gain or loss
solely as a result of the Merger.
It should be noted that there is no assurance that the IRS could not
successfully challenge the Merger as a tax-free reorganization. In the event of
a successful IRS challenge to the Merger as a tax-free reorganization, there
would be significant tax consequences. An Aquis Stockholder would recognize
taxable gain or loss with respect to each share of Aquis Common Stock
surrendered equal to the difference between the stockholder's basis in such
share and the fair market value, as of the Effective Time, of the Merger Shares
received in exchange therefor. In such event, a stockholder's aggregate basis in
the Company's Common
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Stock so received would equal its fair market value, and the stockholder's
holding period for such stock would begin the day after the Merger.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will result in the stockholders of Aquis owning approximately
58.5% of the outstanding shares of the Company's Common Stock. For accounting
purposes, the Merger will be treated as if Aquis was the acquiror (a reverse
acquisition) of the Company using the purchase method of accounting. Under the
purchase method of accounting, the purchase price is allocated to the assets and
liabilities acquired based upon the estimated fair values of such assets and
liabilities on the date of acquisition. Any excess of the fair market value of
the consideration given over the fair market value of the identifiable net
assets acquired is reported as goodwill.
The statement of operations will report combined results only for the
period subsequent to the Merger. Expenses incurred that are directly related to
the Merger are included as part of the total cost of the acquisition.
APPRAISAL RIGHTS
Under the DGCL, Aquis stockholders would be entitled to appraisal rights in
connection with the Merger and the other transactions contemplated by the Merger
Agreement. However, each of the Aquis Stockholders has waived any and all
appraisal rights.
THE VOTING AND COOPERATION AGREEMENT
The following discussion summarizes the material terms of the Voting and
Cooperation Agreement but does not purport to be a complete statement of all
provisions of such agreement and is qualified in its entirety by reference to
such agreement. The Company will furnish without charge a copy of such agreement
to any of the Company's Stockholders upon receipt from any such person of an
oral or written request for such agreement. Such requests should be sent to the
Company at Paging Partners Corporation, Freehold Office Plaza, 4249 Route 9
North, Building 2, Freehold, New Jersey 07728, Attention: Jeffrey Bachrach, or
made by telephone at (732) 409-7088.
In connection with the execution of the Merger Agreement, on November 6,
1998 Aquis and certain stockholders of the Company (the "Agreeing Stockholders")
owning an aggregate of approximately 34.6% of the currently outstanding shares
of the Company's Common Stock (the "Agreeing Shares") entered into a Voting and
Cooperation Agreement, whereby the Agreeing Stockholders agreed to vote for each
of the Merger Proposals and against any other agreement providing for a
competing transaction. Such agreement restricts the Agreeing Stockholders
ability to sell or transfer record or beneficial ownership of the Agreeing
Shares. The agreement terminates upon termination of the Merger Agreement or
consummation of the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors that the
Company's Stockholders vote for the approval of the Merger Proposals,
stockholders should be aware that, pursuant to the Merger Agreement and subject
to certain limitations, the Company will indemnify each person who was an
officer or director of the Company or Aquis against certain liabilities for a
period of ten years from the Effective Time. Furthermore, the Company will
maintain policies of directors' and officers' liability insurance in the amount
of $5,000,000 for each person who was an officer or director of the Company or
Aquis.
Pursuant to the terms of the Registration Rights Agreement, Leonard Fink,
Richard Giacchi and Robert Davidoff, among others, have been granted certain
rights to have shares of the Company's Common Stock that they own registered for
sale under the Securities Act. See "-- Federal Securities Law Consequences." The
Company has also agreed to pay an investment banking fee, if the Merger is
consummated, in the aggregate amount of $100,000, to Rochelle King and Robert
Davidoff.
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Following the Merger, it is currently anticipated that the executive
officers of the Company will be treated as follows: (i) Richard Giacchi's
employment agreement will be allowed to expire, pursuant to its terms, on May
26, 1999; however, pursuant to the terms of the Merger Agreement, the Company
shall use commercially reasonable efforts to secure the services of Mr. Giacchi
as a consultant for the two-year period following the Effective Time for a fee
of $25,000 per year; (ii) Leonard Fink's employment agreement will be allowed to
expire, pursuant to its terms, on May 26, 1999; and (iii) Jeffrey Bachrach will
receive a two month notice of termination pursuant to his employment agreement
and he shall receive approximately $40,000, an amount equal to four months
severance, as required by such agreement. See "Compensation of the Company's
Executive Officers -- Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
FEDERAL SECURITIES LAW CONSEQUENCES
None of the Merger Shares will be registered under the Securities Act. As a
result, the Merger Shares may not be sold, transferred, or otherwise disposed of
at any time absent either registration under the Securities Act and applicable
state securities laws or an exemption therefrom.
The Company has agreed to register the Merger Shares pursuant to the terms
of the Registration Rights Agreement. Subject to the terms and conditions of
such agreement, at any time after 18 months following the Closing Date, holders
of a majority of the Merger Shares may request that the Company file a
registration statement under the Securities Act in a firm commitment
underwritten public offering with an aggregate net offering price of at least
$5,000,000. The Company is obligated to effect a maximum of three such demand
registrations, which shall not be in the same six-month period.
In addition, subject to the terms and conditions of the Registration Rights
Agreement, at any time after six months following the Closing Date, if the
Company proposes to register any shares of its Common Stock for its own or
others' account under the Securities Act (other than a registration relating to
employee benefit plans, shares to be sold under Rule 145 under the Securities
Act, or registration rights of certain third parties), holders of the Merger
Shares will be given the opportunity to have their shares included in the
Company's registration statement.
AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors has adopted resolutions approving and recommending
to the Company's Stockholders for their approval, in the event the Merger is
approved, the following amendments to the Company's Restated Certificate of
Incorporation (the "Company's Charter"):
(i) An amendment to Article Fifth, Section 2, of the Company's Charter
to provide therein for the reconstitution and reclassification of the
directors of the Company in accordance with the terms of the Merger
Agreement.
(ii) An amendment to Article Fifth, Section 3, of the Company's
Charter to exclude from the right of the existing Board of Directors to
fill vacancies in the Board, the right to fill newly created directorships
resulting from the resignation of members of the Board in connection with
the terms of the Merger Agreement.
If approved by the Company's Stockholders and the other Merger Proposals
are approved, these amendments to the Company's Charter will become effective
upon the filing with the Secretary of State of the State of Delaware a
Certificate of Amendment, which filing is expected to take place as of the
Effective Time.
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INFORMATION INCORPORATED BY REFERENCE
The information appearing under the following captions set forth in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998, a copy of which is attached hereto as Exhibit B, is hereby incorporated
herein by reference:
Item 1: Business.
Item 2: Property.
Item 3: Legal Proceedings.
Item 5: Market for Common Equity and Related Stockholder Matters.
Item 6: Management's Discussion and Analysis or Plan of Operations.
Item 7: Financial Statements.
MARKET PRICE OF THE COMPANY'S COMMON STOCK
The Company's Common Stock is quoted for trading on Nasdaq under the symbol
"PPAR." The following table sets forth, for the periods indicated, the high and
low bid prices for the Company's Common Stock as reported on Nasdaq. Quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PRICE OF
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
Quarter ended March 31, 1999 (through March 10, 1999)....... $1.625 $1.125
</TABLE>
On November 6, 1998, the date preceding public announcement of the proposed
Merger, the high and low bid prices of the Company's Common Stock were $0.75 and
$0.75, respectively. On March 10, 1999, the high and low bid prices of the
Company's Common Stock were $1.375 and $1.25, respectively. As of March 10,
1999, there were approximately 100 holders of record of the Company's Common
Stock. There have been no cash dividends declared since the initial public
offering of the Company's Common Stock in May 1994.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
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BUSINESS OF AQUIS
GENERAL
Prior to the Bell Atlantic Closing, Aquis had no operations, except in
connection with the Bell Atlantic Acquisition and the Merger Agreement. Pursuant
to the terms of the Bell Atlantic Acquisition Agreement, Aquis acquired the Bell
Atlantic Paging Business. See "Proposal No. 1: Merger Proposals -- Bell Atlantic
Acquisition." Aquis consists of a group of industry professionals formed to
capitalize on opportunities arising from the continued consolidation in the
paging industry. It is Aquis' long-term goal to build a major wireless
communications carrier through a rapid series of strategic acquisitions.
Acquisition targets will include a variety of communications providers and will
not be limited to the paging industry alone. Aquis does not currently have any
agreements, understandings or arrangements for business acquisitions or
combinations with any third party, other than with the Company. Aquis' principal
executive offices are located at 1719A Route 10, Suite 300, Parsippany, NJ
07054.
Aquis currently provides local paging services on three primary Radio
Common Carrier frequencies. The service area covers some of the most densely
populated regions in the United States, such as the states of Delaware,
Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and the greater
Washington D.C. metropolitan area. Limited coverage is available in New York
City. Approximately 70% of the customer base is located along the Interstate 95
corridor between New York City and the Washington D.C. metropolitan areas
(excluding Virginia). Since the Bell Atlantic Closing, Aquis and Bell Atlantic
have had an operational relationship through certain agreements. Under the terms
of a maintenance agreement, Bell Atlantic performs preventive maintenance and
repairs to the paging system infrastructure, at its tariff rates, for periods of
between five and seven years, depending on the type of equipment. Pursuant to a
real estate licensing agreement, Aquis pays $375 per month for each of
approximately 190 Bell Atlantic owned facilities where transmission equipment is
located. Such agreement is for an initial period of five years with a provision
for a renewal of an additional five years. Under the terms of a reseller
agreement, BAM acts as a non-exclusive reseller for Aquis by offering paging
services to its existing and targeted customer base. BAM also acts and plans to
continue to act as a reseller of paging services of other carriers. Aquis has
agreed to produce and mail, for its cost, invoices in BAM's name to BAM's paging
customers covered by the reseller agreement. BAM reseller units accounted for
approximately 40% of the Bell Atlantic Paging Business' total paging units
during 1997. BAM markets paging services mainly through BAM retail communication
stores located throughout BAM's service area. Aquis also resells nationwide and
regional paging services under agreements assigned to it in the Bell Atlantic
Acquisition. Such agreements primarily specify pricing and minimum performance
standards relative to the carrier's service and are for one-year terms,
renewable for additional one-year terms. Because of the wide geographic reach of
its frequencies and its inter-connected paging systems, the Bell Atlantic Paging
Business is able to provide multi-state regional coverage to its customers in
addition to local service.
PROPERTIES
Aquis markets paging services through its offices in 21,661 square feet of
leased space in Parsippany, New Jersey. The fixed rent on the lease, which
expires April 30, 2001, will be approximately $303,000 per year. In addition to
fixed rent, the lease requires Aquis to pay its proportionate share of certain
maintenance expenses and any increase in real estate taxes. In addition to these
offices, Aquis also leases three smaller retail offices in connection with its
paging operations located in Pittsburgh, Pennsylvania, Rockville, Maryland, and
Virginia Beach, Virginia. The aggregate rental payments on such leases is
approximately $109,000 per year.
Aquis' paging business' network is comprised of six interconnected paging
systems utilizing its three primary frequencies. The paging systems utilize a
total of 16 Glenayre terminals, 211 transmitters and five repeaters. Paging
equipment is located at approximately 227 sites. Currently, approximately 196
sites are owned by the operating telephone companies (the "OTCs") of Bell
Atlantic and are leased to Aquis, 50 sites are leased by the OTCs and either
subleased or assigned to Aquis and approximately 25 sites are customer premises
locations. The aggregate rent payable for such site locations is currently
approximately $1,127,000 per year.
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LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Aquis is a party
or to which any of its property or the Bell Atlantic Paging Business is subject.
AQUIS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF BAPCO'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Aquis had no operations prior to December 31, 1998 except in connection
with the Bell Atlantic Acquisition (discussed below), which was consummated on
December 31, 1998, and the Merger Agreement. The following is a discussion of
the results of operations and financial condition of BAPCO for the years ended
December 31, 1998, 1997 and 1996. This discussion should be read in conjunction
with BAPCO's Financial Statements and the notes thereto included elsewhere in
this proxy statement. During the historical periods covered by this discussion,
the Bell Atlantic paging business was owned and operated by subsidiaries of Bell
Atlantic Corporation ("Bell Atlantic"). Aquis may operate the business
differently than Bell Atlantic operated the business in the past. Therefore, the
results of operations discussed herein may not be indicative of future results.
BELL ATLANTIC ACQUISITION
On December 31, 1998, Aquis acquired the Bell Atlantic paging business for
approximately $29 million, including transaction costs. The Bell Atlantic paging
business was composed of two distinct parts: BAPCO, the sales and marketing
operation, and the paging network operation infrastructure owned and operated by
the Bell Atlantic Operating Telephone Companies (the "OTC's"). The acquisition
was accounted for as a purchase in accordance with Accounting Principles Board
Opinion No.16, "Business Combinations." The acquisition was primarily financed
by a $20 million loan from Finova Capital Corporation ("Finova"), a $4.2 million
note retained by the seller (the "Seller Note"), and the cash proceeds of $5.7
million from the sale of preferred stock.
BAPCO was allocated $13.6 million of the $28 million sale price, and the
remainder of the sales price was allocated to the OTC's. As of December 31,
1998, BAPCO had recorded a receivable from an affiliate that received cash of
$4.8 million from Aquis, a receivable from Aquis for $4.6 million, and the
Seller Note. BAPCO has deferred the recognition of the Seller Note until it is
paid. As a result of the sale, BAPCO recorded an extraordinary gain, net of
income taxes, of $.7 million.
GENERAL
During the years covered by this discussion, BAPCO acted as a reseller for
the OTC's of Bell Atlantic and marketed one-way paging service and equipment to
consumers directly and through other resellers. BAPCO also offered its customers
both customer owned and maintained equipment or lease options for equipment. See
"Results of Operations."
BAPCO derived its revenue primarily from fixed periodic fees for services
that are not generally dependent on usage. Consequently, BAPCO's ability to
recoup its initial selling and marketing costs, to meet operating expenses and
to achieve profitability was dependent on the average length of each customer's
subscription period. As long as a subscriber continued to utilize BAPCO's
service, operating results benefited from the recurring payments of the fixed
fees without the incurrence of additional selling expenses by BAPCO. Conversely,
operating results were adversely affected by customer disconnections. Each month
a percentage of BAPCO's existing customers had their service terminated for a
variety of reasons, including failure to pay, dissatisfaction with service and
switching to a competing service provider. BAPCO's average monthly disconnection
rates for the years ended December 31, 1998, 1997 and 1996 were 2.9%, 2.4% and
2.2%, respectively.
Approximately 95% of BAPCO's average revenue per unit ("ARPU") was
attributable to fixed fees for airtime, coverage options and features. A portion
of the remainder was dependent on usage.
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RESULTS OF OPERATIONS
During the years covered by this discussion, BAPCO's principal operations
were its regional one-way paging operations. The following discussion of results
of operations analyzes the results of BAPCO's one-way paging operations during
such years, unless otherwise indicated.
Certain of the following financial information is presented on a per
subscriber unit basis. Management of Aquis believes that such a presentation is
useful in understanding BAPCO's results because it provides a meaningful
comparison year-to-year, given BAPCO's growth rate and the significant
differences in the number of subscribers of other paging companies.
FISCAL YEARS 1998 AND 1997
Units in Service
Units in service were 257,000 and 218,000 as of December 31, 1998 and 1997,
respectively. This represents an annual net growth rate of 18%. BAPCO
experienced growth in units in service due primarily to the overall industry
growth in the numeric paging and alphanumeric wireless messaging, add-on
services to numeric paging such as voicemail and alphanumeric messaging such as
dispatch, sports, business and news offerings. The increase in units in service
was partially offset by customer turn-offs.
Revenues
Revenues for the fiscal years 1998 and 1997 were $26.4 million and $20.7
million, respectively. Revenues from paging services, rental and maintenance for
the same periods were $23.3 million and $17.9 million, respectively. The
increase in paging services, rental and maintenance revenues of $5.4 million or
30% was attributable to the increase in the customer base and a 5% increase in
ARPU. Revenues from equipment sales, installation and other for 1998 and 1997
were $3.1 million and $2.8 million, respectively. The increase in revenues from
equipment sales, installation and other of $.3 million or 11%, was due to new
product introductions by BAPCO's major supplier, increased productivity in
BAPCO's telemarketing channel, and higher sales to affiliates.
BAPCO's ARPU at December 31, 1998 and 1997 was $7.18 and $6.84,
respectively. The increase in 1998 resulted primarily from the reselling of
enhanced services such as alphanumeric messaging and wide-area services.
Cost of paging services, rental and maintenance
Cost of paging services, rental and maintenance for the fiscal years 1998
and 1997 was $8.9 million and $6.0 million, respectively. The increase of $2.9
million or 48% is 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, installation and other
The cost of equipment sold in 1998 and 1997 was $2.7 million and $2.9
million, respectively. The decrease in 1998 was primarily due to lower vendor
prices offset by an increase in the number of units sold. The increase in the
gross profit margin for the year ended December 31, 1998 in comparison to the
year ended December 31, 1997 was primarily due to physical inventory and
obsolesence adjustments recorded in 1997 of $263 that were recorded in cost of
equipment sales, installation and other, and which resulted in a negative gross
profit margin for the year ended December 31, 1997.
Operating Expenses
Selling and marketing expenses in 1998 and 1997 were $1.7 million and $1.6
million, respectively. This increase of $.1 million or 6% resulted from a change
in the sales commission structure with a focus more towards revenue growth and
the sales of enhanced service offerings. The prior sales commission structure
was based upon number of pager units sold. Print advertising expense remained
relatively constant for both years.
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General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1998 and
1997 were $6.9 million and $5.9 million, respectively. This increase of $1
million or 17% was attributable to BAPCO's expansion of its customer service
call centers, information systems and administrative capabilities to support the
growing subscriber base, which required additional administrative personnel and
customer service representatives.
Depreciation and amortization in 1998 and 1997 was $4.3 million and $3.4
million, respectively. The increase of $.9 million or 26% was primarily due to
the growth in BAPCO's rental pager program.
The provision for doubtful accounts in 1998 and 1997 was $1.2 million and
$.5 million, respectively. The increase of $.7 million or 140% was primarily due
to the increase in the customer base.
Extraordinary Item
As a result of BAPCO's sale to Aquis, BAPCO recorded an extraordinary gain
of $.7 million, which is net of taxes of $.4 million in 1998.
Net Income
BAPCO recognized net income in 1998 and 1997 of $1.1 million and $.2
million, respectively. The increase in net income of $.9 million is principally
due to the extraordinary gain on the sale to Aquis. BAPCO's effective tax rate
was consistent between periods.
FISCAL YEARS 1997 AND 1996
Units in Service
Units in service were 218,000 and 180,000 as of December 31, 1997 and 1996,
respectively. This represents an annual net growth rate of 21%. The largest
increase in units in service was in the rental pager program with an increase of
57%. BAPCO experienced growth in units in service due primarily to the overall
industry growth in the numeric paging and alphanumeric wireless messaging,
add-on services to numeric paging such as voicemail, and alphanumeric messaging
such as dispatch, sports, business and news offerings, and improved
responsiveness to customer satisfaction issues and churn.
Revenues
Revenues for the fiscal years 1997 and 1996 were $20.7 million and $17.1
million, respectively. Revenues from paging services, rental and maintenance for
the same periods were $17.9 million and $14.9 million, respectively. The
increase in paging services, rental and maintenance revenues of $3.0 million or
21% was attributable to the increase in number of rental pagers and the increase
in enhanced service offerings. Revenues from equipment sales, installation and
other for 1997 and 1996 were $2.8 million and $2.2 million, respectively. The
increase in revenues from equipment sales, installation and other of $.6 million
or 27%, was due to new product introductions by BAPCO's major supplier,
increased productivity in BAPCO's telemarketing channel, and higher sales to
affiliates.
BAPCO's ARPU at December 31, 1997 and 1996 was $6.84 and $6.89,
respectively. The decrease in 1997 resulted primarily from a decrease in the
prices charged to resellers during fiscal 1997.
Cost of paging services, rental and maintenance
Cost of paging services, rental and maintenance for the fiscal years 1997
and 1996 were $6.0 million and $5.6 million, respectively. The increase of $.4
million or 7% is attributable to customer growth, and an increase in customer
demand for services such as wide-area, nationwide, alphanumeric, and message
dispatch costs. These increases were offset slightly by lower rates charged by
the OTC's for access to the paging network.
19
<PAGE>
Cost of equipment sales, installation and other
The cost of equipment sold in 1997 and 1996 was $2.8 million and $2.1
million, respectively. The change in 1997 was primarily due to an increase in
the number of units sold.
Operating Expenses
Selling and marketing expenses in 1997 and 1996 were $1.6 million and $1.3
million, respectively. This increase of $.3 million or 23% resulted from the
introduction of a new sales commission structure in 1997 which focused more on
revenue growth and enhanced service offerings instead of compensation based on
number of units sold.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1997 and
1996 were $5.9 million and $3.8 million, respectively. This increase of $2.1
million or 55% was attributable to BAPCO's expansion of its customer service
call centers, information systems and administrative capabilities to support the
growing subscriber base, which required additional administrative personnel and
customer service representatives. In addition, in 1996, BAPCO reversed an
accrual of $1.2 million for pension liability as a result of the merger of Bell
Atlantic Mobile and NYNEX Mobile Communications.
Depreciation and amortization in 1997 and 1996 was $3.4 million and $2.1
million, respectively. The increase of $1.3 million or 62% resulted from a
change in the estimated useful life of rental pagers from four years to three
years and the growth in BAPCO's rental pager program.
The provision for doubtful accounts in 1997 and 1996 was $.5 million and
$.3 million, respectively. The increase of $.2 million or 40% was due to the
increase in the customer base.
Net Income
BAPCO recognized net income in 1997 and 1996 of $.3 million and $1.2
million, respectively. The decrease in net income of $.9 million is principally
due to the reversal of pension costs in 1996 of $1.2 million and the cost of
funding the growth rate of BAPCO's subscriber base which resulted in an increase
in units sold, selling and marketing expenses and other operating expenses.
BAPCO's effective income tax rate was consistent between years.
LIQUIDITY AND CAPITAL RESOURCES
BAPCO's operations have historically required substantial capital
investment for the procurement of subscriber units. During the periods covered
by this discussion, this investment was funded by BAPCO's ultimate parent, Bell
Atlantic.
BAPCO's net cash provided by operating activities for the years ended
December 31, 1998 and 1997 was $2.5 million and $3.4 million, respectively. The
increased operating cash flow in 1997 was a result of improved operating results
from a larger subscriber base. Net cash used in investing activities was $4
million and $4.7 million for the years ended December 31, 1998 and 1997,
respectively, of which $4.2 million and $4.9 million, respectively, were for the
purchase of capital assets, principally rental pagers. Cash provided by
financing activities of $1.6, and $1.3 million, respectively in 1998 and 1997
resulted from funding provided by Bell Atlantic.
BAPCO's net cash provided by operating activities for the years ended
December 31, 1997 and 1996 was $3.4 million and $1.4 million, respectively. The
increased operating cash flow in 1997 was a result of improved operating results
from a larger subscriber base. Net cash used in investing activities was $4.7
million and $3.7 million for the years ended December 31, 1997 and 1996,
respectively, of which $4.9 million and $3.9 million, respectively, were for the
purchase of capital assets, principally rental pagers. Cash provided by
financing activities of $1.3 million and $2.2 million, respectively, in 1997 and
1996 resulted from funding provided by Bell Atlantic.
20
<PAGE>
Bell Atlantic used a centralized cash management system to finance its
operations and the operations of its subsidiaries. During the years covered by
this discussion, 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.
Working capital, defined as current assets less current liabilities as of
December 31, 1998 and 1997 was $4.2 million and $1.1 million, respectively. The
increase in working capital of $3.1 million or 345% was due to the sale of BAPCO
to Aquis on December 31, 1998.
Working capital, defined as current assets less current liabilities as of
December 31, 1997 and 1996 was $1.1 million and $1.3 million, respectively. The
decrease in working capital of $.2 million or 18% was due in large part to a
decrease in accrued expenses and advance billings.
Aquis had working capital of $1.0 million at December 31, 1998. In order to
finance the Bell Atlantic Acquisition, Aquis entered into a five year term loan
agreement with Finova which provided a $30 million facility. The term loan
agreement provides: 1) a $20 million initial disbursement which was used for the
Bell Atlantic Acquisition, 2) an additional loan, not to exceed $1.4 million
(the "Subsequent Loan"), which will primarily be used to make the scheduled $1.2
million payment of principal on the Seller Note, and 3) an acquisition line of
credit which will not exceed $8.2 million plus the amount of the Subsequent Loan
which was not used for the aforementioned principal payment. Aquis management
believes that cash from operations and the term loan agreement will be
sufficient to meet Aquis' operating costs, capital investment needs and
increased debt service costs associated with the term loan.
YEAR 2000
Until recently, many computer programs were written using two digits as a
space 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 the periods covered by this discussion,
BAPCO was in 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.
Prior to December 31, 1998, BAPCO divided its Y2K efforts into two primary
areas: its administrative and network systems, and third party suppliers and
vendors.
BAPCO's administrative and network systems consisted of software and
hardware systems that were a combination of internally developed software and
third party software and hardware. BAPCO's approach was to:
1. Create an inventory of items that must be assessed and prioritize
the items by how critical they are to the operations of BAPCO;
2. Assess their readiness through testing;
3. Plan and implement corrective actions; and
4. Develop contingency plans.
As of December 21, 1998, BAPCO had completed approximately 80% of the
inventory and prioritization of items. Upon the Bell Atlantic Acquisition, Aquis
assumed all responsibility for BAPCO's previously initiated Y2K efforts. Testing
plans are being completed, and Aquis plans to substantially complete testing in
the second quarter of 1999. Aquis expects that critical hardware and software
systems will either be replaced or be Y2K ready by year-end 1999. Aquis expects
to develop contingency plans by June 30, 1999, to mitigate, to the extent
possible, the effects of any significant Year 2000 problem that is not
corrected.
In addition, prior to the Bell Atlantic Acquisition, BAPCO initiated
communications with third party suppliers to determine that the supplier's
operations and the products and services they provide are Y2K compliant. Aquis
has continued this initiative, and, where practicable, will attempt to mitigate
its risks with respect to the failure of suppliers to be Y2K ready. In the event
that these third parties are not Y2K
21
<PAGE>
compliant, Aquis will seek alternative sources of supplies. However, such
failures remain a possibility and could have an adverse impact on Aquis' results
of operations or financial condition.
The total costs associated with required modifications to become Y2K
compliant are estimated to be $.2 million The total amount expended on Y2K
remediation through December 31, 1998 by BAPCO was $.1 million, which related to
the cost to repair software and related hardware problems.
The above expectations are subject to uncertainties. For example, if Aquis
is unsuccessful in identifying or fixing all Y2K problems in its critical
operations, or if Aquis is affected by the inability of suppliers or major
customers to continue operations due to such a problem, Aquis' results of
operations, liquidity, and financial condition could be materially impacted.
SEASONALITY
Pager usage is slightly higher during the spring and summer months, which
was reflected in higher incremental usage fees earned by BAPCO. BAPCO's retail
sales were subject to seasonal fluctuations that affected retail sales
generally. Otherwise, BAPCO's results were generally not significantly affected
by seasonal factors.
ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which
establishes standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. This statement
is effective for fiscal years beginning after December 15, 1997, and requires
reclassification of prior-period financial statements. No presentation of
comprehensive income has been made since the differences from net income are not
material.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
revises disclosure requirements about operating segments and establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS No. 131 requires that public business enterprises
report financial and descriptive information about their reportable operating
segments. The statement is effective for fiscal years beginning after December
15, 1997, and requires restatement of prior years in the initial year of
application. The adoption of SFAS No. 131 did not have a material impact on
BAPCO's financial statements.
In March 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position ("SOP") No. 98-1, "Accounting for the
costs of computer software developed or obtained for internal use." SOP 98-1
identifies the characteristics of internal-use software and provides examples to
assist in determining when computer software is for internal use. This SOP is
effective for financial statements for fiscal years after December 15, 1998.
Costs incurred prior to the implementation of this SOP should not be adjusted.
The adoption of SOP 98-1 is not expected to have a material impact on Aquis'
results of operations, financial position, or cash flows.
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
Aquis' 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 Aquis
management that are based on current expectations, estimates and projections
about the industries in which Aquis 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 Aquis. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
or variations of such words and similar expressions are intended to identify
such forward-looking statements.
22
<PAGE>
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. Aquis undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Subsequent to the Bell Atlantic Acquisition, Aquis began to run and operate
the paging business, and their views and objectives of how to operate the
business may differ from those previously expressed by BAPCO management.
COMPARATIVE RIGHTS OF THE COMPANY'S STOCKHOLDERS
AND AQUIS STOCKHOLDERS
Both the Company and Aquis are incorporated under the laws of the State of
Delaware and, accordingly, the rights of stockholders of the Company and Aquis
are governed by the DGCL. The rights of the stockholders of the Company and
Aquis are also governed by their respective Certificates of Incorporation and
Bylaws. In accordance with the Merger Agreement, at the Effective Time, the
Aquis Stockholders will become Company Stockholders and, as such, their rights
will be governed by the Company's Charter, as amended (see "Proposal No.1:
Merger Proposals--Amendments to the Company's Certificate of Incorporation"),
and Bylaws (the "Company's Bylaws"). Although it is not practical to compare all
the differences between the Company's Charter and the Company's Bylaws with
Aquis' Certificate of Incorporation, as amended ("Aquis' Charter"), and Bylaws
("Aquis' Bylaws"), the following is a summary of certain material differences
which may affect the rights of the Aquis Stockholders.
This summary is qualified in its entirety by reference to the full text of
such documents, copies of which are available from the Company, without charge,
to any stockholder upon receipt from any such person of an oral or written
request for such documents. Such request should be sent to the Company at Paging
Partners Corporation, Freehold Office Plaza, 4249 Route 9 North, Building 2,
Freehold, New Jersey 07728, Attention: Jeffrey Bachrach, or made by telephone at
(732) 409-7088.
AUTHORIZED CAPITAL
The total number of authorized shares of capital stock of Aquis is 195,000,
consisting of 110,000 shares of Aquis Common Stock and 85,000 shares of
preferred stock, par value $0.001 per share ("Aquis Preferred Stock"). Following
the Merger, the authorized shares of capital stock of the Company will be
30,000,000, consisting of 29,000,000 shares of the Company's Common Stock and
1,000,000 shares of preferred stock, par value $0.01 per share (the "Company's
Preferred Stock"). As of the Record Date, there were 6,326,804 and 0 shares of
the Company's Common Stock and the Company's Preferred Stock, respectively,
issued and outstanding, and 22,000 and 19,357.5 shares of Aquis Common Stock and
Aquis Preferred Stock, respectively, issued and outstanding.
BOARD OF DIRECTORS
The Aquis Bylaws provide that the number of directors shall consist of at
least one person, the exact number to be determined by Aquis' Stockholders or
Aquis' Board of Directors. Currently, Aquis' Board of Directors consists of
three members. The Company's Charter provides that the number of directors of
the Company's initial Board of Directors shall be five, which may be changed by
the Company's Board of Directors. Currently, the Company's Board of Directors
consists of five members. The Company's Charter has provided for the
classification of the Company's Board of Directors such that the whole Board is
divided into three classes with each class of directors being elected to serve
for three years. The term of Class 1 directors expires at the annual meeting of
stockholders in 2000, the term of Class 2 directors expires at the annual
meeting of stockholders in 2001 and the term of the Class 3 director expires at
the annual meeting of stockholders in 2002. The classification of members of the
Company's Board of Directors will have the effect of making it more difficult to
change the composition of such Board. At least two annual meetings of
stockholders, instead of one, generally will be required to effect a change in
the majority of the Company's Board of Directors.
23
<PAGE>
REMOVAL OF DIRECTORS
Under Aquis' Bylaws, a director can be removed with or without cause by
holders of a majority of the shares then entitled to vote at an election of
directors. Under the Company's Charter, a director may be removed only for cause
by the holders of a majority of the shares then entitled to vote at an election
of directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Under the Aquis Bylaws, whenever its number consists of three or more,
Aquis' Board of Directors may designate one or more committees, each committee
consisting of two or more directors. Under the Company's Bylaws, the Company's
Board of Directors may designate one or more committees, each committee
consisting of one or more directors.
COMPROMISE OR ARRANGEMENT WITH CREDITORS OR STOCKHOLDERS
As permitted by the DGCL, the Company's Charter has provided that a
Delaware court of equitable jurisdiction may, upon application of the Company,
its creditors or stockholders or certain receivers or trustees appointed for the
benefit of the Company, order a meeting of the Company's creditors and/or
stockholders for the purpose of considering and voting upon any proposed
compromise or arrangement between the Company on the one hand and its creditors
and/or stockholders on the other. If a majority in number representing three-
fourths in value of the affected creditors and/or stockholders agrees to the
proposed compromise or arrangement and to any reorganization resulting
therefrom, and if the court approves, the transaction shall be binding on all
affected creditors and/or stockholders as well as the Company for all purposes.
Aquis' Charter does not contain a provision of like tenor.
RESTRICTIONS ON FOREIGN OWNERSHIP
The Company's Charter contains a provision that no shares of the Company's
stock may be owned of record or beneficially by a person whose ownership thereof
would constitute a violation of Section 310(a) and 310(b) of the Communications
Act of 1934, as amended (the "Communications Act"), or any similar or successor
federal statute. The Company may, at its sole discretion, redeem any outstanding
shares of stock which are owned in violation of the foregoing sentence. Shares
redeemed by the Company may be redeemed for cash, property or rights at the
lessor of (i) fair market value at the time of redemption or (ii) the holder's
purchase price, if the holder had purchased such shares within one year prior to
the redemption. The Board of Directors has the sole discretion to determine
whether shares are owned in violation of the Communications Act, what the fair
market value of any shares to be redeemed are, and the value of any non-cash
consideration to be provided for such shares in any redemption. Aquis' Charter
does not contain a provision of like tenor.
AMENDMENT OF CHARTER AND BYLAWS
Section 242 of the DGCL provides that stockholders may amend their
corporation's certificate of incorporation if a majority of the outstanding
stock entitled to vote thereon, and a majority of the outstanding stock of each
class entitled to vote thereon as a class, has been voted in favor of the
amendment. The DGCL also provides that after a corporation has received any
payment for its stock, the power to adopt, amend or repeal bylaws resides with
the stockholders entitled to vote; provided, however, that a corporation may
grant to its board of directors in its certificate of incorporation concurrent
power to adopt, amend or repeal bylaws. Each of the Company and Aquis has
granted such power to their respective boards of directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and
24
<PAGE>
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of any threatened, pending or completed action or suit brought by or
in the right of a corporation, the corporation may indemnify a director,
officer, employee or agent of the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of the corporation, except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless the court in which such action or suit was
brought or the Delaware Court of Chancery determines that in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper. Aquis' Charter
provides that its respective officers, directors, employees and agents shall be
indemnified to the fullest extent permitted by the laws of Delaware. The
Company's Charter provides that its respective officers, directors and legal
representatives shall be indemnified to the fullest extent authorized by law
and, if authorized by its Board, any other person whom it has the power to
indemnify under Section 145 of the DGCL shall be indemnified to the fullest
extent permitted by such statute.
25
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma consolidated condensed statement of operations presented
herein gives effect, for the year ended December 31, 1998, to the Bell Atlantic
Acquisition and the Merger as if such transactions took place on January 1,
1998. It is based on the historical financial statements of the Company for the
year ended December 31, 1998, as adjusted to reflect the combined results from
recording the transactions. The pro forma consolidated condensed balance sheet
also presented herein is based upon the Company's historical balance sheet as of
December 31, 1998, and includes pro forma adjustments assuming the transactions
had occurred on that date. These statements should be read in conjunction with
the historical financial statements, and notes thereto, of Aquis and BAPCO
included in this Proxy Statement and of the Company included in the Company's
report on Form 10-KSB, for the year ended December 31, 1998. The pro forma
financial statements do not necessarily reflect results that would have occurred
had the transactions been consummated on the dates indicated, or future results,
and does not reflect benefits to be derived, if any, from the transactions.
Aquis has accounted for the Bell Atlantic Acquisition under the purchase method
of accounting at December 31, 1998. The Company is accounting for the Merger as
a reverse acquisition under the purchase method of accounting. The assumptions
and adjustments upon which the pro forma financial statements are based are set
forth in the accompanying notes.
26
<PAGE>
PAGING PARTNERS CORPORATION
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL PAGING PRO FORMA
AQUIS PARTNERS ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ -- $ 558 $ 945(D) $ 983
(520)(L)
Accounts receivable, net of allowance for doubtful
accounts................................................ 2,061 397 2,458
Inventory................................................. 2,076 120 2,196
Prepaid expenses and other current assets................. 1,012 108 1,120
------- ---------- --------- -----------
Total current assets................................ 5,149 1,183 425 6,757
------- ---------- --------- -----------
Property, plant and equipment, net.......................... 10,107 3,693 1,500(A) 15,300
Intangible assets........................................... 16,749 442 5,132(A) 22,409
86(K)
Deferred charges............................................ 330 520(D) 630
(220)(H)
------- ---------- --------- -----------
TOTAL ASSETS........................................ $32,335 $ 5,318 $ 7,443 $ 45,096
======= ========== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 2,005 $ 928 (220)(H) $ 2,713
Current maturities of long-term debt...................... -- 444 444
Advance billings.......................................... 1,033 162 1,195
Notes payable to stockholders............................. 520 (520)(L) --
Customer deposits......................................... 577 577
------- ---------- --------- -----------
Total current liabilities........................... 4,135 1,534 (740) 4,929
------- ---------- --------- -----------
Deferred tax liability...................................... -- -- 86(K) 86
Long-term debt.............................................. 22,685 1,146 $ 1,465(D) 25,296
------- ---------- --------- -----------
TOTAL LIABILITIES................................... 26,820 2,680 811 30,311
------- ---------- --------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock............................................. 5,830 -- (5,830)(B) --
Common stock................................................ -- 63 89(C) 152
Additional paid-in capital.................................. 221 12,668 9,207(A) 15,169
(12,668)(A)
5,830(B)
(89)(C)
Accumulated deficit......................................... (296) (10,093) 10,093(A) (296)
Note receivable from stockholder............................ (240) -- -- (240)
------- ---------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY.......................... 5,515 2,638 6,632 14,785
------- ---------- --------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $32,335 $ 5,318 $ 7,443 $ 45,096
======= ========== ========= ===========
Book value per share........................................ $ 0.42 $ 0.97
---------- -----------
Shares Outstanding.......................................... 6,327,000 15,219,076(S)
========== ===========
</TABLE>
27
<PAGE>
PAGING PARTNERS CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
BELL
ATLANTIC HISTORICAL
HISTORICAL HISTORICAL ACQUISITION ADJUSTED PAGING PRO FORMA
AQUIS BAPCO ADJUSTMENTS AQUIS PARTNERS ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Paging services, rental and
maintenance.................. -- $23,309 $23,309 $ 7,542 $ 30,851
Equipment sales, installation
and other.................... -- 3,123 3,123 2,360 5,483
----- ------- ------- ------- ---------- -------- -----------
Total revenues......... -- 26,432 -- 26,432 9,902 -- 36,334
----- ------- ------- ------- ---------- -------- -----------
OPERATING EXPENSES
Paging services, rental and
maintenance.................. -- 8,902 8,902 1,875 $ (3,933)(Q1) 6,844
Cost of equipment sales,
installation and other....... -- 2,709 2,709 2,422 5,131
Selling and marketing......... -- 1,678 1,678 511 2,189
General and administrative.... $ 38 6,921 $ 169(J) 7,128 1,941 1,154(Q2) 9,728
(495)(R)
Depreciation and
amortization................. -- 4,323 2,727(E) 7,684 1,272 513(O) 9,684
634(I) -- 215(P)
Provision for doubtful
accounts..................... -- 1,154 1,154 (1,154)(Q2) --
Technical..................... -- -- -- 2,575 3,933(Q1) 6,508
----- ------- ------- ------- ---------- -------- -----------
Total operating
expenses............. 38 25,687 3,530 29,255 10,596 233 40,084
----- ------- ------- ------- ---------- -------- -----------
Income (loss) from
operations................... (38) 745 (3,530) (2,823) (694) (233) (3,750)
Merger costs.................. 151 151
Emergency satellite transfer
costs........................ -- -- -- 100 100
Interest expense, net......... 258 -- 1,900(F) 2,640 202 2,842
126(H)
374(G)
(18)(M)
----- ------- ------- ------- ---------- -------- -----------
Income (loss) before income
taxes and extraordinary
item......................... (296) 745 (5,912) (5,463) (1,147) (233) (6,843)
Provision for income taxes.... -- 296 (296)(K) -- -- --
----- ------- ------- ------- ---------- -------- -----------
Income (loss) before
extraordinary item........... (296) 449 (5,616) (5,463) (1,147) (233) (6,843)
Extraordinary item, net of
income taxes................. -- 682 (682)(N) -- -- --
----- ------- ------- ------- ---------- -------- -----------
NET INCOME (LOSS)............. $(296) $ 1,131 $(6,298) $(5,463) $ (1,147) $ (233) $ (6,843)
===== ======= ======= ======= ========== ======== ===========
Weighted number of shares
outstanding.................. 6,305,000 15,219,076(S)
========== ===========
Basic and dilutive net loss
per common share............. $ (0.18) $ (0.45)
========== ===========
</TABLE>
28
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
The exchange of Aquis' Common Stock for Paging Partners' Common Stock in
connection with the Merger is being accounted for as a reverse acquisition for
financial reporting purposes as if Aquis had acquired Paging Partners. As such,
the assets and liabilities of Paging Partners have been adjusted to estimated
fair value in connection with the application of purchase accounting.
(A) Represents adjustments to record the Merger based upon an assumed purchase
price of Paging Partners stock of $9,270. The purchase price was calculated
assuming a market value of Paging Partners' Shares of $1.375 per share
times the outstanding shares of Paging Partners Common Stock of 6,327,000.
The share price was determined based upon the average closing stock prices
for the 5 days from February 8 through February 12, 1999. The total
purchase price is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES AVERAGE VALUE TOTAL
SECURITY OUTSTANDING PER SHARE CONSIDERATION
- -------- ---------------- ------------- -------------
<S> <C> <C> <C>
Common stock.......................................... 6,327,000 $ 1.375 $ 8,700
Merger and other transaction costs.................... 570
---------
Total purchase price........................ $ 9,270
=========
Purchase price (see above)
Common stock..................................... $ 63
Additional paid-in capital....................... 9,207
---------
9,270
Less: Historical book value of Paging Partners
equity
Common stock..................................... $ 63
Additional paid-in capital....................... 12,668
Accumulated deficit.............................. (10,093) 2,638
-------
Less: adjustment to reflect the paging network
assets at fair value............................. 1,500
---------
Excess of cost over value of tangible net assets.... $ 5,132
=========
</TABLE>
Note: The historical costs of the assets and liabilities of Paging Partners
are estimated to be at their fair market value except for the paging network
assets and certain intangible assets.
(B) To reflect the conversion of 78,000 outstanding shares of Aquis preferred
stock into common stock prior to the merger with Paging Partners.
(C) Conversion of Aquis common shares into Paging Partners common shares at a
conversion rate of one share of Aquis for 88.92076 shares of Paging
Partners.
(D) To record $20,000 of borrowings under the senior credit facility, the
payment of $18,535 to Bell Atlantic, the establishment of an escrow cash
account and payment of the balance of financing costs incurred.
(E) To reflect increase in amortization expense of $2,727 due to the increase
in intangible assets resulting from the acquisition of BAPCO. The
intangible assets, which include customer lists and FCC licenses, relating
to the BAPCO acquisition are being amortized on a straight line basis,
based on management's estimate of their useful lives, over 3 and 10 years,
respectively. The FCC licenses are issued for a 10 year period, and are
eligible for renewal. Industry practice for amortization of such licenses
usually ranges from 10 to 20 years.
(F) To reflect increase in interest expense of $1,900 due to the senior credit
financing of $20,000 used for the BAPCO acquisition at an assumed 9.5%
interest rate. The assumed interest rate is based upon the December 31,
1998 Citibank N.A. corporate base rate, floating plus 175 basis points.
29
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(G) To reflect interest expense of $374 on the $4,150 seller note at an 8.75%
interest rate. The interest rate is at one percentage point above the
December 31, 1998 base rate quoted by Chase Manhattan Bank.
(H) To reflect increase in amortization expense of $126 for the deferred
financing costs over the term of the senior credit facility which is 5
years. To reflect in the pro forma consolidated condensed balance sheet the
reversal of the deferred costs capitalized prior to the Merger.
(I) To reflect increase in depreciation expense of $634 attributable to the
depreciation of the paging network assets acquired from the OTCs calculated
on a straight-line basis over 7 years. Management believes that 7 years
approximates the estimated useful lives of the network assets and is
consistent with industry practice.
(J) To reflect the incremental impact of new officer contracts of $169.
(K) Temporary differences give rise to a net deferred tax liability of $86 and
a deferred tax asset of $64, which has a 100% valuation allowance.
Adjustment to the provision for income taxes since the pro forma reflects a
pre-tax loss for both financial statement and pro forma tax return
purposes.
(L) To reflect the repayment of the notes payable to stockholders.
(M) To reflect interest income of $18 on the note receivable from a
stockholder.
(N) To reflect the reversal of the extraordinary item.
(O) To reflect increase in amortization expense of $513 due to the increase in
intangible assets resulting from the merger with Paging Partners. The
intangible assets relating to the merger with Paging Partners are
attributable to the value allocated to FCC licenses, and are being
amortized on a straight line basis over 10 years. The FCC licenses are
issued for a 10 year period, and are eligible for renewal. Industry
practice for amortization of such licenses usually ranges from 10 to 20
years.
(P) To reflect increase in depreciation expense of $215 for the step-up in the
fair value of network assets based upon an average useful life of 7 years.
Management believes that 7 years approximates the estimated useful lives of
the network assets and is consistent with industry practice.
(Q) To reflect reclass adjustments for the following items:
(1) To reclass operating costs of Aquis' paging system which include
telephony, transmitter site rental and engineering staff costs from
cost of service to technical expense.
(2) To reclass the provision for doubtful accounts for Aquis to general
and administrative expense.
(R) Pro forma adjustment to reflect the reduction of salaries of $495 for the
officers who will not be a part of the ongoing operations of the merged
company.
(S) To increase the weighted average shares outstanding at December 31, 1998 for
the issuance of Paging Partners common stock to Aquis stockholders. These
shares have been accounted for on a pro forma basis to be outstanding during
the entire year.
<TABLE>
<S> <C>
Basic....................................................... 8,892
Dilutive.................................................... 8,892
</TABLE>
30
<PAGE>
PROPOSAL NO. 2
COMPANY NAME CHANGE
The Board of Directors has adopted resolutions approving and recommending
to the Company's Stockholders for their approval, in the event the Merger is
approved, an amendment to Article First of the Company's Charter to change the
Company's name to "Aquis Communications Group, Inc." The current name of the
Company is Paging Partners Corporation.
The name "Paging Partners Corporation" is known in the marketplace as a
premier provider of transmission services to resellers of paging products and
services. Following the Merger, Aquis will be a direct provider of paging
products and services as well as a provider of transmission services. Management
believes that it is important to the stockholders and the customers of the
merged company that the name reflect its ability to expand and enhance its
distribution strategies as well as its products and services.
Following the Merger, the Surviving Corporation's distribution network will
be divided approximately one-third direct sales and two-thirds indirect sales.
The Company's growth strategy is directed more towards the direct channel, which
reflects its desire to have more direct contact and control of the end user.
This is important in order to reduce churn and increase its ability to offer
enhanced and additional services to its customer base.
If approved by the Company's Stockholders and the other Merger Proposals
are approved, this amendment to the Company's Charter will become effective upon
the filing with the Secretary of State of the State of Delaware a Certificate of
Amendment, which filing is expected to take place as of the Effective Time.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 3
INCREASE OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted resolutions approving and recommending
to the Company's Stockholders for their approval, in the event the Merger is
approved, an amendment to Article Fourth, Section 1, of the Company's Charter to
provide therein for an increase in the number of authorized shares of the
Company's Common Stock to 30,000,000 shares.
The authorized capital stock of the Company currently consists of (i)
20,000,000 shares of Common Stock, of which 6,326,804 shares were issued and as
of the Record Date, 403,900 shares were reserved for issuance upon exercise of
options under the Plan (352,150 of which are currently outstanding) and
2,140,000 shares were reserved for issuance upon the exercise of certain
currently outstanding warrants, and (ii) 1,000,000 shares of Preferred Stock, of
which no shares were issued and outstanding as of the Record Date.
Pursuant to the terms of the Merger Agreement, the Company will be issuing
an aggregate of 8,892,076 shares of its Common Stock to the Aquis Stockholders.
Following the issuance of such shares, the number of authorized, non-reserved
shares of the Company's Common Stock available for issuance by the Company in
the future will be greatly reduced. Hence, much of the flexibility with respect
to possible future stock splits, equity financings, stock-for-stock
acquisitions, stock dividends or other transactions that involve the issuance of
the Company's Common Stock will be lost. This proposed amendment will preserve
the Company's ability to take such actions. The Board of Directors believes the
authorization of the increase in the number of shares of the Company's Common
Stock is in the best interest of the Company's Stockholders.
31
<PAGE>
While the Company from time to time may consider issuing shares of its
Common Stock in connection with acquisitions, the Company currently has no
plans, agreements or understandings, except in connection with the Merger, for
issuing any shares of Common Stock for such purposes, nor does the Company
currently have any plans, agreements or understandings for otherwise issuing any
shares of its Common Stock other than in connection with outstanding options. In
addition, the Company currently has no plans, agreements or understandings for
issuing any shares of its already authorized preferred stock. However, if this
proposal is approved by the Company's Stockholders, subject to compliance with
applicable laws and regulations, the Board of Directors in most instances could
authorize the issuance of all or part of the additional shares at any time for
any proper corporate purpose without further stockholder action.
If approved by the Company's Stockholders and the other Merger Proposals
are approved, the amendments to the Company's Charter will become effective upon
filing with the Secretary of State of the State of Delaware a Certificate of
Amendment, which filing is expected to take place as of the Effective Time.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 4
REVERSE STOCK SPLIT
The Board of Directors has approved and directed that the proposed
potential reverse stock split be submitted to the Company's Stockholders for
consideration and action. If this proposal is approved by the Company's
Stockholders, the Board of Directors will have the authority to implement the
reverse stock split in the event that it deems such action necessary to enable
the Company's Common Stock to continue to be listed on Nasdaq. The Company has
been informed by Nasdaq that it will treat the Merger as a "reverse merger,"
which will require the Company to file with Nasdaq a new listing application
covering the Company's Common Stock following the Merger. It is currently the
Company's intention to appeal such decision. Nasdaq has also informed the
Company that the listing application can be processed in such a way that the new
listing will take effect as of the Effective Time, thereby creating a seamless
listing of the Company's Common Stock. One of the requirements for a company
filing a new listing application is that the price of the common stock must be
at least $4.00. Therefore, in the event the Merger is determined to be a
"reverse merger" and the Company is required to file a new listing application,
then the Board of Directors will implement the reverse stock split.
In the proposed reverse stock split, up to every eight shares of the
Company's Common Stock issued and outstanding immediately prior thereto,
including the Merger Shares (the "Old Common Stock"), will be reclassified as
and changed into one share of the Company's Common Stock (the "New Common
Stock"), subject to the treatment of fractional share interests as described
below. In the event this proposal is approved and the Board of Directors
determines to implement the reverse stock split, the Company will determine the
ratio of the split and will send transmittal forms to the holders of the Old
Common Stock to be used in forwarding their certificates representing shares of
Old Common Stock for surrender and exchange for certificates representing whole
shares of New Common Stock. Until so surrendered, each current certificate
representing shares of Old Common Stock will be deemed for all corporate
purposes after the effectiveness of the reverse stock split to evidence
ownership of New Common Stock in appropriate whole number shares.
No certificates or scrip representing fractional share interests in the New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights as a stockholder of the Company.
All fractional shares of one-half share or more will be increased to the next
higher whole
32
<PAGE>
number of shares, and all fractional shares of less than one-half share will be
decreased to the next lower whole number of shares.
The Board of Directors believes that a reverse stock split may be advisable
in order to increase the trading price of the Company's Common Stock to levels
acceptable to Nasdaq and may be necessary in order to maintain the listing of
the Company's Common Stock on Nasdaq. The Board of Directors believes that a
decrease in the number of shares of the Company's Common Stock outstanding
without any material alteration of the proportionate economic interest in the
Company represented by individual shareholdings may increase the trading price
of such shares to a price more appropriate for an exchange-listed security,
although no assurance can be given that the market price of the Company's Common
Stock will rise in proportion to the reduction in the number of outstanding
shares resulting from any reverse stock split.
In addition, the Board of Directors also believes that the current per
share price of the Company's Common Stock is too low. Many brokerage firms and
institutional investors tend to be reluctant to recommend lower-priced stocks to
their clients or to hold them in their own portfolios. Certain policies and
practices of the securities industry may tend to discourage individual brokers
within those firms from dealing in lower-priced stocks. Some of those policies
and practices involve time-consuming procedures that make the handling of lower
priced stocks economically unattractive. The brokerage commission on a sale of
lower-priced stock may also represent a higher percentage of the sale price than
the brokerage commission on a higher-priced issue.
The reverse stock split will not reduce or otherwise affect the authorized
capital stock of the Company. Proportionate voting rights and other rights of
the Company's Stockholders will not be altered by any reverse stock split.
Dissenting stockholders have no appraisal rights under Delaware law or under the
Company's Charter and Bylaws in connection with the reverse stock split.
The par value of the Company's Common Stock per share will remain at $.01
following the reverse stock split, and the number of shares of the Company's
Common Stock outstanding will be reduced. As a consequence, the aggregate par
value of the Company's Common Stock will be reduced, while the aggregate capital
in excess of par value attributable to the outstanding shares of the Company's
Common Stock for statutory and accounting purposes will be correspondingly
increased.
As of March 10, 1999, the Company had outstanding (i) options to purchase
352,150 shares of the Company's Common Stock granted pursuant to the Option
Plan, with exercise prices per share ranging from $0.875 to $4.188, (ii)
warrants to purchase 1,800,000 shares of the Company's Common Stock (expiring on
May 26, 1999), with an exercise price per share of $6.60, and (iii) certain unit
purchase options to purchase an aggregate of 170,000 units (the "Units"), each
Unit consisting of one share of the Company's Common Stock and one warrant to
purchase one additional share of the Company's Common Stock. The unit purchase
options have an exercise price per Unit of $9.90 and the underlying warrants
have an exercise price per share of $6.60. Upon the effectiveness of the reverse
stock split, the Board of Directors will make a proportional downward adjustment
in the number of shares subject to outstanding options and warrants, and a
corresponding upward adjustment in the per share exercise prices to reflect such
split.
The Common Stock is listed for trading on Nasdaq and on the Record Date the
reported closing price of the Common Stock was $1.3125 per share.
FEDERAL INCOME TAX CONSEQUENCES OF REVERSE STOCK SPLIT
The following discussion is intended only as a summary of certain material
federal income tax consequences of the reverse stock split, does not purport to
be complete and is for general information only. It does not discuss any state,
local, foreign or other U.S. federal income tax consequences. Also, it does not
address the tax consequences to holders that are subject to special tax rules,
such as banks, insurance companies, regulated investment companies, personal
holding companies, foreign entities, nonresident alien individuals,
broker-dealers and tax-exempt entities. The discussion is based on the
provisions of the United States federal income tax law as of the date hereof,
which is subject to change retroactively as well as prospectively. This summary
also assumes that the Old Common Stock has at all times been held, and that
33
<PAGE>
the New Common Stock will be held, as a "capital asset," as defined in the Code.
The tax treatment of a stockholder may vary depending upon the particular facts
and circumstances of such stockholder. ACCORDINGLY, EACH STOCKHOLDER SHOULD
CONSULT WITH SUCH STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT.
The receipt of shares of New Common Stock in the reverse stock split should
be a nontaxable transaction under the Code for federal income tax purposes.
Consequently, a stockholder receiving shares of New Common Stock should not
recognize either gain or loss, or any other type of income, with respect to
whole shares of New Common Stock received as a result of the split. In addition,
the tax basis of such stockholder's shares of Old Common Stock prior to the
split will carry over as the tax basis of the stockholder's shares of New Common
Stock. Each of the Company's Stockholder will be required to allocate his or her
basis in his or her shares of Old Common Stock ratably among the total number of
shares of New Common Stock owned following the split. The holding period of the
shares of New Common Stock will also include the holding period during which the
stockholder held the Old Common Stock.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 5
AMENDMENTS TO THE 1994 INCENTIVE STOCK OPTION PLAN
Description of the Plan
The following is a brief summary of certain provisions of the Option Plan,
which summary is qualified in its entirety by the actual text of the Option
Plan. The Company will furnish without charge a copy of the Option Plan to any
of the Company's Stockholders upon receipt from any such person of an oral or
written request for the Option Plan. Such requests should be sent to the Company
at Paging Partners Corporation, Freehold Office Plaza, 4249 Route 9 North,
Building 2, Freehold, New Jersey 07728, Attention: Jeffrey Bachrach, or made by
telephone at (732) 409-7088.
The Board of Directors believes that the Option Plan is desirable to
attract and retain executives and other key employees of outstanding ability.
Currently under the Option Plan, options to purchase an aggregate of not more
than 450,000 shares of the Company's Common Stock may be granted from time to
time to key employees, officers, directors, consultants, advisors, agents or
independent consultants to the Company or to any of its subsidiaries. As of the
Record Date, the Company had issued options under the Option Plan to purchase an
aggregate of 403,900 shares of the Company's Common Stock (of which options to
purchase 51,750 shares have been exercised).
The Option Plan is administered by the Board of Directors which may empower
a committee of directors to administer the Option Plan. The Board of Directors
is generally empowered to interpret the Option Plan, prescribe rules and
regulations relating thereto, determine the terms of the option agreements,
amend them with the consent of the optionee, determine the employees to whom
options are to be granted, and determine the number of shares subject to each
option and the exercise price thereof. The per-share exercise price for
incentive stock options ("ISOs") and for non-qualified stock options ("NQSOs")
will not be less than 100% of the fair market value of a share of the Company's
Common Stock on the date the option is granted (110% of fair market value on the
date of grant of an ISO if the optionee owns more than 10% of the Company's
Common Stock). Upon exercise of an option, at the discretion of the Board of
Directors, the optionee may pay
34
<PAGE>
the purchase price with previously acquired securities of the Company or the
Company may loan some or all of the purchase price to the optionee.
Options are exercisable for a term determined by the Board of Directors,
which will not be less than six months nor greater than ten years from the date
of grant (five years from the date of grant if the optionee owns more than 10%
of the Company's Common Stock). Options may be exercised only while the original
grantee has a relationship with the Company which confers eligibility to be
granted options or within three months after termination of such relationship
with the Company, or up to one year after death or permanent and total
disability. In the event of the termination of such relationship between the
original grantee and the Company for cause (as defined in the Option Plan) or if
the original grantee terminates his employment voluntarily and without the
consent of the Company, all options granted to that original optionee terminate
immediately. In the event of certain basic changes in the Company, including the
dissolution or a change in control of the Company (as defined in the Option
Plan), in the discretion of the Board of Directors, each option may become fully
and immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. NQSOs may be transferred to the optionee's
spouse or lineal descendants, subject to certain restrictions. ISOs may be
exercised during the holder's lifetime only by the holder, his or her guardian
or legal representative.
Options granted pursuant to the Plan may be designated as ISOs, with the
attendant tax benefits provided under Section 421 and 422 of the Code.
Accordingly, the Option Plan provides that the aggregate fair market value
(determined at the time an ISO is granted) of the Company's Common Stock subject
to ISOs exercisable for the first time by an employee during any calendar year
(under all plans of the Company and its subsidiaries) may not exceed $100,000.
The Board may modify, suspend or terminate the Option Plan; provided, however,
that certain material modifications affecting the Option Plan must be approved
by the stockholders, and any change in the Option Plan that may adversely affect
an optionee's rights under an option previously granted under the Option Plan
requires the consent of such optionee.
The Proposed Amendments
The Board of Directors has approved and proposed for submission for
approval by the Company's Stockholders at the Special Meeting, the following
amendments to the Option Plan:
(i) To increase from 450,000 to 1,500,000 the number of shares of the
Company's Common Stock as to which purchase options may be granted from
time to time.
To date, the Company has granted options to purchase 404,200 shares of the
Company's Common Stock pursuant to the Option Plan and, pursuant to the Merger
Agreement, Rollover Options (as defined below) to purchase an additional 622,445
will be outstanding following the Merger. The Board of Directors believes that
the ability to grant options pursuant to the Option Plan has assisted the
Company in its efforts to attract and retain employees of outstanding ability.
The Board of Directors believes further that an increase in the number of shares
as to which options may be granted is necessary to enable the Company to
continue to use stock options as a way to attract and maintain highly qualified
personnel. Except in connection with the Rollover Options, neither the Board of
Directors nor the Compensation Committee has any current plans to issue options
to purchase shares of the Company's Common Stock. Nevertheless, the Board of
Directors believes it is appropriate at this time to increase by 1,050,000
shares the number of shares of the Company's Common Stock as to which options
may be granted pursuant to the Option Plan to assure the Company sufficient
flexibility when it may desire to grant stock options in the future. If this
amendment is approved, a maximum of 1,500,000 shares of the Company's Common
Stock will be available for awards under the Option Plan, subject to adjustment
in the event of stock splits or other similar changes.
(ii) To provide for the "rollover" of the Aquis Options in accordance
with the terms of the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time each outstanding
Aquis Option, whether vested or unvested, will become an option (the "Rollover
Options") to acquire a number of shares of the Company's Common Stock equal to
the product (rounded down to the nearest whole number) of (a) the
35
<PAGE>
number of shares of Aquis Common Stock issuable upon the exercise of such Aquis
Option immediately prior to the Effective Time and (b) the Conversion Number.
The exercise price of each Rollover Option will be $1.125. As soon as
practicable after the Effective Time, the Company is obligated to register under
the Securities Act the 622,445 shares of the Company's Common Stock subject to
the Rollover Options and use its best efforts to maintain the effectiveness of
such registration statement for so long as such Rollover Options remain
outstanding.
(iii) To extend the period during which currently outstanding options
under the Option Plan may be exercised after the termination of an
optionee's directorship, employment or consulting arrangement with the
Company to two years from the date of such termination.
Currently, options may be exercised only while the original grantee has a
relationship with the Company which confers eligibility to be granted options or
within three months after termination of such relationship with the Company, or
up to one year after death or total and permanent disability. In the event of
the termination of such relationship between the original grantee and the
Company for cause (as defined in the Option Plan) or if the original grantee
terminates his employment voluntarily and without the consent of the Company,
all options granted to that original optionee terminate immediately.
Pursuant to the Merger Agreement, immediately prior to the Effective Time
all directors and officers of the Company will resign and be replaced by the
individuals set forth in the Merger Agreement. The purpose of this proposed
amendment is to extend the period in which such officers and directors (as well
as all other optionees) may exercise their options from three months to two
years. This will enable such individuals to potentially profit from an increase
in the price of the Company's Common Stock in the near future due to events
which they were at least partially responsible for.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 6
ELECTION OF DIRECTORS
The Company currently has a classified Board of Directors of five persons
divided into three classes. The size of the Board of Directors will be increased
to seven persons if the Merger Proposals are approved. Directors of each class
are elected at the Annual Meeting of stockholders held in the year in which the
term for such class expires and will serve thereafter for three years. The Board
of Directors has approved and directed that the Company's Stockholders be asked
to consider and vote upon the election of directors to the Board of Directors,
pursuant to the terms of the Merger Agreement.
The Merger Agreement provides that, at the Effective Time, the individuals
set forth below will be the members of the Board of Directors. Included for each
nominee is his or her name, age, his or her principal occupations during the
last five years and any additional directorships in publicly-held companies. The
information is as of March 10, 1999.
Term to Expire in 2002
PATRICK M. EGAN, age 47, has been the Chairman of the Board of Aquis since
October 1997. Mr. Egan has also been the Chairman of the Board and Chief
Executive Officer of Select Security, an electronic security services company
servicing multiple markets primarily in central Pennsylvania, since November of
1997. For approximately 27 years prior thereto, Mr. Egan acted as the President
of the Commonwealth Security Systems, Inc., a major provider of electronic
security services in the mid-Atlantic region.
36
<PAGE>
LEONARD D. FINK, age 60, founded the Company with Richard J. Giacchi in
August 1990. Mr. Fink served as Secretary and Treasurer of the general partner
of Paging Partners, L.P. since its formation and was appointed Chairman of the
Company upon its organization in February 1994. Since August 1984, Mr. Fink has
served as President of MessageBank, Inc., a privately held voice
mail/telecommunications service business which he founded and continues to own.
From June 1964 through February 1983, Mr. Fink served as President of Phone
Depots, Inc., a radio common carrier paging business he founded and subsequently
sold to Paging Network, Inc. ("PageNet").
ROBERT DAVIDOFF, age 71, has served as a director of the Company since its
organization in February 1994. He is currently serving as Managing Director of
Carl Marks & Co., Inc., an investment banking firm, where he has been employed
since June 1950. He is also a general partner of CMNY Capital, L.P., an
investment company founded in March 1962, general partner of CMNY Capital II,
L.P., a small business investment company founded in June 1989, and chairman of
CM Capital Corporation, an investment vehicle which he founded in March 1982,
all of which are affiliated with Carl Marks & Co., Inc. Mr. Davidoff serves on
the Board of Directors of Hubco Exploration, Inc., Marisa Christina Corporation
and Rex Stores Corporation, all of which are publicly held corporations.
Term to Expire 2001
MICHAEL SALERNO, age 39, has been the Managing Director of Select Capital
Corporation, an investment management and private equity investment firm, since
July 1996. From June 1995 to July 1996, he was the Chief Financial Officer of
American Future Systems, a privately held publishing company. From November 1989
to June 1995, Mr. Salerno was an officer and director of the predecessor to
Select Capital Corporation. Prior thereto, he was the President of MT&T Capital,
the venture capital and investment banking subsidiary of MT&T Bank Corp., a
large regional bank holding company.
MONTE ENGLER, age 56, served as legal adviser to Paging Partners, L.P.,
predecessor to the Company, since its inception, and as a director of the
Company since its organization in February 1994. He is a partner at the law firm
of Phillips, Nizer, Benjamin, Krim & Ballon LLP ("PNBKB"), specializing in
telecommunications matters, where he has worked since November 1984. In
addition, Mr. Engler currently serves as the attorney for the New York State
Radio Common Carrier Association, a paging company trade association. Mr. Engler
was one of the founders of and formerly counsel to the predecessor company to
Cellular One, the non-wireline cellular operator in the New York metropolitan
area.
Term to Expire 2000
JOHN X. ADILETTA, age 50, has been the President and Chief Executive
Officer of Aquis since September 1997. Mr. Adiletta is a Principal at PCS
Management Group, a company that provides financial advisory and merger and
acquisition services to the wireless messaging industry, which he founded in
July 1993. From June 1986 to July 1993, Mr. Adiletta was the Chief Operating
Officer, Principal Financial Officer and a Director of PageAmerica Group, Inc.,
a publicly traded, FCC licensed facilities-based wireless provider.
JOHN B. FRIELING, age 43, has been the Vice Chairman of Aquis since June
1998. Mr. Frieling is the co-founder and has been the Managing Director of
Deerfield Partners, LLC, an investment banking firm, since June 1997. From June
1985 through June 1997, he was a founding member and Vice President of Bariston
Associates, Inc., a Boston-based merchant banking firm, where his
responsibilities included the origination, acquisition and implementation of
investments in operating businesses, particularly in the communications and
electronic security sectors. Prior to joining Bariston Associates, he was an
Associate in the acquisitions department of Winthrop Financial Associates. Prior
thereto, Mr. Frieling practiced corporate law specializing in mergers,
acquisitions and leverage buyouts. He currently serves as Chairman of the Board
of Modis Training Technologies, Inc., an Orlando-based software company which
delivers sophisticated interactive training packages to corporations through
computer based training systems and virtual reality simulations and is on the
Boards of Directors of Touch Technology International, Inc., a Phoenix-based
company that is a
37
<PAGE>
leader in transaction processing for smart card applications, and Life Memorial
Partners, Inc., a Boston-based consolidator of funeral homes and services.
No family relationship exists between any directors, nominees or executive
officers of the Company.
EXECUTIVE OFFICERS
The Merger Agreement provides that at the Effective Time the individuals
set forth below will be the executive officers of the Company. The names of the
executive officers and their respective ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John X. Adiletta....................... 50 President and Chief Executive Officer
D. Brian Plunkett...................... 42 Chief Financial Officer, Vice
President, Treasurer and Assistant
Secretary
</TABLE>
Set forth below is certain information concerning the executive officers of
the Company following the Merger. Please refer to the information provided above
under "Election of Directors" for biographical information regarding the balance
of the Company's officers following the Merger.
D. BRIAN PLUNKETT, age 42, has over 15 years of experience in the financial
area of the wireless service industry. He has served the Chief Financial
Officer, Vice President, Treasurer and Assistant Secretary of Aquis since
January 1, 1999. Prior thereto, he had been as the Chief Financial Officer for
NationPage, Inc., an FCC licensed facilities-based wireless provider operating
primarily in Eastern Pennsylvania and Central New York, since January 1995. Mr.
Plunkett was instrumental in executing a plan which saw the company grow from
15,000 units and $3.2 million in revenues to 85,000 units and over $9.0 million
in revenues, which resulted in the sale of the company for approximately $28
million. For more than ten years prior thereto, Mr. Plunkett was employed by
PageAmerica Group, Inc., a publicly traded, FCC licensed facilities-based
wireless provider where he served as Vice President of Finance and Principal
Accounting Officer. At both companies he played a key role in the identification
and integration of acquisition targets. Mr. Plunkett also served as Controller
for Paging Network, Inc. Mr. Plunkett is a Certified Public Accountant.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 7
TRANSFER OF THE COMPANY'S ASSETS
Pursuant to the terms of the Merger Agreement, immediately following the
Effective Time, the Company will transfer all or substantially all of its assets
to the Surviving Corporation so that following the Merger the Company will be a
holding company and the Surviving Corporation will be the operating entity. This
structure is being required by FINOVA Capital Corporation ("FINOVA"). Pursuant
to an agreement between Aquis and FINOVA, FINOVA is agreeing to lend up to
$30,000,000 to Aquis in connection with the Bell Atlantic Acquisition, the
Merger and for other business purposes. Such loan will be secured by a lien on
all of the assets of Aquis and the Surviving Corporation; however, a lien may
not be placed on licenses issued by the FCC. Therefore, in order for the FCC
licenses to be included in the collateral for the loans, the Surviving
Corporation will possess all of the assets and FINOVA will have a lien on the
shares of the common stock of the Surviving Corporation held by the Company as
well as the assets of the Surviving Corporation other than the licenses.
38
<PAGE>
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Special Meeting. However, the approval of this proposal is also contingent on
the approval of all of the other Merger Proposals.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
PROPOSAL NO. 8
REVERSE SPLIT PROPOSAL
If the Merger Proposals do not receive votes sufficient for approval, then
the Board of Directors has approved and directed that the proposed potential
reverse stock split be submitted to the Company's Stockholders for consideration
and action. If this proposal is approved by the Company's Stockholders, the
Board of Directors will have the authority to implement the reverse stock split
in the event that it deems such action necessary to enable the Company's Common
Stock to continue to be listed on Nasdaq. In the proposed reverse stock split,
up to every four shares of the Company's Old Common Stock issued and outstanding
immediately prior thereto will be reclassified as and changed into one share of
the Company's New Common Stock, subject to the treatment of fractional share
interests as described below. In the event this proposal is approved and the
Board of Directors determines to implement the reverse stock split, the Company
will determine the ratio of the split and will send transmittal forms to the
holders of the Old Common Stock to be used in forwarding their certificates
representing shares of Old Common Stock for surrender and exchange for
certificates representing whole shares of New Common Stock. Until so
surrendered, each current certificate representing shares of Old Common Stock
will be deemed for all corporate purposes after the effectiveness of the reverse
stock split to evidence ownership of New Common Stock in appropriate whole
number shares.
No certificates or scrip representing fractional share interests in the New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights as a stockholder of the Company.
All fractional shares of one-half share or more will be increased to the next
higher whole number of shares, and all fractional shares of less than one-half
share will be decreased to the next lower whole number of shares. The
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock cast at the Special Meeting is required for the approval
of the reverse stock split.
THE BOARD OF DIRECTORS RECOMMENDS, IF THE MERGER PROPOSALS ARE NOT
APPROVED, THAT HOLDERS OF THE COMPANY'S COMMON STOCK VOTE "FOR" THE APPROVAL OF
THE REVERSE SPLIT PROPOSAL.
The Board of Directors believes that a reverse stock split may be advisable
in order to increase the trading price of the Company's Common Stock to levels
acceptable to Nasdaq and may be necessary in order to maintain the listing of
the Company's Common Stock on Nasdaq. The Board of Directors believes that a
decrease in the number of shares of the Company's Common Stock outstanding
without any material alteration of the proportionate economic interest in the
Company represented by individual shareholdings may increase the trading price
of such shares to a price more appropriate for an exchange-listed security,
although no assurance can be given that the market price of the Company's Common
Stock will rise in proportion to the reduction in the number of outstanding
shares resulting from any reverse stock split.
In addition, the Board of Directors also believes that the current per
share price of the Company's Common Stock is too low. Many brokerage firms and
institutional investors tend to be reluctant to recommend lower-priced stocks to
their clients or to hold them in their own portfolios. Certain policies and
practices of the securities industry may tend to discourage individual brokers
within those firms from dealing in lower-priced stocks. Some of those policies
and practices involve time-consuming procedures that make the handling of lower
priced stocks economically unattractive. The brokerage commission on a sale of
lower-priced stock may also represent a higher percentage of the sale price than
the brokerage commission on a higher-priced issue.
39
<PAGE>
The reverse stock split will not reduce or otherwise affect the authorized
capital stock of the Company. Proportionate voting rights and other rights of
the Company's Stockholders will not be altered by any reverse stock split.
Dissenting stockholders have no appraisal rights under Delaware law or under the
Company's Charter and Bylaws in connection with the reverse stock split.
The par value of the Company's Common Stock per share will remain at $.01
following the reverse stock split, and the number of shares of the Company's
Common Stock outstanding will be reduced. As a consequence, the aggregate par
value of the Company's Common Stock will be reduced, while the aggregate capital
in excess of par value attributable to the outstanding shares of the Company's
Common Stock for statutory and accounting purposes will be correspondingly
increased.
As of March 10, 1999, the Company had outstanding (i) options to purchase
352,150 shares of the Company's Common Stock granted pursuant to the Option
Plan, with exercise prices per share ranging from $0.875 to $4.188, (ii)
warrants to purchase 1,800,000 shares of the Company's Common Stock (expiring on
May 26, 1999), with an exercise price per share of $6.60, and (iii) certain unit
purchase options to purchase an aggregate of 170,000 Units, each Unit consisting
of one share of the Company's Common Stock and one warrant to purchase one
additional share of the Company's Common Stock. The unit purchase options have
an exercise price per Unit of $9.90 and the underlying warrants have an exercise
price per share of $6.60. Upon the effectiveness of the reverse stock split, the
Board of Directors will make a proportional downward adjustment in the number of
shares subject to outstanding options and a corresponding upward adjustment in
the per share exercise prices to reflect such split.
The Common Stock is listed for trading on Nasdaq and on the Record Date the
reported closing price of the Common Stock was $1.3125 per share.
FEDERAL INCOME TAX CONSEQUENCES OF REVERSE STOCK SPLIT
See "Proposal No. 4: Reverse Stock Split -- Federal Income Tax Consequences
of Reverse Stock Split."
PROPOSAL NO. 9
THE DIRECTOR PROPOSAL
If the Merger Proposals do not receive votes sufficient for approval, then
the Company's Stockholders will be asked to separately consider and vote upon
the election of directors to the Board of Directors. The Company has a
classified Board of Directors of five persons divided into three classes.
Directors of each class are elected at the Special Meeting of stockholders held
in the year in which the term for such class expires and will serve thereafter
for three years. At the Special Meeting, if the Merger Proposals are not
approved, the Company's Stockholders will elect two directors whose terms will
expire in 2000, two directors whose terms will expire in 2001, and one director
whose term will expire in 2002.
The current Board of Directors has selected, and will cause to be nominated
at the Special Meeting, if the Merger Proposals are not approved, the following
individuals for reelection as directors. Although the terms of directors
Davidoff, Fink and Giacchi expired in 1996, 1996 and 1997, respectively, they
continued to serve as directors because the Company determined not to hold
Annual Meetings during 1996 and 1997. These nominees for directors have
consented to serve, and it is not contemplated that they will be unable to
serve, as directors. However, if a nominee is unable to serve as a director, a
substitute will be selected by the Board of Directors and all proxies eligible
to be voted for the Board's nominees will be voted for such other person.
NOMINEES FOR ELECTION TO THE BOARD
Set forth below for each nominee is his or her name, age, the year in which
he or she became a director of the Company, his or her principal occupations
during the last five years and any additional directorships in publicly-held
companies. The information is as of March 10, 1999.
40
<PAGE>
New Term to Expire in 2002
LEONARD D. FINK, age 60, founded the Company with Mr. Giacchi in August
1990. Mr. Fink served as Secretary and Treasurer of the general partner of
Paging Partners, L.P. since its formation and was appointed Chairman of the
Company upon its organization in February 1994. Since August 1984, Mr. Fink has
served as President of MessageBank, Inc., a privately held voice
mail/telecommunications service business which he founded and continues to own.
From June 1964 through February 1983, Mr. Fink served as President of Phone
Depots, Inc., a radio common carrier paging business he founded and subsequently
sold to PageNet.
New Term to Expire 2001
ROBERT DAVIDOFF, age 71, has served as a director of the Company since its
organization in February 1994. He is currently serving as Managing Director of
Carl Marks & Co., Inc., an investment banking firm, where he has been employed
since June 1950. He is also a general partner of CMNY Capital, L.P., an
investment company founded in March 1962, general partner of CMNY Capital II,
L.P., a small business investment company founded in June 1989, and chairman of
CM Capital Corporation, an investment vehicle which he founded in March 1982,
all of which are affiliated with Carl Marks & Co., Inc. Mr. Davidoff serves on
the Board of Directors of Hubco Exploration, Inc., Marisa Christina Corporation
and Rex Stores Corporation, all of which are publicly held corporations.
RICHARD J. GIACCHI, age 49, founded the Company with Leonard Fink in August
1990. He served as the President of the general partner of Paging Partners, L.P.
since its formation and was appointed a director and the President and Chief
Executive Officer of the Company upon its organization in February 1994. From
March 1986 to October 1990, Mr. Giacchi was employed as the Director of
Engineering for O.R. Estman, Inc. (also known as Satellite Paging), a company
which provides paging services. In this position, Mr. Giacchi's responsibilities
included design, construction and maintenance of a wide-area paging system
operating throughout the Northeast Corridor.
New Term to Expire 2000
MONTE ENGLER, age 56, served as legal adviser to Paging Partners, L.P.,
predecessor to the Company, since its inception, and as a director of the
Company since its organization in February 1994. He is a partner at PNBKB,
specializing in telecommunications matters, where he has worked since November
1984. In addition, Mr. Engler currently serves as the attorney for the New York
State Radio Common Carrier Association, a paging company trade association. Mr.
Engler was one of the founders of and formerly counsel to the predecessor
company to Cellular One, the non-wireline cellular operator in the New York
metropolitan area.
ROCHELLE B. KING, age 61, has served as an investment banker to Paging
Partners, L.P., predecessor to the Company, since its inception and as a
director of the Company since its organization in February 1994. From January
1992 to the present, she has been a Senior Advisor to Bentley Associates L.P.
and Bentley Securities Corporation, investment banking firms. In April 1989, she
established King Investment Banking Services to provide financial services and
consulting to the broadcasting, media and communications industries, which
business she continues today. Ms. King also has served as an independent general
partner in Kagan Media Partners, a PaineWebber public limited partnership.
No family relationship exists between any directors, nominees or executive
officers of the Company.
VOTE REQUIRED
Election of the foregoing nominees to serve on the Board of Directors
requires the plurality of the votes of the shares voted in person or by proxy at
the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS, IF THE MERGER PROPOSALS ARE NOT
APPROVED, THAT HOLDERS OF THE COMPANY'S COMMON STOCK VOTE "FOR" THE APPROVAL OF
THE DIRECTORS PROPOSAL.
41
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
In connection with the National Association of Securities Dealers' recent
amendments to various requirements applicable to Nasdaq companies, the Board of
Directors considered the relationships between the Company and each of its
directors and determined that Robert Davidoff, Monte Engler and Rochelle King
are all "independent directors."
The Board of Directors has established an Audit Committee and a
Compensation Committee, the current members of which are Mr. Davidoff and Mr.
Engler. The functions of the Audit Committee are to (i) recommend annually to
the Board of Directors the appointment of the independent auditors of the
Company, (ii) discuss and review in advance the scope and the fees of the annual
audit and review the results thereof with the independent auditors, (iii) review
compliance with existing major accounting and financial reporting policies of
the Company and (iv) review the adequacy of the financial organization of the
Company and review management's procedures and policies relating to the adequacy
of the Company's internal accounting controls and compliance with applicable
laws relating to accounting practices. The functions of the Compensation
Committee are to (i) review and approve annual salaries, bonuses and grants of
stock options pursuant to the Company's stock option plans for all executive
officers and (ii) review and approve the terms and conditions of the Company's
employee benefit plans.
During the fiscal year ended December 31, 1998, the Board of Directors took
various actions by unanimous written consent and held nine Board meetings. The
Audit Committee and the Compensation Committee held no meetings during such
period but acted by unanimous written consent. Each director attended at least
75% of the meetings of the Board of Directors and of the committees, if any, of
which he or she was a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Company's Compensation Committee consists of Messrs. Davidoff and
Engler, each of which is an independent director of the Company. Neither of
these individuals had any "interlock" relationship to report during 1998.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company receive $500 for attendance at each meeting of the Board of
Directors or a committee thereof. All directors are reimbursed for expenses
incurred in connection with attendance at meetings. In addition, on December 4,
1997, each independent director of the Company, Robert Davidoff, Monte Engler
and Rochelle King, were granted options to purchase 5,000 shares of the
Company's Common Stock at an exercise price of $1.313 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the directors and executive
officers of the Company and persons who beneficially own more than ten percent
of the Company's Common Stock (collectively, the "Reporting Persons") to report
their ownership of and transactions in the Company's Common Stock to the
Securities and Exchange Commission (the "Commission"). Copies of these reports
are also required to be supplied to the Company. The Company believes, based
upon a review of the copies of such reports received by the Company and written
representations furnished by the Reporting Persons to the Company, that during
the fiscal years ended December 31, 1997 and December 31, 1998, all applicable
Section 16(a) reporting requirements applicable to the Reporting Persons were
complied with, except as follows: (i) Richard J. Giacchi and his former wife
each made gifts of 17,000 shares of the Company's Common Stock to their children
in December 1997 and Mr. Giacchi neglected to timely file the reports required
as a result of such gifts (the late reports reflected two transactions in the
Company's Common Stock); (ii) in November 1998, Mr. Giacchi sold 7,500 shares of
the Company's Common Stock as custodian for his minor child and neglected to
timely file a Form 4 (the late report reflected one transaction) and (iii) in
March 1998, Rochelle B. King purchased 2,000 shares of the Company's Common
Stock and neglected to timely file a Form 4 (the late report reflected one
transaction). All late reports have since been filed.
42
<PAGE>
COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The names of the executive officers of the Company and their respective
ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Leonard D. Fink....................... 60 Chairman of the Board of Directors
Richard J. Giacchi.................... 49 President, Chief Executive Officer and
Director
Keith J. Powell....................... 44 Executive Vice President and General
Manager
Jeffrey M. Bachrach................... 43 Vice President, Chief Financial
Officer, Treasurer and Secretary
</TABLE>
Set forth below is certain information concerning certain executive
officers and key personnel of the Company. Please refer to the information
provided under "Proposal 9 -- The Director Proposal" for biographical
information regarding the balance of the Company's officers.
KEITH J. POWELL, age 44, had served as Executive Vice President and General
Manager of the Company from June 1996 until February 15, 1999. He has been
acting as a consultant to the Company since then. From April 1992 through May
1996, he was Vice President and General Manager for PageNet of New York and then
for PageNet of New Jersey. From 1983 to 1992 Mr. Powell held various positions
including Vice President of Marketing with the Texwipe Company, a manufacturer
of engineered products for aerospace, electronics and biomedical markets.
JEFFREY M. BACHRACH, age 43, has served as the Company's Vice President,
Chief Financial Officer, Treasurer and Secretary since September 1994. From 1988
to December 1992, Mr. Bachrach served as the Chief Financial Officer of
Polymerix, Inc., a publicly held company engaged in the manufacture of plastic
lumber. From January 1993 to March 1994, Mr. Bachrach was employed as the Vice
President of Finance of Sadat Associates, Inc., a privately held environmental
consultant. Mr. Bachrach is a certified public accountant.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the cash
compensation paid by the Company, for the fiscal years ended December 31, 1996,
1997 and 1998, to Mr. Giacchi, the Company's Chief Executive Officer, and the
amounts paid to the other most highly compensated executive officers for years
in which such officers' compensation exceeded $100,000 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------
SALARY BONUS OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(1)
- --------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Richard J. Giacchi............................. 1998 $171,000 0 --
President and Chief 1997 $143,000 0 --
Executive Officer 1996 $146,000 0 --
Keith J. Powell (2)............................ 1998 $140,000 $13,000 --
Executive Vice President 1997 $130,000 $16,000 --
and General Manager
Jeffrey M. Bachrach............................ 1998 $110,000 0 --
Vice President, Chief 1997 $104,000 0 --
Financial Officer,
Treasurer and Secretary
</TABLE>
- ---------------
(1) The Company has concluded that the aggregate amount of perquisites and other
personal benefits paid to each of the Named Executive Officers did not
exceed the lesser of ten percent (10%) of such officer's annual salary and
bonus for each fiscal year indicated or $50,000.
(2) As of February 15, 1999, Mr. Powell was no longer an executive officer of
the Company but is acting as a consultant.
43
<PAGE>
Option Grants in Fiscal Year 1998. The following stock options were
granted to the Named Executive Officers during the year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF % OF TOTAL GRANT
SECURITIES OPTIONS EXERCISE DATE
UNDERLYING GRANTED TO PRICE PER PRESENT
OPTIONS EMPLOYEES IN SHARE EXPIRATION VALUE
NAME GRANTED (#) FISCAL YEAR(%) ($/SH) DATE ($)(3)
---- ----------- -------------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Richard J. Giacchi.............. 0 0 -- -- 0
Keith J. Powell................. 50,000(1) 23.1% $1.125 10/31/05 $19,804
Jeffrey M. Bachrach............. 25,000(2) 11.6% $1.125 4/1/06 $ 6,777
</TABLE>
- ---------------
(1) These options were granted in exchange for the cancellation of options to
purchase 50,000 shares of the Company's Common Stock (which had been granted
with exercise prices of $1.63). See "-- Repricing of Options."
(2) These options were granted in exchange for the cancellation of options to
purchase 25,000 shares of the Company's Common Stock (which had been granted
with exercise prices of $2.88). See "-- Repricing of Options."
(3) The valuation method used was the binomial option pricing model. The
calculations are based on the following factors as of the grant date: (i)
the expected exercise of the options within three years; (ii) the risk-free
interest rate using treasury note rate of 5.5% over the expected term of the
options; (iii) the current price of the stock was $1.125 with its expected
volatility at 20.54%; (iv) there was no risk of forfeiture; and (v) dividend
yield was not applicable as dividends are not expected.
Aggregated Option Exercises in Fiscal Year 1998 and 1998 Fiscal Year-End
Option Values. The table below sets forth information relating to the exercise
of options during the year ended December 31, 1998 by each Named Executive
Officer and the year-end value of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT FISCAL YEAR END FISCAL
ACQUIRED (#) YEAR END($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------------- --------------
<S> <C> <C> <C> <C>
Richard J. Giacchi................. -- -- -- --
Keith J. Powell.................... 18,750 $17,350 73,250/0 $2,250/0
Jeffrey M. Bachrach................ -- -- 30,000/0 $1,050/0
</TABLE>
REPRICING OF OPTIONS
On August 13, 1998, in exchange for outstanding options covering 156,600
shares of the Company's Common Stock (the "Old Options"), which were granted
pursuant to the Plan, the Company granted new options covering 156,600 shares of
the Company's Common Stock (the "New Options"), with exercise prices equal to
$1.125 per share (the fair market value per share on the date of the grant),
pursuant to the Plan. The surrender of the Old Options are not deemed to take
effect until the New Options are accepted by the optionee. Concurrently with the
repricing of Messrs. Powell's and Bachrach's options, certain other holders of
options had their respective options repriced in the same manner. The Old
Options held by Messrs. Powell and Bachrach and the other optionholders were
designed to further compensate and provide for an incentive for them, and the
Board of Directors determined that the significant decline in the market price
of the Company's Common Stock since the date of grant of the Old Options
frustrated these purposes. The Board believed that by awarding Messrs. Powell
and Bachrach (and the other optionholders) New Options with exercise prices at
$1.125 per share (the fair market value per share on the date of the grant) they
will be fairly compensated for their efforts and further motivated to achieve
the Company's success. The Board of Directors also believes that exchanging
"out-of-the-money" options is a cost-effective method of retaining key employees
and preserving the important motivating effect that stock options have.
44
<PAGE>
10-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SECURITIES MARKET VALUE EXERCISE TERM
UNDERLYING OF STOCK PRICE AT NEW REMAINING
OPTIONS AT TIME OF TIME OF EXERCISE AT DATE OF
NAME AND POSITION DATE REPRICED(#) REPRICING($)(1) REPRICING($) PRICE($) REPRICING
----------------- ---- ----------- --------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Keith J. Powell............ 8/13/98 50,000 $1.125 $1.625 $1.125 8 years
Executive Vice President
and General Manager
Jeffrey M. Bachrach........ 8/13/98 25,000 $1.125 $ 2.88 $1.125 6 years
Vice President, Chief 1/2/97 25,000(2) $0.875 $4.375 $0.875 7.5 years
Financial Officer,
Treasurer
and Secretary
</TABLE>
- ---------------
(1) Based upon the average of the high and low sales price on the date of
repricing.
(2) In exchange for the cancellation of options to purchase 25,000 shares of
Common Stock, Mr. Bachrach received options to purchase 15,000 shares at the
lower exercise price.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Scope of Committee's Work
The Compensation Committee, consisting of Robert Davidoff and Monte Engler,
monitors the performance and compensation of executive officers of the Company
and makes recommendations and reports to the Board of Directors with respect to
appropriate executive compensation. The Committee has also, on occasion, made
recommendations with respect to incentive compensation for other key employees
of the Company.
Compensation Philosophy and Policies
In making recommendations regarding the compensation of the Company's
executive officers, the Compensation Committee is essentially bound by
employment agreements between the Company and the executive officers. In each
case, the base salary of the executive officers are established through
negotiated contractual obligations and result from consideration of various
factors, including the Company's ability to pay, the Committee's understanding
of competitive compensation for similarly situated executives in the Company's
industry and the position and expertise of the particular executive.
Incentive Compensation and Bonuses
The contractual arrangements between the Company and its chief executive
officer, its chief financial officer and its chief operating officer contemplate
incentive compensation and potential bonus awards, based upon performance for
the immediately preceding year. In all cases, the executives are invited to
present to the Compensation Committee factors in support of appropriate awards
and the Committee takes into consideration all of such factors. In addition, the
Committee has expressed its appreciation to the executive officers for deferring
and/or waiving contractual compensation entitlements to assist the Company in
meeting certain of its other financial obligations by granting options to
purchase shares of the Company's Common Stock at a price regarded as favorable
to said officers. Included in the Committee's recommendations in 1998 were
proposed severance arrangements in light of the contemplated merger with Aquis,
which recommendations were based upon a recognition of past efforts.
MONTE ENGLER ROBERT DAVIDOFF
45
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into five-year employment agreements with Mr. Giacchi
and Mr. Fink effective May 1994. Mr. Giacchi agreed to devote his entire working
time and attention to the business of the Company during the term of his
agreement. Mr. Fink agreed to devote such of his working time and attention to
the business of the Company as is necessary for him to effectively perform his
duties under his agreement. Mr. Fink currently serves as President of
MessageBank, Inc., a corporation which he founded and continues to own, which is
engaged in the provision of voice mail services and is permitted by the terms of
his agreement with the Company to continue to serve in such capacity and to
engage in such other non-competing business activities as will not prevent him
from performing his duties on behalf of the Company. Mr. Giacchi and Mr. Fink
have also agreed not to compete with the business of the Company for a period of
two years following termination of their respective employment agreements.
Pursuant to Mr. Giacchi's employment agreement, as amended, his base
compensation for the contract year ending May 1999 is $176,550. The Company also
provides Mr. Giacchi with certain disability and life insurance in addition to
that provided to its employees generally, as well as the use of an automobile.
To enable the Company to preserve cash, Mr. Giacchi agreed to defer until
January 15, 1999 receipt of an aggregate of $40,618 of salary and bonus payable
for services rendered in 1997 and 1996. Such amount has since been paid in full.
Mr. Giacchi has received notice from the Company that his contract will not be
renewed and will be allowed to expire in May 1999.
Pursuant to Mr. Fink's employment agreement, as amended, his compensation
for the contract year ending May 1999 is $58,850. To enable the Company to
preserve cash, Mr. Fink agreed to defer until January 15, 1999 receipt of an
aggregate of $48,090 of salary and bonus payable for services rendered in 1997
and 1996. In January 1999, Mr. Fink agreed to defer $40,890 of this amount until
June 30, 1999.
The Company also has entered into an employment agreement with Jeffrey
Bachrach. Mr. Bachrach's current employment agreement, as amended, is effective
through September 30, 1999, and, if not terminated by either party, renews on a
year-to-year basis thereafter. The agreement provides for an annual salary of
$115,500 for the year ended September 30, 1999. In addition, the Company granted
to Mr. Bachrach options to purchase an aggregate of 40,000 shares of the
Company's Common Stock, exercisable at the fair market prices of the Company's
Common Stock as determined on the respective dates of grant of the options. To
facilitate Mr. Bachrach's exercise of his stock options, the Company agreed to
pay to him at such time as he should choose to exercise options for 10,000
shares that are exercisable during the second half of 1997, an amount equal to
the exercise price of such options, $8,750 in the aggregate. Mr. Bachrach
exercised these options in July 1997. To enable the Company to preserve cash,
Mr. Bachrach agreed to defer until January 15, 1999 receipt of $8,167 in salary
for services rendered in 1997 and 1996. Such amount has since been paid in full.
In the event Mr. Bachrach's employment is terminated by the Company without
"cause" (as defined in his agreement), he shall be given two months prior notice
of termination and receive a severance payment equal to four months base salary.
Mr. Bachrach has also agreed not to compete with the business of the Company for
a period of one year following termination of his employment agreement.
The Company also had entered into an employment agreement with Keith
Powell. Mr. Powell's employment agreement provided for an annual salary of
$144,450. Mr. Powell has also agreed not to compete with the business of the
Company for a period of one year following termination of his employment
agreement. Pursuant to a severance agreement, dated January 22, 1999, between
the Company and Mr. Powell, Mr. Powell's employment with the Company was
terminated, effective as of February 15, 1999. Pursuant to such agreement, the
Company agreed to pay Mr. Powell $44,325 on the earlier of the Effective Time
and the termination date set forth in the Merger Agreement, but in no event
later than June 30, 1999. In return, Mr. Powell has agreed to serve as a
consultant to the Company and any successor for two years. During such two-year
period, he is entitled to exercise any options he has to purchase shares of the
Company's Common Stock. In addition, both parties released each other from any
claims they may have against the other. Furthermore, Mr. Powell agreed to abide
by his one-year non-compete arrangement.
46
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder returns
(assuming reinvestment of dividends) on $100 invested on May 31, 1994 (the end
of the month of the Company's initial public offering) in the Company's Common
Stock, the Nasdaq Composite (U.S.) Stock Index and the Paul Kagan Wireless
Messaging Average Index. The stock price performance shown on the graph below
reflects historical data provided by the National Association of Securities
Dealers, Inc. and not necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Base
Period
Company/Index Name May 94 Dec 94 Dec 95 Dec 96 Dec 97 Dec 98
<S> <C> <C> <C> <C> <C> <C>
PAGING PARTNERS
CORPORATION $100 $131.58 $63.16 $15.79 $21.05 $22.95
NASDAQ COMPOSITE
(U.S.) STOCK INDEX 100 103.13 145.86 179.37 220.06 309.34
PAUL KAGAN WIRELESS
MESSAGING AVERAGE 100 98.76 120.19 51.68 60.40 55.96
</TABLE>
47
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
based on information obtained from the persons named below or from documents
filed by them with the Commission, which information the Company has not
independently verified, with respect to the beneficial ownership of shares of
the Company's Common Stock (on an actual basis and as adjusted to reflect the
consummation of the Merger) by (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of the Company's
Common Stock, (ii) each director, nominee for director and Named Executive
Officer and (iii) all of the Company's executive officers and directors as a
group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING SHARES OUTSTANDING
BENEFICIALLY COMMON STOCK BENEFICIALLY COMMON STOCK
OWNED PRIOR PRIOR TO THE OWNED AFTER AFTER THE
NAME AND ADDRESS(1) TO THE MERGER MERGER(2) THE MERGER MERGER(3)
------------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Leonard D. and Nancy Fink(4).......... 1,020,372 16.1% 1,020,372 6.7%
Richard J. Giacchi(5)................. 889,406 14.1% 889,406 5.8%
Dolphin Offshore Partners, L.P.(6).... 609,000 9.6% 609,000 4.0%
Allen & Company(7).................... 443,571 7.0% 443,571 2.9%
Celeste Rusin(8)...................... 356,795 5.6% 356,795 2.3%
Robert Davidoff(9).................... 285,168 4.5% 285,168 1.8%
Rochelle B. King(10).................. 145,139 2.3% 145,139 *
Keith Powell(11)...................... 68,750 1.1 68,750 *
Jeffrey Bachrach(12).................. 48,000 * 48,000 *
Monte Engler(13)...................... 34,396 * 34,396 *
Michael Salerno(14)................... 0 0 2,091,861 13.7%
Select Paging Investors, L.P.(14)..... 0 0 2,056,293 13.5%
Patrick Egan(15)...................... 0 0 1,085,722 7.1%
Robert Greene......................... 0 0 1,289,351 8.5%
John B. Frieling(16).................. 0 0 1,002,582 6.6%
Deerfield Partners, LLC(16)........... 0 0 1,002,582 6.6%
Deerfield Capital, L.P.(16)........... 0 0 780,280 5.1%
John X. Adiletta...................... 0 0 937,225 6.2%
D. Brian Plunkett..................... 0 0 0 0
All executive officers and directors
as a group prior to the Merger (7
persons)
(4)(5)(9)(10)(11)(12)(13)........... 2,491,231 39.3% -- --
All executive officers and directors
as a group after the Merger (8
persons) (4)(9)(13)(14)(15)(16)..... 0 0 7,069,081 46.4%
</TABLE>
- ---------------
* Less than 1%
(1) The business address of Richard Giacchi, Celeste Rusin and Leonard Fink is
c/o Paging Partners, 4249 Route 9 North, Freehold, NJ 07728. The business
address of Allen & Company is 711 Fifth Avenue, New York, NY 10022. The
business address of Dolphin Offshore Partners, L.P. is 129 E. 17th Street,
New York, NY 10003. The business address of John B. Frieling is c/o
Deerfield Capital, L.P. is 20 North Main Street, Suite 120, Sherborn, MA
01770. The business address of Patrick Egan is c/o Select Security, Inc.,
1706 Hempstead Road, Lancaster, PA 17601. The business address of John X.
Adiletta is c/o Aquis Communications, Inc., 1719A Route 10, Suite 300,
Parsippany, NJ 07054. The business address of Michael Salerno is c/o Select
Paging Investors, L.P. is 4718 Old Gettysburg Road, Mechanicsburg, PA
17055. The business address of Robert Greene is c/o Robert Greene
Communications, Inc., 210 West Market Street, Pottsville, PA 17901.
48
<PAGE>
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. These percentages are based on
6,326,804 shares of the Company's Common Stock outstanding as of the Record
Date. Each beneficial owner's percentage ownership is determined by
assuming that convertible securities, options or warrants that are held by
such person (but not those held by any other person) and which are
exercisable or convertible within 60 days have been exercised or converted.
(3) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. These percentages are based on
15,219,000 shares of the Company's Common Stock outstanding immediately
following the Merger. Each beneficial owner's percentage ownership is
determined by assuming that convertible securities, options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable or convertible within 60 days have been exercised or
converted.
(4) Includes (i) 550,035 shares held of record by Leonard Fink and (ii) 470,337
shares held of record by Nancy Fink, Leonard Fink's wife. Mr. and Mrs. Fink
each disclaims any beneficial ownership of the shares held of record by the
other. Excludes any shares held of record by the adult children of Mr. and
Mrs. Fink.
(5) Includes 511,353 held of record by Richard Giacchi, 41,516 shares held of
record by trusts for the benefit of his minor children and 336,537 shares
held of record by Celeste Rusin, his former wife (over which Mr. Giacchi
possesses voting control until July 1, 2001). Excludes any shares held of
record by Mr. Giacchi's adult children.
(6) Based upon information included in a Schedule 13D filed with the Commission
by Dolphin Offshore Partners, L.P.
(7) Based upon information included in a Schedule 13G filed with the Commission
by Allen & Company.
(8) Includes 336,537 shares held of record by Celeste Rusin and 20,258 shares
held of record by trusts for the benefit of her minor children. Excludes
any shares held of record by Richard Giacchi, her former husband.
(9) Includes 235,168 shares owned by CMNY Capital I and CMNY Capital II; Mr.
Davidoff is a general partner of CMNY Capital I and CMNY Capital II and
disclaims beneficial ownership of such shares. Includes 5,000 shares which
may be acquired pursuant to options exercisable within sixty (60) days of
the date hereof.
(10) Includes 7,895 shares held of record by trusts for the benefit of Ms.
King's grandchildren. Also includes 5,000 shares which may be acquired
pursuant to options exercisable within sixty (60) days of the date hereof.
Excludes any shares held of record by Ms. King's adult children.
(11) These shares may be acquired pursuant to options exercisable within sixty
(60) days of the date hereof.
(12) Includes 30,000 shares which may be acquired pursuant to options
exercisable within sixty (60) days of the date hereof and 8,000 shares held
by Mr. Bachrach as custodian for his minor child.
(13) Includes 5,000 shares which may be acquired pursuant to options exercisable
within sixty (60) days of the date hereof. Also includes 29,396 shares held
of record by Mr. Engler's wife and he disclaims any beneficial ownership
thereof. Excludes 18,182 shares held by PNBKB, as to which Mr. Engler
disclaims beneficial ownership. See "Interest of Management in Certain
Transactions" below.
(14) Includes 35,568 shares held of record by Michael Salerno. Mr. Salerno is
the Managing Director of Select Capital, Inc., which in turn is the general
partner of Select Paging Investors, L.P. Mr. Salerno disclaims any
beneficial ownership of the 2,056,293 shares of the Company's Common Stock
owned by Select Paging Investors, L.P.
(15) Excludes the shares beneficially owned by Deerfield Partners, LLC
("Deerfield Partners"), in which Mr. Egan has a 4% equity interest.
(16) John Frieling is the Managing Director of Deerfield Partners, which in turn
is the general partner of Deerfield Capital, L.P. ("Deerfield Capital" and
together with Deerfield Partners, the "Deerfield Entities"). Following the
Merger, Deerfield Partners will be the record holder of 222,303 shares
(1.5%) and Deerfield Capital will be the record holder of 780,280 shares
(5.1%). Mr. Frieling disclaims any beneficial ownership of the shares of
the Company's Common Stock owned by the Deerfield Entities.
49
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently leases space from MessageBank, Inc., a corporation
owned by Mr. Fink, for which it pays $1,300 per month. Management believes that
the terms of such lease are no less favorable to the Company than those which
would be available from a third party. MessageBank, Inc. also provides voicemail
and other services to the Company for which it is paid its standard charges. The
amount of revenues paid to MessageBank, Inc. during each of 1997 and 1998 for
services rendered to the Company was less than $5,000. The Company anticipates
that it will continue to lease space and purchase certain services from
MessageBank, Inc. in the future, but the volume of such purchases is not
anticipated to substantially increase.
Monte Engler, a director of the Company, is a partner at PNBKB, which has
performed legal services for the Company since the Company's inception and
represents Aquis in connection with the Bell Atlantic Acquisition and certain
non-related matters. Mr. Engler recused himself from voting on the Merger
Proposals, the Reverse Split Proposal, the Director Proposal and the Accountants
Proposal. During 1997, PNBKB agreed to receive 18,182 shares of the Company's
Common Stock in satisfaction of accrued legal fees in the amount of $25,000.
PROPOSAL NO. 10
ACCOUNTANTS PROPOSAL
The Board of Directors has appointed Berenson & Company LLP to perform the
audit of the Company's financial statements for the year ending December 31,
1998, subject to ratification by the Company's Stockholders at the Special
Meeting. Berenson & Company LLP served as the Company's Independent Auditors for
the years ended December 31, 1996 and 1997. Representatives of Berenson &
Company are expected to be present at the Special Meeting. They will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions of stockholders.
If the selection of Berenson & Company LLP is not ratified, or prior to the
next Annual Meeting of stockholders such firm shall decline to act or otherwise
become incapable of acting, or if its engagement shall be otherwise discontinued
by the Board of Directors, the Board of Directors will appoint other independent
certified public accountants whose engagement for any period subsequent to the
next Annual Meeting will be subject to stockholder approval at such meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE APPROVAL OF THE ACCOUNTANTS PROPOSAL.
OTHER MATTERS
It is not expected that any matters other than those described in this
Proxy Statement will be brought before the Special Meeting. If any other matters
are presented, however, it is the intention of the persons named in the proxy to
vote the proxy in accordance with the discretion of the persons named in such
proxy.
STOCKHOLDER PROPOSALS
Any stockholder proposal which is intended to be presented at the next
Special Meeting of stockholders of the Company must be received at the Company's
principal executive offices, 4249 Route 9 North, Freehold, New Jersey 07728,
Attention: Secretary, by no later than November 12, 1999, if such proposal is to
be considered for inclusion in the Company's proxy statement and form of proxy
relating to such meeting.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AQUIS COMMUNICATIONS, INC.
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet as of December 31, 1998....................... F-3
Statement of Operations for the year ended December 31,
1998...................................................... F-4
Statement of Stockholders' Equity for the year ended
December 31, 1998......................................... F-5
Statement of Cash Flows for the year ended December 31,
1998...................................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
BELL ATLANTIC PAGING, INC.
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-14
Balance Sheets as of December 31, 1998 and 1997............. F-15
Statements of Operations for the years ended December 31,
1998, 1997 and 1996....................................... F-16
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996....................................... F-17
Notes to Financial Statements............................... F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Aquis Communications, Inc.:
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity, and cash flows present fairly, in all material
respects, the financial position of Aquis Communications, Inc. (formerly known
as BAP Acquisition Corporation) ("Aquis") as of December 31, 1998, and the
results of its operations and cash flows for the year then ended in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of Aquis' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
F-2
<PAGE>
AQUIS COMMUNICATIONS, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<S> <C>
ASSETS:
CURRENT ASSETS:
Accounts receivable, net of allowance for doubtful accounts
of $490................................................... $ 2,061
Inventory................................................... 2,076
Prepaid expenses and other current assets................... 1,012
-------
Total current assets.............................. 5,149
-------
Property, plant and equipment............................... 10,107
Intangible assets........................................... 16,749
Deferred charges............................................ 330
-------
TOTAL ASSETS................................................ $32,335
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 1,769
Accrued expenses............................................ 236
Advance billings............................................ 1,033
Customer deposits........................................... 577
Notes payable to stockholders............................... 520
-------
Total current liabilities......................... 4,135
-------
Note payable to Bell Atlantic Paging, Inc................... 4,150
Payable to Bell Atlantic and affiliates..................... 18,535
-------
TOTAL LIABILITIES........................................... 26,820
-------
Commitments and contingencies (Note 7)......................
STOCKHOLDERS' EQUITY
Series A convertible preferred stock, no par value,
Authorized -- 80,000 shares, issued and
outstanding -- 78,000 shares.............................. 5,830
Common stock, $.001 par value, Authorized -- 110,000 shares,
issued and outstanding -- 22,000 shares...................
Additional paid-in capital.................................. 221
Accumulated deficit......................................... (296)
Note receivable from stockholder............................ (240)
-------
TOTAL STOCKHOLDERS' EQUITY.................................. 5,515
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $32,335
=======
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
AQUIS COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING EXPENSES
General and administrative.................................. $ 38
-----
Total operating expenses.......................... 38
Interest expense............................................ (258)
-----
NET LOSS.................................................... $(296)
=====
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
AQUIS COMMUNICATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK PREFERRED STOCK ADDITIONAL RECEIVABLE TOTAL
---------------- ----------------- PAID-IN ACCUMULATED FROM STOCKHOLDERS'
SHARES AMOUNTS SHARES AMOUNTS CAPITAL DEFICIT STOCKHOLDER EQUITY
------ ------- ------ -------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January
1, 1998.............. 99 $-- -- $ -- $ -- $ -- $ -- $ --
Issuance of shares to
the Founders of Aquis
in connection with
their individual
stock subscriptions
in January 1998...... 7,991 -- -- -- -- -- -- --
Value ascribed to the
issuance of shares to
the Founders of Aquis
in July 1998......... 2,910 -- -- -- 39 -- -- 39
Value ascribed to the
issuance of shares in
connection with the
issuance of
promissory notes in
July 1998............ 7,500 -- -- -- 108 -- -- 108
Value ascribed to the
issuance of shares to
one of the note
holders in July
1998................. 1,500 -- -- -- 20 -- -- 20
Value ascribed to the
issuance of shares to
one of the purchasers
of preferred stock... 2,000 -- -- (54) 54 -- -- --
Issuance of preferred
stock................ -- -- 78,000 5,884 -- -- -- 5,884
Net loss............... -- -- -- -- -- (296) -- (296)
Note received from
stockholder in
connection with the
purchase of preferred
stock................ -- -- -- -- -- -- (240) (240)
------ -- ------ ------ ---- ------ ------ ------
Balance as of December
31, 1998............. 22,000 -- 78,000 $5,830 $221 $ (296) $ (240) $5,515
====== == ====== ====== ==== ====== ====== ======
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
AQUIS COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (296)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization of original issue discount on notes....... 121
Value ascribed to common stock issued to officer....... 22
Changes in net assets and liabilities, net of business
acquired:
Accounts payable and accrued expenses................ 71
--------
Net cash used in operating activities....................... (82)
--------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Bell Atlantic Paging, Inc.................... (5,996)
--------
Net cash used in investing activities....................... (5,996)
--------
CASH FLOW FROM FINANCING ACTIVITIES:
Deferred financing costs.................................... (110)
Proceeds from notes payable to stockholders................. 750
Repayment of notes payable to stockholders.................. (750)
Proceeds from notes payable to stockholders................. 520
Issuance of preferred stock................................. 5,661
Issuance of common stock.................................... 7
--------
Net cash provided by financing activities................... 6,078
--------
Increase in cash............................................ --
Cash, beginning of year..................................... --
--------
Cash, end of year......................................... $ --
========
NON-CASH FINANCING ACTIVITIES:
Value ascribed to common stock issued to stockholders....... $ 192
Note receivable from stockholder............................ 240
SUPPLEMENTAL INFORMATION ON BUSINESS ACQUIRED:
Fair value of assets acquired............................... $ 32,005
Liabilities assumed......................................... (2,836)
Note issued to Bell Atlantic Paging, Inc.................... (4,150)
Payable to Bell Atlantic and affiliates..................... (18,535)
Accrued transaction costs................................... (488)
--------
Cash paid.............................................. $ 5,996
========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Aquis Communications, Inc. ("Aquis"), formerly known as BAP Acquisition
Corporation, was formed in September 1997 by two individuals and Deerfield
Partners LLC (the "Founders") for the purpose of acquiring Bell Atlantic Paging,
Inc. ("BAPCO"), as discussed in Note 2, and other companies within the
communications industry. On the date of formation of Aquis, each of the Founders
received 33 shares of Aquis common stock at par value ($.001).
Aquis, as a result of their purchase of BAPCO, markets one-way paging
service and equipment to consumers, directly and through resellers. Aquis also
offers its customers both customer owned and maintained equipment or lease
options for equipment. Aquis is regionally focused with its primary service area
located in the East Coast states from New Jersey to Virginia.
The financial statements presented herein reflect the acquisition of BAPCO
and the Federal Communications Commission ("FCC") licenses and paging network
infrastructure from Bell Atlantic Corporation and its affiliates ("Bell
Atlantic") on December 31, 1998.
2. ACQUISITION OF BAPCO
On July 7, 1998, Aquis entered into an agreement with BAPCO to purchase
certain assets, properties, rights, contracts and claims of BAPCO's paging
business (the "Asset Purchase Agreement"). As part of the Asset Purchase
Agreement, Aquis acquired the paging frequencies and paging network
infrastructure that are owned by various operating telephone companies (the
"OTCs") affiliated with Bell Atlantic. In addition, Aquis also acquired all
rights, title and interest the OTCs have in the equipment relating to the
existing paging network infrastructure. Excluded from the sale of BAPCO's paging
business were the following: cash on hand with financial institutions, accounts
receivable from other Bell Atlantic affiliated entities, tax credits and
refunds, payables to other Bell Atlantic affiliated entities, accrued expenses
not related to inventory purchases, BAPCO's rights to the Bell Atlantic and Bell
Atlantic Paging names, marks and logos, other intellectual property owned by
Bell Atlantic or any of its affiliates other than BAPCO, any assets of the
Cellco Savings and Profit Sharing Retirement Plan, insurance proceeds payable on
account of casualty or liability claims for which BAPCO may seek recovery under
its existing insurance policies, any contracts for borrowed money, and all
contracts and arrangements with affiliates of BAPCO.
The acquisition of BAPCO and the paging frequencies and the paging network
infrastructure for approximately $29,200, including transaction costs, on
December 31, 1998, has been accounted for as a purchase in accordance with
Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations." The
acquisition will be financed by a $20,000 loan from FINOVA Capital Corporation
(the "FINOVA loan") (see Note 12) which was received on January 4, 1999, and
used to make the payment to Bell Atlantic, a $4,150 note retained by the seller
(see Note 12), and the cash proceeds of $5,700 from the sale of preferred stock
(see Note 10). The aggregate purchase price has been allocated to the net assets
acquired based upon their estimated fair market values.
Subsequent to the sale, BAPCO asserted various claims against Aquis
pertaining to the assets acquired and liabilities assumed under the terms of the
Asset Purchase Agreement. The claims asserted pertain to the reimbursement to
BAPCO and assumption by Aquis of certain liabilities in excess of amounts
acknowledged by Aquis. In this regard, Aquis has recorded an additional $1,100
assumption of liabilities, based on current negotiations, which represents
management's best estimate of the additional liabilities which will be assumed
upon completion of the negotiations. It is management's opinion that the
ultimate resolution of these claims will not have a material adverse effect on
Aquis' financial position or the results of its operations or cash flows.
F-7
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
2. ACQUISITION OF BAPCO (CONTINUED)
The following unaudited pro forma information presents a summary of the
combined results of operations of Aquis and BAPCO as if the acquisition of BAPCO
occurred on January 1, 1998.
<TABLE>
<S> <C>
Revenues.................................................... $26,432
Net loss.................................................... (5,463)
</TABLE>
The pro forma results are based on various assumptions and are not
necessarily indicative of what would have occurred had the transaction been
consummated on January 1, 1998.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Paging service revenues are comprised of airtime for paging services and
pager rentals and are recognized as the services are performed and ratably over
the rental periods, respectively. Revenues related to prebilled services to
subscribers are deferred and are included in advance billings. Equipment sales
revenue is recognized when the equipment is delivered to the customer.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used for among other things: allowance for doubtful accounts, determining
depreciable lives and amortization periods for intangibles and property, plant
and equipment, and inventory obsolescence.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of 90 days or less
are considered to be cash equivalents.
Inventory
Inventory consists of new pagers held for sale. Inventories are stated at
the lower of cost or market, with cost determined on a first-in, first-out
basis. Such inventory is also available to support the rental programs.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of depreciation and
amortization. The property, plant and equipment acquired (see Note 2) was
recorded at estimated fair value. Property, plant and equipment consists of
rental pagers, paging network assets, data processing equipment, office
furniture and equipment and leasehold improvements. Property, plant and
equipment is depreciated over its estimated useful life by the straight-line
method. Leasehold improvements are amortized over the shorter of their estimated
useful lives or the terms of the related leases. Expenditures for repairs and
maintenance are charged to expense as incurred.
F-8
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Upon the sale or retirement of property, plant and equipment, the cost and
related accumulated depreciation or amortization is eliminated from the accounts
and any related gain or loss is reflected in the statement of operations.
Deferred Charges
Costs associated with the merger of Aquis and Paging Partners Corporation
(see Note 11) have been deferred and will be included in the total cost of the
merger. Costs associated with the financing of the acquisition will be deferred
over the life of the related financing.
Income Taxes
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." As a result, the balance sheet will reflect
anticipated tax impact of future taxable income or deductions implicit in the
balance sheet in the form of temporary differences. These temporary differences
will reflect the difference between the basis in assets and liabilities as
measured in the financial statements and as measured by tax laws using enacted
tax rates.
Fair Value of Financial Instruments
Aquis' financial instruments include cash, accounts and notes receivable,
accounts and notes payable, and customer deposits. The fair values of these
financial instruments approximate carrying values because of the short-term
nature of these instruments. The carrying amount of Aquis' long-term borrowings
approximates fair value.
Concentrations of Risk
Aquis purchases a significant portion of its pagers from one vendor.
Although there are a limited number of manufacturers of pagers, management
believes that Aquis could secure reasonably similar pagers from other vendors on
comparable terms. Additionally, Aquis has one primary provider of nationwide
paging services. While there are a limited number of nationwide carriers,
management believes that other carriers could provide similar services, on
comparable terms. However, a change in vendor or nationwide carrier could cause
a delay in service provisioning or possible loss of revenues, which could
adversely affect operating results.
To the extent Aquis' customers become delinquent, collection activities are
commenced. No single customer is large enough to present a significant financial
risk to Aquis. Aquis maintains an allowance for doubtful accounts based on the
expected collectibility of accounts receivable.
Advertising Costs
Costs associated with advertising are expensed as incurred.
Long-Lived Assets
Intangible assets arising from the acquisition of the Bell Atlantic paging
business are being amortized over three to ten years on a straight-line basis.
Aquis assesses the impairment of these assets based on
F-9
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
several factors, including probable fair market value, cash flows, and the
aggregate value of the business as a whole.
Aquis continually evaluates whether current events or circumstances warrant
adjustments to the carrying value or the estimated useful lives of fixed assets
and intangible assets in accordance with the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets."
4. PROPERTY, PLANT AND EQUIPMENT
As of December 31, 1998, property, plant and equipment consists of the
following:
<TABLE>
<S> <C>
Rental pagers (3 years)..................................... $ 4,847
Paging network equipment (7 years).......................... 4,441
Data processing equipment (2-5 years)....................... 508
Leasehold improvements...................................... 311
-------
Total property, plant and equipment......................... $10,107
=======
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1998:
<TABLE>
<S> <C>
State certificates and FCC licenses......................... $12,238
Customer lists.............................................. 4,511
-------
Total....................................................... $16,749
=======
</TABLE>
6. DEFERRED CHARGES
Deferred charges consist of the following at December 31, 1998:
<TABLE>
<S> <C>
Professional fees:
Related to financing........................................ $110
Related to merger with Paging Partners Corporation.......... 220
----
Total....................................................... $330
====
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Under the Asset Purchase Agreement (see Note 2), Aquis assumed operating
leases for facilities and equipment used in its operations. Some lease contracts
include renewal options that include rent expense adjustments based on the
Consumer Price Index. At December 31, 1998, the aggregate future minimum
F-10
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
rental commitments under noncancelable operating leases, including renewal
options which Aquis intends to exercise, for the periods shown are as follows:
<TABLE>
<CAPTION>
YEARS
- -----
<S> <C>
1999........................................................ $400
2000........................................................ 372
2001........................................................ 124
----
Total....................................................... $896
====
</TABLE>
In addition, Aquis' paging equipment is located at approximately 225 sites,
a majority of which are owned or leased by the OTCs. These leases are cancelable
by Aquis, and the aggregate annual rent payable for such site locations
approximates $1,127 annually.
8. NOTES PAYABLE TO STOCKHOLDERS
On July 7, 1998, Aquis completed an offering in which it issued $750 face
amount, 15% promissory notes due on December 31, 1998, and 7,500 shares of
common stock at $1 per share to the note holders. In addition, one of the note
holders purchased 1,500 shares of common stock at par value ($.001). In addition
to the $7 of cash proceeds received, a value of $121 was ascribed to the
issuance of these shares and was recorded as an original issue discount on the
notes payable, and amortized over the life of the notes. The proceeds from the
offering were used for working capital, acquisitions, and general corporate
purposes. In connection with the acquisition of BAPCO, these notes and related
interest were paid on December 31, 1998, upon the consummation of the
acquisition of BAPCO. Pursuant to the note agreements, as amended, a 10% premium
on the promissory notes was also paid upon maturity and was recorded as
additional interest over the life of the notes.
Simultaneous with the repayment of these notes, Aquis issued an additional
$520 of notes to stockholders for working capital purposes. Those notes earn
interest at an annual rate of 15%, and are due on the earlier to occur of March
31, 1999 or the consummation of the proposed merger with Paging Partners
Corporation (see Note 11) and have been classified as current liabilities. The
notes may also be repaid from the proceeds of the FINOVA term loan, subject to
the satisfaction of certain conditions set forth in the term loan agreement.
Pursuant to the note agreements, at maturity a 10% premium will be due on
$225 of the notes, and a 15% premium will be due on the remaining $295 of the
notes. The premiums are being amortized as additional interest expense over the
life of the notes. Additionally, the 15% premium will increase to 30% and 45%,
respectively, if these amounts are not repaid by January 31, 1999, and March 31,
1999. As of February 12, 1999, the notes had not been repaid.
9. STOCK SUBSCRIPTIONS
On January 30, 1998, Aquis entered into three stock subscription agreements
with the Founders and issued 7,991 shares of common stock at par value. On July
7, 1998, the Founders purchased an additional 2,910 shares at par value. Aquis
recognized a compensation charge of $22 for 1,635 of these shares issued to an
officer of Aquis. In addition, a value of $17 was ascribed to the 1,275 shares
issued to the other two Founders and was netted against the proceeds from the
issuance of the Series A Convertible Preferred Stock (see Note 10).
F-11
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
10. PREFERRED STOCK
On October 16, 1998, the Board of Directors of Aquis authorized up to
80,000 shares of preferred stock to be designated as Series A Convertible
Preferred Stock ("Series A Preferred Stock") at $80 per share ("Original Issue
Price"). Each holder of outstanding shares of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of whole shares of common
stock into which the shares of Series A Preferred Stock held by each holder are
convertible. Each share of Series A Preferred Stock may be converted, at any
time, at the option of the holder, into shares of common stock by dividing the
Original Issue Price of the shares by the Applicable Conversion Price
("Applicable Conversion Price"). The initial Applicable Conversion Price is $80
per share. Adjustments to the Applicable Conversion Price are based upon a
formula noted in the Preferred Stock Purchase Agreement. A mandatory conversion
of the Series A Preferred Stock into common stock may occur in the event of any
one of the following circumstances: (1) the request of at least two-thirds of
the holders of the outstanding Series A Preferred Stock, (2) the consummation of
the Paging Partners transaction (see Note 11), or (3) the closing of the sale of
shares of common stock in a public offering pursuant to the Securities Act of
1933, at a price in excess of 200% of the Applicable Conversion Price then in
effect and resulting in at least $20,000 of gross proceeds to Aquis.
In the event of any voluntary or involuntary liquidation of Aquis, the
holders of shares of Series A Preferred Stock shall be entitled to be paid out
of the assets of Aquis available for distribution to its stockholders before any
payment shall be made to the holders of common stock or any other series of
stock. The holders of Series A Preferred Stock are entitled to receive, when and
if declared by the Board of Directors of Aquis, a dividend (the "Accruing
Dividend") at the annual rate of 8% of the Original Issue Price (appropriately
adjusted in the event of any stock dividend, stock split or combination or
similar recapitalization). The Accruing Dividend will accrue, whether or not
earned or declared, on each issued and outstanding share of Series A Preferred
Stock and shall be cumulative.
On November 6, 1998, Aquis approved the sale and issuance of 78,000 shares
of its Series A Preferred Stock at a purchase price of $80 per share. As part of
his purchase of a portion of the Series A Preferred Stock, an officer of the
Company signed a note for $240 which will be paid in four equal annual
installments commencing on May 15, 2000. The note bears interest at a rate of
8%, and all interest is due with the final payment on May 15, 2003. In addition,
2,000 shares of common stock were issued to an individual who also purchased
shares of the Series A Preferred Stock, and a value of $54 was ascribed to these
shares and was netted against the proceeds from the issuance of the Series A
Preferred Stock.
11. MERGER TRANSACTION
On November 6, 1998, Aquis entered into a merger agreement with Paging
Partners Corporation ("Paging Partners") whereby each share of Aquis common
stock will be exchanged for 88.92076 shares of Paging Partners' common stock.
Paging Partners provides one-way wireless services throughout the Northeast
exclusively through a network of resellers. The merger with Paging Partners will
significantly expand both companies' capacity and geographic reach. If the
merger is consummated, Aquis' current stockholders will own 58.5% of the merged
organization and certain of Aquis' principals will assume strategic roles in the
merged entity. The merger will be accounted for as a reverse merger for
financial reporting purposes as if Aquis had acquired Paging Partners.
Consummation of the merger is subject to several conditions, including, but
not limited to, approval by the stockholders of Paging Partners.
F-12
<PAGE>
AQUIS COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
12. NOTES PAYABLE
On October 23, 1998, Aquis entered into a five-year term loan agreement
with FINOVA Capital which provides a $30,000 facility comprising the FINOVA loan
of $20,000, an additional loan in an amount not to exceed $1,400 to be received
at the request of Aquis (the "Subsequent Loan"), and an acquisition line of
credit in an amount not to exceed $8,200 plus the amount of the Subsequent Loan
in excess of the amount used to pay the scheduled $1,200 payment of principal on
the Seller debt (discussed below). The FINOVA loan has a term of five years at
an interest rate based upon Citibank, N.A.'s corporate base rate plus 175 basis
points. Aquis may also elect to have a part of the FINOVA loan applied against a
LIBOR rate plus 425 basis points. The FINOVA loan is collateralized by all
property owned by Aquis and after-acquired property of Aquis and all issued and
outstanding capital stock and warrants, options and other rights to acquire
capital stock of Aquis.
The loan agreement with FINOVA Capital Corporation contains various
restrictive covenants that include restrictions on capital expenditures and
compliance with certain financial ratios. On January 4, 1999, Aquis received the
FINOVA loan and utilized the proceeds to pay for the acquisition of Bell
Atlantic's paging business.
The Seller Note has a term of five years at an annual interest rate of one
percentage point above the base rate published by Chase Manhattan Bank N.A., and
is payable in two installments: 1) $1,200 on March 31, 2000 and 2) $2,950 on
December 31, 2003. The note contains various restrictive covenants that include
restrictions on capital expenditures and compliance with certain financial
ratios.
13. STOCK OPTIONS
Simultaneous with the closing of the BAPCO acquisition on December 31,
1998, Aquis granted 5,500 options to purchase Aquis common stock to officers of
Aquis. These options vest ratably over three years and have an exercise price
equal to the initial conversion price of Aquis' Series A Preferred Stock (see
Note 10).
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," Aquis
has opted to apply APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for options granted. No
compensation cost has been recognized for the grant of these options. In
addition, under SFAS No. 123, there would have been no compensation cost for the
options granted.
The weighted average fair value of options granted in 1998 was $0 per
share. The fair value is based on the minimum value method with the following
assumptions: risk free interest rate of 4.78%, no dividend yield, and a weighted
average expected life of the options of seven years.
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Aquis Communications, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations and cash flows present fairly, in all material respects, the
financial position of Bell Atlantic Paging, Inc. ("BAPCO") as of December 31,
1998 and 1997, and the results of its operations and cash flows for the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of BAPCO's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
F-14
<PAGE>
BELL ATLANTIC PAGING, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 70 $ 31
Accounts receivable, net of allowance for doubtful accounts
of $304 in 1997........................................... -- 1,977
Receivable from Aquis Communications, Inc................... 4,565 --
Due from affiliates......................................... 8,630 1,974
Inventory................................................... -- 1,546
Deferred tax asset.......................................... -- 161
Prepaid expenses and other current assets................... -- 633
------- -------
Total current assets................................... 13,265 6,322
------- -------
Property, plant and equipment, net.......................... -- 6,240
Deferred tax asset.......................................... 1,646 894
Other assets................................................ -- 91
------- -------
TOTAL ASSETS................................................ $14,911 $13,547
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 1,572 $ 1,513
Accrued expenses............................................ 589 514
Income taxes payable........................................ 1,371 523
Advance billings............................................ -- 1,083
Intercompany payable........................................ 357 926
Customer deposits........................................... -- 665
Due to affiliates........................................... 5,301 --
------- -------
Total current liabilities.............................. 9,190 5,224
------- -------
Due to affiliates........................................... -- 3,737
------- -------
TOTAL LIABILITIES........................................... 9,190 8,961
------- -------
STOCKHOLDER'S EQUITY:
Commitments and contingencies (Note 8)
Common Stock, $10 par value
Authorized, issued and outstanding one share.............. -- --
Retained earnings........................................... 5,721 4,586
------- -------
TOTAL STOCKHOLDER'S EQUITY.................................. 5,721 4,586
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $14,911 $13,547
======= =======
</TABLE>
See Notes to Financial Statements
F-15
<PAGE>
BELL ATLANTIC PAGING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Paging services, rental and maintenance..................... $ 23,309 $ 17,894 $ 14,879
Equipment sales, installation and other..................... 3,123 2,795 2,178
------------- ------------- -------------
Total revenues.................................... 26,432 20,689 17,057
------------- ------------- -------------
OPERATING EXPENSES
Paging services, rental and maintenance..................... 8,902 5,979 5,573
Cost of equipment sales, installation and other............. 2,709 2,873 2,116
Selling and marketing....................................... 1,678 1,556 1,260
General and administrative.................................. 6,921 5,944 3,843
Depreciation and amortization............................... 4,323 3,378 2,066
Provision for doubtful accounts............................. 1,154 538 273
------------- ------------- -------------
Total operating expenses.......................... 25,687 20,268 15,131
------------- ------------- -------------
Income before income taxes and extraordinary item........... 745 421 1,926
Provision for income taxes.................................. 296 168 770
------------- ------------- -------------
Income before extraordinary item.................. 449 253 1,156
Extraordinary item, net of income taxes of $454............. 682 -- --
------------- ------------- -------------
NET INCOME.................................................. $ 1,131 $ 253 $ 1,156
============= ============= =============
</TABLE>
See Notes to Financial Statements
F-16
<PAGE>
BELL ATLANTIC PAGING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,135 $ 253 $ 1,156
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of business............................... (1,136) -- --
Depreciation and amortization.......................... 4,323 3,378 2,066
Deferred income taxes.................................. (590) (552) (307)
Provision for doubtful accounts........................ 1,154 538 273
Provision for inventory obsolescence................... (136) 316 6
Loss on sale of property, plant, and equipment......... 232 49 25
Changes in assets and liabilities, before the effects
of sale of business:
Accounts receivable............................... (1,238) (699) (426)
Due from affiliates (for trade)................... (1,821) (793) 752
Inventory......................................... (394) 1,416 (1,867)
Prepaid expenses and other current assets......... (547) (5) (340)
Other assets...................................... -- 7 38
Accounts payable and accrued expenses............. 1,160 (11) (1,070)
Income taxes payable.............................. 848 247 (209)
Intercompany payable.............................. (569) (581) 1,236
Advance billings and customer deposits............ 35 (186) 97
------------- ------------- -------------
Net cash provided by operating activities................... 2,456 3,377 1,430
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.................. (4,217) (4,930) (3,937)
Sale of property, plant and equipment....................... 236 200 234
------------- ------------- -------------
Net cash used in investing activities....................... (3,981) (4,730) (3,703)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates........................................... 1,564 1,339 2,232
------------- ------------- -------------
Net cash provided by financing activities................... 1,564 1,339 2,232
------------- ------------- -------------
Increase (decrease) in cash................................. 39 (14) (41)
Cash, beginning of period................................... 31 45 86
------------- ------------- -------------
Cash, end of period......................................... $ 70 $ 31 $ 45
============= ============= =============
</TABLE>
See Notes to Financial Statements
F-17
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Bell Atlantic Paging, Inc. ("BAPCO"), a wholly owned subsidiary of Bell
Atlantic Cellular Holdings, LP, began conducting business operations on June 17,
1987. Bell Atlantic Cellular Holdings, LP also holds a limited partnership
interest in Bell Atlantic Mobile Systems, Inc., which holds a general
partnership interest in Cellco Partnership ("Cellco"), doing business as Bell
Atlantic Mobile ("BAM"). The results of operations of BAPCO have been combined
with the results of operations of Cellco through December 31, 1998, the date of
the sale to Aquis Communications, Inc. ("Aquis"), formerly known as BAP
Acquisition Corporation (see Note 2).
Prior to its acquisition by Aquis, BAPCO acted as an agent for the
operating telephone companies of Bell Atlantic, marketing one-way paging service
and equipment to consumers directly and through resellers, including Cellco.
BAPCO also offered its customers both customer owned and maintained equipment or
lease options for equipment. BAPCO was regionally focused with its primary
service area located in the East Coast states from New Jersey to Virginia.
BAPCO's paging frequencies and paging network infrastructure were owned by
various operating telephone companies (the "OTCs") affiliated with Bell Atlantic
Corporation. BAPCO managed the paging operations, including all sales and
customer service, network engineering and product line management. BAPCO paid a
monthly network charge to the OTCs for access to these networks (see Note 6).
This charge was based upon a methodology mandated by the Federal Communications
Commission ("FCC").
The 1998 financial statements presented herein reflect the adjustments made
to record the sale to Aquis. Accordingly, the financial statements for the years
ended December 31, 1997 and 1996 may not be comparable in all material respects
with the financial statements as of and for the year ended December 31, 1998.
Subsequent to the sale, BAPCO is no longer conducting paging business
operations and management has not made any decisions as to future operations.
2. SALE OF THE COMPANY
On July 7, 1998, BAPCO and the OTCs entered into an Asset Purchase
Agreement (the "Agreement") with BAP Acquisition Corporation (Aquis), to sell
certain assets, properties, rights, contracts and claims of BAPCO's paging
business as well as all rights, title and interest the OTCs had in and to the
FCC licenses, equipment and site leases relating to the paging network
infrastructure. The sale was completed on December 31, 1998 for $28,000.
Excluded from the sale of BAPCO's paging business were the following: cash on
hand with financial institutions, accounts receivable from other Bell Atlantic
affiliated entities, tax credits and refunds, payables to other Bell Atlantic
affiliated entities, accrued expenses not related to inventory purchases,
BAPCO's rights to the Bell Atlantic and Bell Atlantic Paging names, marks and
logos, other intellectual property owned by Bell Atlantic Corporation or any of
it affiliates other than BAPCO, any assets of the Cellco Savings and Profit
Sharing Retirement Plan (see Note 9), insurance proceeds payable on account of
casualty or liability claims for which BAPCO may seek recovery under its
existing insurance policies, any contracts for borrowed money, and all contracts
and arrangements with affiliates of BAPCO.
BAPCO received $13,550 from the sale ($14,450 was allocated to the OTCs),
of which $4,835 was received in cash by an affiliate on December 31 1998, $4,565
was received on January 4, 1999, and the remainder of $4,150 was received in the
form of a promissory note from Aquis (the Seller Note). The Seller Note has a
term of five years and is payable in two installments: 1) $1,200 on March 31,
2000 and 2) $2,950
F-18
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
2. SALE OF THE COMPANY (CONTINUED)
on December 31, 2003 at an annual interest rate of one percentage point above
the base rate quoted by Chase Manhattan Bank, N.A. BAPCO has deferred the gain
with respect to the Seller Note until it is paid. As a result of the sale, BAPCO
recorded an extraordinary gain, net of income taxes, of $682 in 1998.
Subsequent to the sale, BAPCO asserted various claims against Aquis
pertaining to the amounts of assets sold and liabilities assumed under the terms
of the Agreement. The claims asserted pertain to the reimbursement to BAPCO and
assumption by Aquis of certain liabilities. In this regard, BAPCO has recorded
an additional $1,100 assumption of liabilities by Aquis, based on current
negotiations, which increased the gain on the sale. It is management's opinion
that the ultimate resolution of these claims will not have a material adverse
effect on BAPCO's financial position.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Paging service revenues are comprised of airtime for paging services and
pager rentals and are recognized as the services are performed and ratably over
the rental periods, respectively. Revenues related to prebilled services to
subscribers are deferred and are included in advance billings. Equipment sales
revenue is recognized when the equipment is delivered to the customer.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used for among other things: allowance for doubtful accounts, determining
depreciable lives and amortization periods for property, plant and equipment,
and inventory obsolescence.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of 90 days or less,
are considered to be cash equivalents.
Inventory
Inventory consists of new pagers held for sale. Inventories are stated at
the lower of cost or market, with cost determined on a first-in, first-out
basis. Such inventory is also available to support the rental programs.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of depreciation and
amortization and consists of rental pagers, paging network assets, data
processing equipment, office furniture and equipment and leasehold improvements.
The cost of property, plant and equipment is depreciated over its estimated
useful life by the straight-line method. Leasehold improvements are amortized
over the shorter of their estimated useful lives or the terms of the related
leases. Expenditures for repairs and maintenance are charged to expense as
incurred.
F-19
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Upon the sale or retirement of property, plant and equipment, the cost and
related accumulated depreciation or amortization is eliminated from the accounts
and any related gain or loss is reflected in the statement of operations.
Income Taxes
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." As a result, the balance sheet reflects the anticipated tax
impact of future taxable income or deductions implicit in the balance sheet in
the form of temporary differences. These temporary differences reflect the
difference between the basis in assets and liabilities as measured in the
financial statements and as measured by tax laws using enacted tax rates.
BAPCO has been included in the consolidated Federal and certain combined
state income tax returns of its parent. The provision for income taxes in the
accompanying financial statements has been calculated on a separate return
basis.
Fair Value of Financial Instruments
BAPCO's financial instruments include cash, receivables, payables and
amounts due from or to affiliates. The fair values of these financial
instruments approximate carrying values because of the short-term nature of
these instruments.
Concentrations of Risk
BAPCO purchased a significant portion of its pagers from one vendor.
Although there are a limited number of manufacturers for pagers, management
believed that BAPCO could secure reasonably similar pagers from other vendors on
comparable terms. Additionally, BAPCO had one primary provider of nationwide
paging services. While there are a limited number of nationwide carriers,
management believed that other carriers could provide similar services, on
comparable terms. However, a change in vendor or reseller could cause a delay in
service provisioning or possible loss of revenues, which could adversely affect
operating results.
To the extent BAPCO's customers become delinquent, collection activities
are commenced. No single customer is large enough to present a significant
financial risk to BAPCO. BAPCO maintains an allowance for doubtful accounts
based on the expected collectibility of accounts receivable.
Advertising Costs
Costs associated with advertising are expensed as incurred.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
4. PROPERTY, PLANT AND EQUIPMENT
As of December 31, 1997, property, plant and equipment consisted of the
following:
F-20
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
<TABLE>
<CAPTION>
1997
----
<S> <C>
Rental pagers (3 years)..................................... $ 10,249
Data processing equipment (2-5 years)....................... 1,394
Leasehold improvements...................................... 778
Office furniture and equipment (5 years).................... 503
-------------
12,924
Less: Accumulated depreciation and amortization............. (6,684)
-------------
$ 6,240
=============
</TABLE>
Effective December 31, 1998, BAPCO sold all of its property, plant and
equipment to Aquis (see Note 2).
Effective January 1, 1997, BAPCO revised its estimate of the useful life
for rental pagers from four years to three years. The change was made to better
reflect the estimated period during which pagers will produce equipment rental
income. The change in estimate increased depreciation expense for the year ended
December 31, 1997 by $461.
Effective July 1, 1996, BAPCO revised its estimate of the useful life for
office furniture and equipment from ten years to five years. The change did not
have a material effect on depreciation expense or net income for the year ended
December 31, 1996.
Depreciation and amortization of property, plant and equipment for the
years ended December 31, 1998, 1997 and 1996, was $4,323, $3,340, and $2,016,
respectively.
5. DUE FROM/TO AFFILIATES
BAPCO, in the normal course of business, has trade receivables with
affiliated companies that are included in due from affiliates. Due from
affiliates also includes the receivable from an affiliate for the proceeds of
the sale of the business to Aquis.
Cellco uses a centralized cash management system to finance its operations
and the operations of its subsidiaries and BAPCO. Prior to the sale of BAPCO to
Aquis, cash deposits from BAPCO's business were transferred to Cellco on a daily
basis and Cellco funded the BAPCO disbursement bank accounts as required. No
interest was charged on these balances. After BAPCO has received all cash
proceeds from the sale to Aquis, Cellco and its affiliates intend to offset the
amounts due from/to affiliates. Accordingly, the entire balance due to
affiliates is classified as a short-term liability at December 31, 1998.
6. TRANSACTIONS WITH AFFILIATES
Significant transactions with affiliates are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues from affiliates............................... $ 3,622 $ 2,406 $ 1,635
Revenues from BAM as a reseller of BAPCO's services.... 2,724 2,114 2,149
Network charges........................................ 3,933 3,750 4,663
Telecommunications expense............................. 194 247 194
Data processing charges................................ 216 181 261
</TABLE>
F-21
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
In addition, BAPCO was allocated certain costs from Cellco for certain
administrative, management, and other services. The allocated costs of
administrative, management, and other services has been assigned to BAPCO based
on either the ratio of BAPCO's employees to Cellco's total operating employees
or the ratio of BAPCO's revenues to Cellco's total revenues and totaled $215,
$161 and $144 for the years ended December 31, 1998, 1997 and 1996,
respectively. Management believes the amounts have been allocated on a
reasonable basis. However, the costs for these services charged to BAPCO are not
necessarily indicative of the costs that would have been incurred if BAPCO
provided these services as a separate entity.
7. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal:
Current................................................ $ 1,235 $ 564 $ 359
Deferred, net.......................................... (647) (433) 240
----------- ----------- -----------
588 131 599
----------- ----------- -----------
State:
Current................................................ 337 157 104
Deferred, net.......................................... (179) (120) 67
----------- ----------- -----------
158 37 171
----------- ----------- -----------
Total provision for income taxes............. $ 746 $ 168 $ 770
=========== =========== ===========
</TABLE>
Temporary differences which give rise to deferred tax assets and
(liabilities) are as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Seller note................................................. $ 1,646 $ --
Allowance for doubtful accounts............................. -- 130
Depreciation................................................ -- 937
Other....................................................... -- 94
----------- -----------
Deferred tax assets.................................... 1,646 1,161
Other....................................................... -- (106)
----------- -----------
Deferred tax liabilities............................... -- (106)
----------- -----------
Net deferred tax assets................................ $ 1,646 $ 1,055
=========== ===========
</TABLE>
The deferred tax assets arising from the deferred recognition of the Seller
Note, for financial reporting purposes, has been recognized because management
believes it is more likely than not that it will be realized either through the
collection of the Note or other tax planning strategies that would be available
to them through their parent.
F-22
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
7. INCOME TAXES (CONTINUED)
A reconciliation of the Federal statutory income tax rate to BAPCO's
effective tax rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate...................................... 34% 34% 34%
State income taxes, net of Federal income tax benefit....... 6% 6% 6%
------- ------- -------
Effective tax rate.......................................... 40% 40% 40%
======= ======= =======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Prior to December 31, 1998, BAPCO entered into operating leases for
facilities and equipment used in its operations. Some lease contracts included
renewal options that included rent expense adjustments based on the Consumer
Price Index. Upon the sale of BAPCO on December 31, 1998 (see Note 2), all
operating leases were assumed by Aquis. For the years ended December 31, 1998,
1997 and 1996, BAPCO recognized a total of $551, $515 and, $516, respectively,
as rent expense related to payments under these operating leases. At December
31, 1998, BAPCO had no future minimum rental commitments under noncancelable
operating leases.
9. EMPLOYEE SAVINGS AND PROFIT SHARING RETIREMENT PLAN
Employees of BAPCO, who met certain service requirements, were afforded the
opportunity to save for retirement by making contributions to retirement savings
accounts and receive Cellco matching contributions to their savings accounts
(all on a tax-advantaged basis), under Cellco's Savings and Profit Sharing
Retirement Plan (the "Retirement Plan").
Under the savings component of the Retirement Plan, employees contributed,
subject to IRS limitations, up to a total of 16% of eligible compensation to a
"401(k)" qualified retirement savings account. Cellco matched 50% of the first
6% of employee contributions (the "fixed matching contribution"). Additionally,
Cellco could elect, at the sole discretion of BAM's Board of Directors, to
voluntarily match up to an additional 50% of the first 6% of an employee's
contribution (the "variable matching contribution"). The BAM Board of Directors
declared variable-matching contributions of 50% for each of the years ended
December 31, 1998, 1997 and 1996. BAPCO recognized approximately $184, $178 and
$109 of expense related to aggregate fixed and variable matching contributions
for the years ended December 31, 1998, 1997 and 1996, respectively.
Under the profit sharing component of the Retirement Plan, Cellco could
elect, at the sole discretion of BAM's Board of Directors, to voluntarily
contribute amounts to a "401(k)" qualified retirement profit sharing account.
The BAM Board of Directors declared a profit sharing contribution of 3% of
employees' eligible salary for the year ended December 31, 1998, and 2% for each
of the years ended December 31, 1997 and 1996. BAPCO recognized $120, $68 and
$58 of expense related to profit sharing contributions for the years ended
December 31, 1998, 1997 and 1996, respectively.
Subsequent to the sale to Aquis, BAPCO employees that became employees of
Aquis are no longer eligible to participate in the Retirement Plan, and all
non-vested participant balances became fully vested as of December 31, 1998.
F-23
<PAGE>
BELL ATLANTIC PAGING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
10. ADDITIONAL FINANCIAL INFORMATION
BAPCO's non-cash financing and investing activities during 1998
attributable to the sale of BAPCO to Aquis were as follows:
<TABLE>
<S> <C>
Notes receivable received as partial consideration $ 4,150
Receivable from affiliate $ 4,835
Receivable from Aquis $ 4,565
</TABLE>
Advertising expenses were $71, $82 and $80 for the years ended December 31,
1998, 1997 and 1996, respectively.
Cash paid on behalf of BAPCO for income taxes was $570, $492 and $1,179 for
the years ended December 31, 1998, 1997 and 1996, respectively.
F-24
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BAP ACQUISITION CORP.,
PAGING PARTNERS CORPORATION
AND
PAGING PARTNERS MERGER CORPORATION
DATED AS OF NOVEMBER 6, 1998
A-1
<PAGE>
(This page intentionally left blank)
A-2
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of November 6, 1998 ("Agreement"),
by and among BAP Acquisition Corp., a Delaware corporation ("BAP"), Paging
Partners Corporation, a Delaware corporation ("Paging Partners"), and Paging
Partners Merger Corporation, a Delaware corporation and a wholly-owned
subsidiary of Paging Partners ("Newco").
RECITALS
WHEREAS, BAP has entered into the Asset Purchase Agreement, dated as of
July 2, 1998 and amended as of November 3, 1998 (as further amended from time to
time, the "Bell Atlantic Acquisition Agreement"), by and among BAP and the
Sellers named therein (the "Bell Atlantic Subsidiaries"), pursuant to which BAP
has agreed to acquire the licenses and other assets relating to the paging
business of the Bell Atlantic Subsidiaries (the "Bell Atlantic Paging
Business"), upon the terms and subject to the conditions specified in the Bell
Atlantic Acquisition Agreement (such acquisition being hereinafter referred to
as the "Bell Atlantic Acquisition");
WHEREAS, the respective Boards of Directors of BAP, Paging Partners and
Newco have each determined that it is in the best interests of their respective
stockholders to effect the merger of Newco with and into BAP (the "Merger") upon
the terms and subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of Newco and BAP have each
approved the Merger, upon the terms and subject to the conditions set forth
herein;
WHEREAS, concurrently with the execution of this Agreement, Paging Partners
and BAP are entering into a Voting Agreement with certain stockholders of Paging
Partners named in the signature pages thereof (the "Voting Agreement") pursuant
to which such stockholders have agreed, among other things, to vote their shares
in favor of the Merger and the other transactions contemplated by this
Agreement; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations and warranties contained herein, and subject
to the terms and conditions set forth herein, the parties hereby agree as
follows:
ARTICLE I
MERGER
1.1 Merger. At the Effective Time (as defined in Section 1.3 hereof) and
subject to the terms and conditions of this Agreement and the General
Corporation Law of the State of Delaware (the "DGCL"), Newco shall be merged
with and into BAP, the separate corporate existence of Newco shall thereupon
cease, and BAP shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation").
1.2 Surviving Corporation; Effects of the Merger. At the Effective Time,
the Surviving Corporation shall continue its corporate existence under the laws
of the State of Delaware. The Merger shall have the effects specified in Section
259 of the DGCL. As of the Effective Time, the Surviving Corporation shall
change its name to BAPP Holdings, Inc.
1.3 Effective Time. As soon as practicable following the satisfaction
(or, to the extent permitted by law, the waiver) of all of the conditions to the
Merger, and provided that this Agreement has not been terminated pursuant to
Article VI hereof, the parties hereto shall effect the Merger by filing with the
Secretary of State of the State of Delaware a Certificate of Merger (the
"Certificate of Merger") in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL (the time of such filing
being herein referred to as the "Effective Time").
A-3
<PAGE>
1.4 Certificate of Incorporation of the Surviving Corporation. At the
Effective Time and without any further action on the part of BAP or Newco, the
Certificate of Incorporation of BAP, as in effect at the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation.
1.5. By-Laws of the Surviving Corporation. At the Effective Time and
without any further action on the part of BAP or Newco, the By-Laws of BAP, as
in effect at the Effective Time, shall be the By-Laws of the Surviving
Corporation.
1.6 Directors of the Surviving Corporation. The directors of BAP
immediately prior to the Effective Time shall resign, effective as of the
Effective Time, and shall be replaced, at the Effective Time, by the individuals
listed in Exhibit 1.6 hereto, who shall serve as the directors of the Surviving
Corporation, each of such directors to hold office, subject to the applicable
provisions of the Certificate of Incorporation and By-Laws of the Surviving
Corporation, until their respective successors are duly elected or appointed and
qualified.
1.7 Officers of the Surviving Corporation. The officers of BAP
immediately prior to the Effective Time shall resign, effective as of the
Effective Time, and shall be replaced, at the Effective Time, by the individuals
listed in Exhibit 1.7 hereto, who shall serve as officers of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
1.8 Conversion of Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof:
(a) Each share of Common Stock, par value $.001 per share ("BAP Common
Stock"), of BAP that shall be issued and outstanding at the Effective Time
(other than (i) shares of BAP Common Stock as to which appraisal has been
properly demanded in accordance with Section 262 of the DGCL and Section
1.9 below, (ii) shares of BAP Common Stock, if any, that are held by Paging
Partners, Newco, or any other wholly owned subsidiary of Paging Partners,
and (iii) shares of BAP Common Stock held in the treasury of BAP) shall be
converted into the right to receive 88.92076 (the "Conversion Number")
shares of Common Stock, par value $.01 per share, of Paging Partners
("Paging Partners Common Stock"), subject to adjustment as provided in
paragraphs (d) and (e) of this section (the "Merger Consideration").
Subject to Section 1.8(e) hereof, the total number of shares of Paging
Partners Common Stock to be issued to all holders of BAP Common Stock shall
not exceed (i) 8,892,076 shares, excluding shares issuable upon the
exercise of the Rollover Options (as defined below), if the Motorola
Warrants are not exercised prior to or at the Effective Time or (ii)
9,160,273 shares, excluding shares issuable upon the exercise of the
Rollover Options, if all of the Motorola Warrants are exercised prior to or
at the Effective Time.
(b) Each share of common stock, par value $0.01 per share ("Newco
Common Stock"), of Newco that is issued and outstanding immediately prior
to the Effective Time shall be converted into and represent one fully paid
and non-assessable share of common stock of the Surviving Corporation.
(c) Each share of BAP Common Stock owned by Paging Partners, Newco or
any other wholly owned subsidiary of Paging Partners or held in the
treasury of BAP shall be canceled and cease to exist at the Effective Time,
and no consideration shall be paid with respect thereto.
(d) Notwithstanding the foregoing, no fractional shares of Paging
Partners Common Stock shall be issued. In lieu of fractional shares, the
number of shares of Paging Partners Common Stock to be issued to any former
stockholder of BAP who would otherwise be entitled to a fractional share of
Paging Partners Common Stock shall be rounded to the nearest number of
whole shares of Paging Partners Common Stock (with any fractional share
greater than or equal to one-half share being rounded up).
(e) If, between the date hereof and the date of payment of any shares
of Paging Partners Common Stock pursuant to Section 1.10, (i) the
outstanding shares of BAP Common Stock or Paging Partners Common Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization, exchange of shares, stock split,
reverse stock split, combination, stock dividend, or similar change in
capitalization, (ii) any dividend on shares of BAP Common Stock or Paging
Partners
A-4
<PAGE>
Common Stock shall be declared with a record date within said period, (iii)
any shares of BAP Common Stock shall be repurchased pursuant to the Equity
Sponsor Agreement (as defined below), (iv) any shares of BAP Preferred
Stock shall be reduced pursuant to the BAP Stock Purchase Agreement (as
defined below), or (v) any of the Motorola Warrants (as defined below)
shall be exercised, the Conversion Number shall be appropriately adjusted
so that immediately after consummation of the Merger, (i) the 6,308,054
shares of Paging Partners Common Stock outstanding on the date hereof, plus
(ii) the number of shares of Paging Partners Common Stock issued upon the
exercise, if any, of the Motorola Warrants will equal 41.5% of the shares
of Paging Partners Common Stock outstanding immediately following the
Effective Time.
1.9 Dissenting Shares. Notwithstanding the provisions of Section 1.8 or
any other provision of this Agreement to the contrary, shares of BAP Common
Stock that are issued and outstanding immediately prior to the Effective Time
and that are held by stockholders who have not voted such shares in favor of the
approval and adoption of this Agreement and who shall have properly demanded
appraisal of such shares in accordance with Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration at or after the Effective Time, unless and until the holder of
such Dissenting Shares shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal and payment under the DGCL. If a
holder of Dissenting Shares shall have so failed to perfect or shall have
effectively withdrawn or lost such right to appraisal and payment, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, such
holder's Dissenting Shares shall be converted into and solely represent the
right to receive the Merger Consideration, without any interest thereon, as
provided in Section 1.8 hereof. BAP shall give Paging Partners notice of any
demand made by or on behalf of any such holder to be paid the "fair value" of
his shares, as provided in Section 262 of the DGCL, and Paging Partners and the
Surviving Corporation shall have the sole and exclusive right to conduct and
direct, in their sole discretion, all negotiations, proceedings and ultimate
disposition with respect to any such demands in any manner that Paging Partners
and the Surviving Corporation may elect.
1.10 Exchange of Certificates.
(a) At or prior to the Effective Time, Paging Partners shall contribute to
Newco, and Newco shall deposit with an exchange agent to be selected by the
parties hereto prior to the Effective Time (which may be Paging Partners or one
of its affiliates) (the "Exchange Agent"), 8,892,076 shares of Paging Partners
Common Stock (subject to adjustment in the event that the Conversion Number is
adjusted pursuant to Section 1.8(e) hereof).
(b) After the Effective Time, each holder of a certificate or certificates
that immediately prior to the Effective Time represented issued and outstanding
shares of BAP Common Stock (other than Dissenting Shares and other than shares
of BAP Common Stock that are held by Paging Partners, Newco or any other wholly
owned subsidiary of Paging Partners or are held in the treasury of BAP) (the
"Certificates") shall surrender the same to the Exchange Agent. After the
Effective Time, upon receipt by the Exchange Agent of (i) the Certificates duly
endorsed in proper form for transfer and (ii) the federal taxpayer
identification number of each holder of Certificates, the Exchange Agent shall
issue, to each former holder of BAP Common Stock (other than Dissenting Shares
and other than shares of BAP Common Stock that are held by Paging Partners,
Newco or any other wholly owned subsidiary of Paging Partners or are held in the
treasury of BAP), a certificate representing the number of shares of Paging
Partners Common Stock that such holder is entitled to receive pursuant to
Section 1.8 hereof. Pending such surrender and exchange, each Certificate shall
be deemed for all corporate purposes to evidence the number of whole shares of
Paging Partners Common Stock into which such shares of BAP Common Stock
evidenced by such Certificate shall have been so converted by the Merger. All
certificates for shares of Paging Partners Common Stock to be issued in the
Merger shall be issued in the same name in which the Certificate surrendered in
exchange therefore is registered.
(c) No holder of a Certificate shall be entitled to receive any dividend or
other distribution from Paging Partners in respect of the Paging Partners Common
Stock to be issued in respect thereof until the surrender of such Certificate.
Upon such surrender, there shall be paid to the holder the amount of dividends
or other
A-5
<PAGE>
distributions (without interest) that theretofore became payable but that were
not paid by reason of the foregoing, with respect to the number of shares of
Paging Partners Common Stock represented by the certificates issued upon such
surrender.
(d) At any time following one year after the Effective Time, the Surviving
Corporation shall be entitled to require the Exchange Agent to deliver to the
Surviving Corporation any shares of Paging Partners Common Stock that had been
deposited with to the Exchange Agent by or on behalf of Paging Partners, Newco
or the Surviving Corporation and have not been disbursed to holders of
Certificates. Any holders of Certificates who have not theretofore complied with
Section 1.10(b) hereof shall thereafter look (subject to applicable escheat and
other similar laws) only to the Surviving Corporation for payment of their claim
for the Merger Consideration, without any interest thereon, and shall have no
greater rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under Delaware law.
1.11 No Further Rights or Transfers. At and after the Effective Time,
holders of Certificates shall cease to have any rights as stockholders of the
Surviving Corporation, except for the right to surrender such Certificates in
exchange for the Merger Consideration pursuant to Sections 1.8 and 1.10 hereof
or to perfect their right to receive payment for their shares of BAP Common
Stock pursuant to Section 262 of the DGCL and Section 1.9 hereof. No transfer of
shares of BAP Common Stock outstanding immediately prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation after the
Effective Time. If, after the Effective Time, Certificates formerly representing
shares of BAP Common Stock are presented to the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration.
1.12 Registration Rights. Paging Partners shall provide the holders of
the shares of Paging Partners Common Stock to be received in the Merger by the
holders of shares of BAP Common Stock with certain rights to register the resale
of such shares of Paging Partners Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), as set forth in a registration rights
agreement substantially in the form attached as Exhibit 1.12 hereto (the
"Registration Rights Agreement").
1.13 Closing. The closing of the Merger and the other transactions
contemplated by this Agreement shall, unless another date or place is agreed to
in writing by the parties hereto, take place at a location and time mutually
agreed upon by Paging Partners, Newco and BAP as soon as practicable, and in any
event within five business days, following the satisfaction (or, to the extent
permitted by law, the waiver) of all of the conditions to the Merger, provided
that this Agreement shall not have been terminated pursuant to Article VI
hereof. Such date, time and location shall be confirmed in writing by such
parties not less than 10 days prior to the scheduled date of such closing. The
term "Closing," when used in this Agreement shall mean the Effective Time.
1.14 BAP Preferred Stock. Immediately prior to the Effective Time, the
outstanding shares of Series A Convertible Preferred Stock, par value $0.001 per
share, of BAP (the "BAP Preferred Stock") shall be automatically converted into
the number of shares of BAP Common Stock for which such shares of BAP Preferred
Stock are exercisable, convertible or exchangeable, and such shares of BAP
Common Stock shall be deemed to be issued and outstanding at the Effective Time
for purposes of Section 1.8 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BAP
BAP hereby represents and warrants to Paging Partners and Newco that:
2.1 Organization. BAP is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware, with all requisite
power and authority to own, operate and lease its properties and to carry on its
business as now conducted and as proposed to be conducted. True, correct and
complete copies of the Certificate of Incorporation and By-laws of BAP, each as
amended through the date hereof, have been delivered to Paging Partners and
Newco, and each of such documents will continue in effect, except as otherwise
contemplated in Section 2.3 hereof, until immediately prior to the Effective
Time.
A-6
<PAGE>
2.2 No Subsidiaries. BAP does not have any direct or indirect
Subsidiaries and does not, directly or indirectly, own or have the right to
acquire any interest in any Person other than pursuant to the Bell Atlantic
Acquisition Agreement. Except as set forth on Schedule 2.2 of the Disclosure
Schedule delivered to Paging Partners and Newco (the "BAP Disclosure Schedule"),
BAP has not made any investment in, loan to, or advance of cash or other
extension of credit to any Person (other than travel and similar advances to
officers or employees in the ordinary course of business).
2.3 Authorization. BAP has the necessary corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by BAP, the performance by BAP of its
obligations hereunder, and the consummation by BAP of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors and Stockholders of BAP, and no other corporate proceeding on the part
of BAP is necessary for the execution and delivery of this Agreement by BAP, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger and (ii) approval by the Board of Directors and Stockholders of BAP of
any amendment of the Certificate of Incorporation of BAP to change the capital
structure of BAP as may be required to obtain the debt and equity financing to
be provided by Finova Capital Corporation ("Finova") or another senior lender
(other than Motorola, Inc.) and the Persons that will be stockholders of BAP
immediately prior to the closing of the Bell Atlantic Acquisition) required for
the transactions contemplated by this Agreement and the Bell Atlantic
Acquisition Agreement (the "Financing") and (iii) the authorization by the Board
of Directors of BAP of the definitive agreements providing for the Financing
including, without limitation, (a) the credit agreement and related agreements
to be entered into with Finova Capital Corporation and/or another lender
(collectively, the "BAP Credit Agreement") in connection with the issuance by
BAP of indebtedness to finance the Bell Atlantic Acquisition and (b) the secured
promissory note to be issued by BAP at the closing of the Bell Atlantic
Acquisition (the "Bell Atlantic Note" and, together with the BAP Credit
Agreement, the "BAP Debt Agreements"), and the transactions contemplated
thereby, which actions will be taken prior to the execution and delivery of the
BAP Debt Agreements. This Agreement has been duly and validly executed and
delivered by BAP and, assuming the due authorization, execution and delivery
hereof by each of Paging Partners and Newco, is a legal, valid and binding
obligation of BAP, enforceable against BAP in accordance with its terms, except
as enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights generally or by general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
2.4 Capitalization.
(a) As of the date hereof, the authorized capital stock of BAP consists of
85,000 shares of Preferred Stock, par value $.001 per share, of which 80,000
shares have been designated "Series A Convertible Preferred Stock" (the "BAP
Preferred Stock"), and 110,000 shares of BAP Common Stock. As of the date
hereof, 22,000 shares of BAP Common Stock and 15,000 shares of BAP Preferred
Stock were issued and outstanding. As of the date hereof, no shares of BAP
Common Stock and no shares of BAP Preferred Stock were held in BAP's treasury.
Immediately prior to the Effective Time, 22,000 shares of BAP Common Stock and
78,000 shares of BAP Preferred Stock will be issued and outstanding, subject to
reduction pursuant to the BAP Stock Purchase Agreement and the Equity Sponsor
Agreement. Immediately prior to the Effective Time, no shares of BAP Common
Stock and no shares of BAP Preferred Stock will be held in BAP's treasury. As of
the date hereof, all of the outstanding shares of BAP Common Stock and BAP
Preferred Stock are, and at the Effective Time will be, validly issued, fully
paid, nonassessable, and free of preemptive rights and cumulative voting rights,
with no personal liability attaching to the ownership thereof.
(b) As of the date hereof, 15,000 shares of BAP Common Stock are issuable
upon the conversion of the BAP Preferred Stock outstanding on the date hereof,
and 7,000 shares of BAP Common Stock are issuable upon the exercise of options
("BAP Options") to purchase shares of BAP Common Stock under the BAP 1998
Omnibus Stock Option Plan (the "BAP Option Plan") assuming that the BAP Options
were exercisable on the date hereof. Immediately prior to the Effective Time,
78,000 shares of BAP Common Stock will be issuable upon the conversion of the
then outstanding shares of BAP Preferred Stock. Except as set forth on Schedule
2.4, as of the date hereof there are, and as of the Effective Time there will
be, no outstanding
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options, warrants, subscriptions, conversion or other rights, agreements (other
than this Agreement) or other commitments obligating BAP to issue any shares of
its capital stock or any securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of its capital stock. At the
Effective Time, the number of shares of BAP Common Stock that will be
outstanding on a fully diluted basis (excluding shares issuable upon the
exercise of the BAP Options) shall not exceed 100,000 shares.
(c) There are no outstanding obligations, contingent or otherwise, of BAP
to redeem, purchase or otherwise acquire any capital stock or other securities
of BAP other than those set forth in the Equity Sponsor Agreement, dated as of
the date hereof (the "Equity Sponsor Agreement"), among BAP and the other
parties named therein.
(d) BAP is not in violation of and has not violated any federal or state
securities laws in connection with any transaction relating to BAP, including
without limitation, the acquisition of any stock, business or assets of any
third party or the issuance of any capital stock of BAP.
2.5 No Prior Activities. BAP has not incurred, directly or indirectly,
any liabilities or obligations, except those incurred in connection with (i) its
incorporation, (ii) the issuance and sale of the BAP Common Stock and the
incurrence of indebtedness for borrowed money in the amount of $750,000 pursuant
to the Securities Purchase Agreements, dated as of July 7, 1998 and November 6,
1998, between BAP and the respective parties named therein, (iii) the issuance
and sale of the BAP Preferred Stock pursuant to the Preferred Stock Purchase
Agreement, dated as of the date hereof (the "BAP Stock Purchase Agreement"),
between BAP and the respective parties named therein, (iv) the employment
agreement, dated as of July 7, 1998, between BAP and John X. Adiletta, as
amended by the letter agreement dated August 15, 1998, between BAP and John X.
Adiletta (the "Adiletta Employment Agreement"), (v) the letter agreement, dated
as of July 7, 1998 (the "Deerfield Agreement"), by and between BAP and Deerfield
Partners, LLC, a Delaware limited liability company ("Deerfield"), (vi) the
negotiation of this Agreement, the Bell Atlantic Acquisition Agreement and the
Financing and the consummation of the transactions contemplated hereby and
thereby and other activities incidental thereto, (vii) in the event that the
Merger and the Bell Atlantic Acquisition shall not have occurred simultaneously,
the ownership and operation of the Bell Atlantic Paging Business following the
Bell Atlantic Acquisition (the "BAP Paging Business"), and (viii) such other
activities as are incidental and related to the foregoing. BAP has not engaged,
directly or indirectly, in any business or activity of any type or kind, or
entered into any agreement or arrangement with any person or entity, and is not
subject to or bound by any obligation or undertaking, and has not incurred any
material liability that, in each case, is not contemplated by or in connection
with this Agreement, the Bell Atlantic Acquisition Agreement, the Financing, the
transactions contemplated hereby and thereby or, in the event that the Merger
and the Bell Atlantic Acquisition shall not have occurred simultaneously, the
ownership and operation of the BAP Paging Business.
2.6 Transaction Documents. BAP has all requisite corporate power and
authority to execute, deliver and perform its obligations under the other
Transaction Documents (as defined in Article VII), including the Bell Atlantic
Acquisition Agreement; each of the other Transaction Documents has been duly and
validly authorized, executed and delivered by BAP, and each constitutes a legal,
valid and binding obligation of BAP, enforceable against BAP in accordance with
its terms (assuming due authorization, execution and delivery of each other
Transaction Document by any other party thereto), except to the extent that (a)
the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). A true, correct and complete copy of each of the other
Transaction Documents, including the Bell Atlantic Acquisition Agreement, in
each case, as amended through the date hereof, has been delivered to Paging
Partners and Newco.
2.7 Bell Atlantic Representations and Warranties. BAP has heretofore
provided Paging Partners and Newco with true, complete, and correct copies of
the Bell Atlantic Acquisition Agreement and all Exhibits and Schedules thereto.
Subject to the terms of this Agreement, the text of each of the representations
and warranties of the OTCs (as defined in Article VII) and BAPCO (as defined in
Article VII) contained in
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Sections 3.1 and 3.2, respectively, of the Bell Atlantic Acquisition Agreement
(the "Bell Atlantic Representations and Warranties") is hereby incorporated by
reference mutatis mutandis without regard to any waiver or amendment thereto
from the form of the Bell Atlantic Acquisition Agreement existing on the date of
this Agreement, other than those waivers and amendments (i) of which Paging
Partners and Newco have been advised a reasonable time prior to the Effective
Time, (ii) that have been consented to by Paging Partners, such consent not to
be unreasonably withheld, and (iii) that are subsequently confirmed to Paging
Partners and Newco in writing. Subject to Section 8.5 hereof, each of the Bell
Atlantic Representations and Warranties is herein made by BAP, as if BAP were
the Bell Atlantic Subsidiary making each such representation and warranty;
provided, however, that each representation is only made to the best of BAP's
knowledge, after reasonable inquiry.
2.8 Financing. BAP has heretofore (i) received written commitments,
copies of which have previously been delivered to Paging Partners and Newco, to
provide the debt portions of the Financing (all of which are subject to the
negotiation, preparation and execution of the definitive BAP Credit Agreement,
certain of which will require the participation of Paging Partners, and Newco,
and the fulfillment of various conditions precedent contained therein) and (ii)
entered into the BAP Stock Purchase Agreement with members of senior management
and others (together with certain permitted assignees, the "Equity
Participants") that provide for the issuance and sale of the BAP Preferred Stock
to provide the equity portion of the Financing (which are subject to the
fulfillment of various conditions precedent contained therein). Assuming
satisfaction of the conditions to BAP's obligation to close under the Bell
Atlantic Acquisition Agreement, BAP will have sufficient financing to consummate
the Bell Atlantic Acquisition and the Merger and to pay related fees and
expenses.
2.9 Consents and Approvals. Except as set forth on Schedule 2.9 of the
BAP Disclosure Schedule and except for such filings as may be required under
Regulation D under the Securities Act or state blue sky laws in connection with
the sale of the BAP Preferred Stock to the Equity Participants, no filing or
registration with, no notice to and no permit, authorization, consent or
approval of any public or governmental body or authority is necessary for the
consummation by BAP of the transactions contemplated by this Agreement or the
other Transaction Documents or to enable the Surviving Corporation to continue
to conduct its business after the Effective Time in a manner that is in all
material respects consistent with that in which such business is currently
conducted.
2.10 No Conflict. Except as set forth on Schedule 2.10 of the BAP
Disclosure Schedule, neither the execution and delivery by BAP of this Agreement
or any Transaction Document to which BAP is a party nor the consummation by BAP
of the transactions contemplated hereby or thereby nor the compliance by BAP
with any of the provisions hereof or thereof will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation and By-Laws of
BAP, (ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which BAP is a party or by which it or any of
its properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to BAP or any of its
properties or assets, except, in the case of clauses (ii) and (iii) hereof, for
those violations or breaches that would not, individually or in the aggregate,
have a material adverse effect on the business, condition (financial or
otherwise), assets or liabilities (a "Material Adverse Effect") of BAP, the Bell
Atlantic Acquisition or the Merger.
2.11 Affiliated Transactions. No officer, director, shareholder, partner
or agent of or consultant to, or to the knowledge of BAP any of its Affiliates,
owes, as of the date hereof, or will owe at the Effective Time, any outstanding
indebtedness to BAP, except for a promissory note in the amount of $240,000 to
be issued by John X. Adiletta to BAP (the "Adiletta Note") immediately prior to
the Effective Time in connection with the purchase of shares of BAP Preferred
Stock.
2.12 Certain Agreements. The agreements and plans set forth on Schedule
2.12 of the BAP Disclosure Schedule (the "BAP Employ Agreements") are the only
employment, severance, consulting or similar agreements of BAP containing a
"change of control" provision.
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2.13 Brokers. No investment bank, broker or finder is entitled to any fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of BAP, other than (i) Deerfield
which fee shall not exceed $400,000 and (ii) PCS Management, Inc., which fee
shall not exceed $225,000.
2.14 Disclosure.
(a) Neither this Agreement nor any Transaction Document nor any exhibit or
schedule hereto nor any statement, list or certificate delivered to Paging
Partners or Newco pursuant hereto or pursuant to any written request therefor,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances in which they were made, not misleading.
(b) None of the information supplied in writing by BAP specifically for
inclusion in the letter to stockholders, notice of meeting, proxy or information
statement and form of proxy, to be distributed to stockholders of Paging
Partners in connection with the Merger (collectively, the "Paging Partners Proxy
Statement") will, as of the date the Paging Partners Proxy Statement is first
mailed to such stockholders, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. BAP shall promptly notify Paging Partners and
Newco of any change in the information so supplied that would make the foregoing
representation and warranty untrue.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PAGING PARTNERS AND NEWCO
Paging Partners and Newco, jointly and severally, represent and warrant to
BAP as follows:
3.1 Organization, Etc. Each of Paging Partners and Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Paging Partners and Newco is qualified or licensed to
conduct business in each jurisdiction necessary for Paging Partners and Newco to
own, lease and operate its properties and assets and to carry on its business as
now conducted or as proposed to be conducted. Each of Paging Partners and Newco
has full power and authority (corporate and otherwise) to own, lease and operate
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted. True, correct and complete copies of the Certificate
of Incorporation and Bylaws of each of Paging Partners and Newco, each as
amended through the date hereof, have been delivered to BAP, and each of such
documents will continue in effect without further amendment through the
Effective Time.
3.2 Subsidiaries. Paging Partners has no direct or indirect Subsidiaries
other than Newco. Neither Paging Partners nor Newco directly or indirectly owns
or has the right to acquire any interest in any Person (other than, in the case
of Paging Partners, Newco). Except as set forth in Schedule 3.2 of the
Disclosure Schedule delivered to BAP (the "Paging Partners Disclosure
Schedule"), neither Paging Partners nor Newco has made any investment in, loan
to, or advance of cash or other extension of credit to any Person (other than
customer receivables and other than travel and similar advances to employees in
the ordinary course of business). Paging Partners owns all of the issued and
outstanding shares of capital stock of Newco free and clear of any lien, claim,
encumbrance, charge or agreement with respect thereto, other than a lien (the
"Motorola Lien") in favor of Motorola, Inc., a Delaware corporation
("Motorola"), under the Credit Agreement, dated as of June 29, 1995, between
Motorola and Paging Partners (as amended, the "Motorola Credit Agreement").
3.3 Authorization, Etc.
(a) Each of Paging Partners and Newco has the necessary corporate power and
authority to enter into this Agreement and, to the extent required by the
Financing, the BAP Debt Agreements and to carry out its obligations hereunder
and thereunder (except for the approval and adoption of this Agreement by the
stockholders of Paging Partners). The execution and delivery of this Agreement
and, to the extent required by the Financing, the BAP Debt Agreements, by Paging
Partners and Newco, the performance by Paging
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Partners and Newco of their obligations hereunder and thereunder, and the
consummation by Paging Partners and Newco of the transactions contemplated
hereby and thereby have been duly and validly authorized by the board of
directors of each of Paging Partners and Newco, and no other corporate
proceedings on the part of Paging Partners and Newco are necessary to authorize
and approve this Agreement and the BAP Debt Agreements and the consummation of
the transactions contemplated hereby and thereby (except for the approval and
adoption of this Agreement by the stockholders of Paging Partners). As of the
date hereof, there are no agreements, arrangements or other requirements that
require that the transactions contemplated by this Agreement, considered
together in a single vote, be approved by more than a majority of the
outstanding shares of Paging Partners Common Stock.
(b) This Agreement has been duly and validly executed and delivered by each
of Paging Partners and Newco, and assuming the due authorization, execution and
delivery hereof by BAP, is a legal, valid and binding obligation of each of
Paging Partners and Newco enforceable against each of Paging Partners and Newco
in accordance with its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally or by general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(c) The respective Boards of Directors of Paging Partners and Newco have
taken all appropriate and necessary action such that the provisions of Section
203 of the DGCL will not apply to any of the transactions contemplated by this
Agreement, including without limitation the voting of the shares of Paging
Partners Common Stock pursuant to the Voting Agreement and the Merger. No other
anti-takeover or similar statute or regulation applies or purports to apply to
the transactions contemplated by this Agreement.
3.4 Capitalization.
(a) As of September 30, 1998, the authorized capital stock of Paging
Partners consists of 1,000,000 shares of Preferred Stock, par value $.01 per
share (the "Paging Partners Preferred Stock"), and 20,000,000 shares of Paging
Partners Common Stock. As of September 30, 1998, 6,308,054 shares of Paging
Partners Common Stock and no shares of Paging Partners Preferred Stock were
issued and outstanding. As of September 30, 1998, no shares of Paging Partners
Common Stock and no shares of Paging Partners Preferred Stock were held in
Paging Partners' treasury. All of the outstanding shares of Paging Partners
Common Stock have been validly issued and, as of the date hereof, are and, at
the Effective Time, will continue to be fully paid, nonassessable and free of
preemptive rights and cumulative voting rights, with no personal liability
attaching to the ownership thereof. When issued in accordance with the terms of
this Agreement, all of the shares of Paging Partners Common Stock constituting
the Merger Consideration will be validly issued, fully paid, nonassessable and
free of preemptive rights and cumulative voting rights, with no personal
liability attaching to the ownership thereof.
(b) As of the date hereof, the authorized capital stock of Newco consists
of 1,000 shares of Newco Common Stock. As of such date, 1,000 shares of Newco
Common Stock were issued and outstanding, and no shares of Newco Common were
held in Newco's treasury. All of the outstanding shares of Newco Common Stock
have been validly issued and, as of the date hereof, are and, at the Effective
Time, will continue to be fully paid, nonassessable and free of preemptive and
cumulative voting rights, with no personal liability attaching to the ownership
thereof.
(c) As of September 30, 1998, (i) 376,200 shares of Paging Partners Common
Stock were issuable upon the exercise of options ("Paging Partners Options") to
purchase shares of Paging Partners Common Stock under the Paging Partners
Corporation 1994 Incentive Stock Option Plan (the "Paging Partners Option
Plan"), (ii) 190,259 shares of Paging Partners Common Stock may be issuable upon
the exercise of warrants granted to Motorola (the "Motorola Warrants") in
connection with the Motorola Credit Agreement, (iii) 1,800,000 shares of Paging
Partners Common Stock were issuable upon the exercise of 1,800,000 warrants with
an exercise price of $6.60 (the "Public Warrants") issued under the Warrant
Agreement, dated as of May 26, 1994 (the "Paging Partners Warrant Agreement"),
between Paging Partners and Continental Stock Transfer & Trust Company, as
warrant agent, and (iv) 340,000 shares of Paging Partners Common Stock were
issuable upon the exercise of an option (the "Unit Purchase Option") to purchase
170,000 units
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(the "Units") (each Unit, consisting of a share of Paging Partners Common Stock
and a warrant to purchase one share of Paging Partners Common Stock at an
exercise price of $6.60) at an exercise price of $9.90 per Unit, which were
granted to GKN Securities Corporation and certain affiliated individuals. Except
as set forth above, as of the date hereof, there are and, as of the Effective
Time, there will be no outstanding options, warrants, subscriptions, conversion
or other rights, agreements (other than this Agreement) or commitments
obligating Paging Partners or Newco to issue any shares of the capital stock or
any securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of the capital stock of Paging Partners or Newco. None
of the Paging Partners Options will become subject to (i) any termination or
cancellation requiring the payment of any consideration or (ii) any adjustment
in the exercise price (except in connection with the Reverse Stock Split (as
defined below), in either case, in connection with or as a result of the Merger
or any other transaction contemplated by this Agreement. At the Effective Time,
the number of shares of Paging Partners Common Stock that will be outstanding
(excluding shares issuable upon the exercise of the Paging Partners Options, the
Motorola Warrants, the Public Warrants and the Unit Purchase Option) shall not
exceed 6,308,054 shares.
(d) Since September 30, 1998, neither Paging Partners nor Newco has
authorized or issued any shares of its capital stock (except shares of Paging
Partners Common Stock issued upon exercise of Paging Partners Options granted
prior to September 30, 1998) or authorized or issued any option, warrant,
subscription, conversion or other right, agreement or commitment (other than
this Agreement) obligating it to issue any shares of its capital stock or any
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of its capital stock. There are no outstanding
obligations, contingent or otherwise, of either Paging Partners or Newco to
redeem, purchase or otherwise acquire any capital stock or other securities of
Paging Partners or Newco.
(e) Neither Paging Partners nor Newco is in violation of or has violated
any federal or state securities laws in connection with any transaction relating
to Paging Partners or Newco, including without limitation, the acquisition of
any stock, business or assets of any third party or the issuance of any capital
stock of Paging Partners or Newco.
3.5 No Prior Activities. Newco has not incurred, directly or indirectly,
any liabilities or obligations, except those incurred in connection with its
incorporation or with the negotiation of this Agreement and the consummation of
the transactions contemplated hereby. Newco has not engaged, directly or
indirectly, in any business or activity of any type or kind, or entered into any
agreement or arrangement with any person or entity and is not subject to or
bound by any obligation or undertaking, and has not incurred any material
liability in each case, except as contemplated by or in connection with this
Agreement and the transactions contemplated hereby.
3.6 Consents and Approvals. Except as set forth on Schedule 3.6 to the
Paging Partners Disclosure Schedule and except for any filings under federal or
state securities laws in connection with the Merger, no filing or registration
with, no notice to and no permit, authorization, consent or approval of any
public or governmental body or authority is necessary for the consummation by
Paging Partners or Newco of the transactions contemplated by this Agreement or
to enable Paging Partners to continue to conduct its business after the
Effective Time in a manner that is in all material respects consistent with that
in which such business is currently conducted.
3.7 No Conflict. Except as set forth on Schedule 3.7 to the Paging
Partners Disclosure Schedule, neither the execution and delivery of this
Agreement by Paging Partners and Newco nor the consummation by Paging Partners
and Newco of the transactions contemplated hereby nor the compliance by Paging
Partners and Newco with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation and
By-Laws of Paging Partners or Newco, as the case may be, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which Paging Partners or Newco is a party or by which either of them or any
of their properties or assets may be bound or
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(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Paging Partners or Newco or any of their properties or assets.
3.8 No Undisclosed Liabilities. Except as and to the extent reflected on
the audited consolidated balance sheet of Paging Partners as at December 31,
1997, including the notes thereto (the "1997 Balance Sheet"), or in the
unaudited consolidated balance sheets included in Paging Partners' Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998 (the "March 10-Q")
and June 30, 1998 (the "June 10-Q") or Paging Partners's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997 (the "1997 10-K") or
disclosed pursuant to Section 3.10 hereof and except for (a) liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since June 30, 1998, (b) liabilities incurred in connection with or as
a result of the Merger, and (c) liabilities set forth on Schedule 3.8 of the
Paging Partners Disclosure Schedule, neither Paging Partners nor Newco has, at
the date hereof, or will have, at the Effective Time, any liabilities or
obligations. The aggregate amount of indebtedness and other liabilities of
Paging Partners outstanding under the Motorola Credit Agreement (the "Motorola
Loan") is, as of this date hereof, $1,654,189.98 (excluding interest charges
accruing after September 30, 1998), and will not exceed, at the Effective Time,
$1,654,189.98.
3.9 Financial Statements. Paging Partners has previously furnished BAP
with a copy of its financial statements as of and for the fiscal year ended
December 31, 1997, certified by Berenson & Company (the "Audited 1997
Financials"), and as of and for the six months ended June 30, 1998 (the "Second
Quarter Financials" and, together with the Audited 1997 Financials, the "Paging
Partners Financial Statements") and with true and complete copies of each
registration statement and proxy statement (including supplements and amendments
thereto) filed by Paging Partners with the SEC since January 1, 1994 and of the
following reports filed by Paging Partners with the SEC: Paging Partners's
Annual Reports on Form 10-KSB for each of the three fiscal years in the periods
ended December 31, 1995, December 31, 1996 and December 31, 1997, and all
Quarterly Reports on Form 10-Q and all Current Reports on Form 8-K filed after
January 1, 1995 (the "SEC Filings"). The Paging Partners Financial Statements
and the audited year-end and unaudited interim financial statements and
schedules contained in the SEC Filings (or incorporated therein by reference)
were prepared in accordance with the books and records of Paging Partners in all
material respects and were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as otherwise noted therein and except that the unaudited
interim financial statements were or are subject to normal year-end and audit
adjustments that in the aggregate are not material. Each of the financial
statements referred to above fairly presents the financial position of Paging
Partners as of the respective dates set forth therein or the results of
operations and changes in financial position of Paging Partners for the
respective fiscal periods or as of the respective dates set forth therein,
except that the unaudited interim financial statements were or are subject to
normal year-end and audit adjustments that in the aggregate are not material.
Each such registration statement, proxy statement and SEC Filing did not, on the
date of effectiveness in the case of such registration statements, on the date
of mailing and on the date of any stockholder meetings in the case of such proxy
statements and on the date of filing in the case of such SEC Filings, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each SEC
Filing, as of the date of its filing, complied as to form with the requirements
of the Exchange Act.
3.10 Litigation. Except as set forth on Schedule 3.10 of the Paging
Partners Disclosure Schedule, there is no litigation, including without
limitation any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority
(collectively, "Proceedings"), pending or, to the knowledge of any of the Senior
Officers (as defined below) of Paging Partners or Newco, threatened against
Paging Partners or Newco that would reasonably be expected to have a Material
Adverse Effect on Paging Partners and Newco, taken as a whole, or on the
transactions contemplated by this Agreement and the Transaction Documents.
Except as set forth on Schedule 3.10 of the Paging Partners Disclosure Schedule,
neither Paging Partners nor Newco is a party to or subject to the provisions of
any judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental or regulatory official, body or authority (collectively
"Orders") that would have a Material Adverse Effect on Paging
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Partners and Newco, taken as a whole or on the transactions contemplated by this
Agreement and the Transaction Documents. As used herein, "Senior Officers" of
Paging Partners and Newco means the Chairman, Vice Chairman, President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, and any
Vice President, in each case, of Paging Partners or Newco, as the case may be.
3.11 Absence of Changes. Since the date of the 1997 Balance Sheet and
except for, or as a result of, the transactions contemplated by this Agreement
or as set forth on Schedule 3.11 of the Paging Partners Disclosure Schedule,
Paging Partners has conducted its business only in the ordinary and usual course
consistent with past practice and (a) there has been no event or condition that
would have a Material Adverse Effect on Paging Partners and Newco, taken as a
whole, (b) there has been no damage to or destruction or loss of property
(whether or not covered by insurance) that individually or in the aggregate,
exceeds $25,000, (c) neither Paging Partners nor Newco has issued or authorized
for issuance any equity securities or redeemed, purchased or otherwise acquired
any capital stock or any other equity interest or declared, set aside or paid
any dividend or distribution or authorized or effected any split, combination or
reclassification of capital stock as any other equity interest or any securities
convertible into or exchangeable for or evidencing the right to subscribe for
shares of its capital stock or any other equity interest, (d) neither Paging
Partners nor Newco has increased the compensation of, or paid or authorized any
bonus to, any of its officers or directors, or the rate of pay of its employees
as a group, (e) there has been no resignation or termination of employment of
any key officer, consultant or employee of Paging Partners or Newco, (f) there
has been no sale, transfer or other disposition of assets or commitment therefor
other than sales in the ordinary course of business consistent with past
practice, or any acquisition of any material assets, (g) neither Paging Partners
nor Newco has made any loans to any of its employees, officers or directors
other than travel advances and other advances made in the ordinary course of
business, and no Lien (other than a Permitted Lien) has been placed on any of
the assets of Paging Partners or Newco, and (h) neither Paging Partners nor
Newco has taken any action that would have been prohibited under Section 4.4
below had this Agreement been in effect.
3.12 Authorizations and Compliance. Schedule 3.12 of the Paging Partners
Disclosure Schedule sets forth a complete and accurate list of all material
licenses, franchises, permits, consents, approvals, authorizations and orders of
governmental authorities held by Paging Partners or Newco that are in effect and
that are used or useful to operate its business and/or own its assets
(collectively, the "Authorizations"). The Authorizations constitute all
licenses, franchises, permits, registrations, consents, approvals,
authorizations and orders required for the conduct by Paging Partners or Newco
of its business as currently conducted and to own, lease, use and operate its
properties at the places and in the manner in which the business is currently
conducted, other than those the absence of which would not have a Material
Adverse Effect on paging Partners or Newco. Each of Paging Partners and Newco is
in compliance in all material respects with all Authorizations, and all of the
Authorizations are in full force and effect. No proceeding is pending that is
likely to have the effect of revoking or limiting any such Authorizations and,
except for amendments to Authorizations that will be necessary as a result of
the transactions contemplated hereby and that can be obtained in due course
prior to the Closing, the same will not cease to remain in full force and effect
by reason of the transactions contemplated by this Agreement or the Transaction
Documents. Each of Paging Partners and Newco and the operation of its business
are in compliance with all federal, state, local and other statutes, laws, acts,
codes, orders, judgments, decrees, injunctions, regulations, rules, policies,
guidelines, licenses, permits, franchises, by-laws and ordinances (collectively,
"Laws") applicable to it, except where the failure to comply would not
individually or in the aggregate have a Material Adverse Effect on Paging
Partners and Newco, taken as a whole. Neither Paging Partners nor Newco has
received any notice from any governmental or regulatory authority or otherwise
of any alleged violation of or noncompliance with any Law.
3.13 FCC Licenses. Paging Partners and Newco have heretofore provided BAP
with a list of all of the licenses from the Federal Communications Commission
(the "FCC") held by Paging Partners and have heretofore made available to BAP
true, complete and correct copies of all associated licenses (including any
filings made with the FCC to memorialize the sites of any fill-in transmitter as
defined and provided for under the rules of the FCC but which may not be shown
on such 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
that are listed on Schedule 3.13 of the Paging Partners Disclosure Schedule
("Fill-in Transmitters")), files and correspondence
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with the FCC. The FCC Licenses identified on Schedule 3.13 of the Paging
Partners Disclosure Schedule as being held by Paging Partners (the "FCC
Licenses") are all of the FCC Licenses held by Paging Partners relating to the
Paging Partners Frequencies (as defined below) or Paging Partners' paging
business. Except as set forth on Schedule 3.13 of the Paging Partners Disclosure
Schedule, the FCC Licenses held by Paging Partners are in full force and effect,
are validly held by Paging Partners, and are free and clear of Liens (other than
Permitted Liens), conditions or other restrictions of such nature as would
materially limit the operation of Paging Partners' antenna and transmitter sites
covered by the FCC Licenses (including sites for any Fill-in Transmitters) held
by Paging Partners (all such sites for Paging Partners collectively, the
"Transmitter Facilities"). Except for the FCC Licenses, there are no permits,
licenses or other authorizations currently held by it, or required by Law to be
held by it, with respect to its ownership and operation of its paging business,
except where its failure to hold such a permit, license or other authorization
would not reasonably be expected to materially and adversely affect Paging
Partners' and Newco's ownership and operation of Paging Partners' paging
business. The sites of Paging Partners set forth in the FCC Licenses and any
associated sites for Fill-in Transmitters listed therewith in Schedule 3.13 have
been or will be timely constructed and placed into operation with service to
subscribers by Paging Partners in accordance with the rules of the FCC. Except
as set forth on Schedule 3.13, there are no applications, petitions to deny,
complaints or proceedings pending or, to the knowledge of any of the Senior
Officers of Paging Partners or Newco, threatened before the FCC or relating to
the operations of or the provision of service from Paging Partners' and Newco's
Transmitter Facilities that are likely to preclude Paging Partners or Newco from
entering into or consummating the transactions contemplated by this Agreement or
that are likely to materially adversely affect the validity of the FCC Licenses
held by Paging Partners or Newco.
3.14 Equipment and Telecommunications Transmission Services.
(a) Paging Partners has good and valid title to the paging transmission
equipment set forth on Schedule 3.14 of the Paging Partners Disclosure Schedule
(all such equipment described on Schedule 3.14 being referred to herein as the
"Equipment") and to the spare parts for such Equipment free and clear of all
Liens, except for the Permitted Liens. The Equipment identified on Schedule 3.14
constitutes all of the terminals, transmitters, link receivers and antennas used
by Paging Partners to provide one-way paging service.
(b) Schedule 3.14 of the Paging Partners Disclosure Schedule sets forth a
list of all of the telecommunications services that it provides in support of
Paging Partners' paging business, including services to (i) interconnect paging
terminals to local telephone networks, (ii) connect paging terminals to
transmitters, (iii) connect transmitters to monitoring locations for the
performance of status monitoring, control and troubleshooting functions, and
(iv) program numbers into paging terminals and perform remote monitoring,
adjustments, and troubleshooting with respect to the paging terminals. Each of
Paging Partners and Newco represents that the only telecommunications
transmission services provided in support of their paging business are pursuant
to arrangements between Paging Partners or Newco and certain independent local
exchange carriers and interexchange carriers specifically listed as such on
Schedule 3.14.
3.15 Compliance with Law. Paging Partners' and Newco's ownership and
operation of its business are in compliance with all applicable Laws (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 subscribers, and the timely filing of
applications and reports), except where non-compliance would not individually or
in the aggregate have a Material Adverse Effect on Paging Partners or Newco,
taken as a whole. Neither Paging Partners nor Newco has received any written
notice or otherwise been advised that its ownership or operation of its paging
business is not in compliance with any such Laws.
3.16 Site Leases.
(a) Schedule 3.16 of the Paging Partners Disclosure Schedule sets forth a
complete and accurate list of all of the site leases on which equipment is
located to which Paging Partners or Newco is a party (the "Site Leases"). Except
as described in subsection (b) below, each Site Lease to which Paging Partners
or Newco is a party is valid, binding and enforceable against Paging Partners
and, to Paging Partners' knowledge, each other party thereto, in accordance with
its terms and is in full force and effect, except as enforceability thereof
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may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity). All
rents due under each such Site Lease have been paid; in each case, the lessee
has been in peaceable possession since the commencement of the original term of
such lease and is not in default thereunder, and no waiver or postponement of
the lessee's obligations thereunder has been granted by the lessor; and there
exists no default or event of default by the lessee or, to the knowledge of
Paging Partners or Newco, by any other party, or occurrence, condition or act
that, with or without the giving of notice, the lapse of time or the happening
of any further event or condition, would become a default or event of default
under such lease. Neither Paging Partners nor Newco has received any notice of
special assessment and, to the knowledge of Paging Partners and Newco, there is
no threatened special assessment with respect to Paging Partners' or Newco's
Site Leases.
(b) Schedule 3.16 sets forth those Site Leases that are subject to the
terms of the Prime Leases or Master Leases referred to therein. Neither Paging
Partners nor Newco has received notice of or has knowledge of any termination of
any Prime Lease or Master Lease referred to in such Site Lease.
3.17 Books and Records. All material corporate action of the boards of
directors and the stockholders of Paging Partners and Newco taken on or prior to
the date hereof has been duly authorized in accordance with applicable law and
the respective Certificates of Incorporation and Bylaws of Paging Partners and
Newco and has been duly and accurately recorded in the minute books of Paging
Partners and Newco. The general ledgers and books of Paging Partners and Newco
and all other books, accounts and records of Paging Partners and Newco are in
all material respects complete and correct and have been maintained in
accordance with good business practice and all applicable laws and regulations.
3.18 Accounts Receivable. The accounts receivable reflected on the
balance sheet contained in the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1998 and all accounts receivable arising since the
date of such balance sheet (collectively, the "Accounts Receivable") arose from
bona fide transactions in the ordinary course of business and have been recorded
in accordance with Paging Partners' historical revenue recognition policy.
Except as set forth in Schedule 3.18 of the Disclosure Schedule, no Account
Receivable has been assigned or pledged to any other person and no defense or
set off to any such Account Receivable has been asserted by the account obligor.
The allowance for doubtful accounts for such Accounts Receivable is adequate and
in accordance with the historical accounting practices of Paging Partners and
all of the Accounts Receivable, net of allowance for doubtful accounts, are good
and collectible in full in the ordinary course of business.
3.19 Customer Contracts. Copies of the forms of customer contracts
entered into by Paging Partners and Newco since January 1, 1997 for the
provision by Paging Partners or Newco of paging service, pager rental and pager
maintenance, were previously delivered to BAP by Paging Partners and Newco.
3.20 Pagers. Paging Partners has provided to BAP a copy of its inventory
listing dated October 1, 1998, which reflects as of September 30, 1998, the
approximate number of new pagers in Paging Partners' and Newco's pager inventory
and identifies the approximate number of each general type of pager (i.e.,
digital, alphanumeric, etc.) in each category. Since such date, the number of
pagers in pager inventory has not changed except in the ordinary course of
business.
3.21 Retail and Office Leases. Neither Paging Partners nor Newco owns any
real property. Schedule 3.21 of the Paging Partners Disclosure Schedule sets
forth a list of all of Paging Partners' and Newco's real property leases (the
"Retail and Office Leases"), copies of which have previously been delivered to
or made available to BAP. Each Retail and Office Lease is valid, binding and
enforceable against Paging Partners and, to Paging Partners' knowledge, each
other party thereto, in accordance with its terms, and is in full force and
effect, except as enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally or by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). All rents due under each such lease have
been paid; in each case, Paging Partners or Newco has been in peaceable
possession since the commencement of the original term of such lease and is not
in default thereunder and no waiver or postponement of Paging Partners' or
Newco's
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obligations thereunder has been granted by the lessor; and there exists no
default or event of default by the lessee or, to the knowledge of Paging
Partners and Newco, by any other party, or occurrence, condition or act that,
with or without the giving of notice, the lapse of time or the happening of any
further event or condition, would become a default or event of default under
such lease. The buildings and leasehold improvements leased under the Retail and
Office Leases are in good operating condition (normal wear and tear excepted),
are not in need of any known major repairs and are suitable for their current
uses. Neither Paging Partners nor Newco has received any notice of special
assessment and, to Paging Partners and Newco's knowledge, there is no threatened
special assessment relating to the premises leased by it under the Retail and
Offices Leases or any portion thereof.
3.22 Telephone Number Inventory. Schedule 3.22 hereto, which has
heretofore been provided to BAP, sets forth, as of the date of preparation of
such Schedule, the telephone numbers assigned or available for assignment to or
association with individual paging units as part of the Paging Partners' and
Newco's paging business.
3.23 Billing Software. The billing software used by Paging Partners and
Newco shall, at and after the Effective Time, be in the same condition in which
Paging Partners and Newco used it in its operations of its paging business on
the date hereof. The base platform for such billing software was developed by
Mr. Frank Atkinson prior to his employment at Paging Partners. As part of his
employment agreement with Paging Partners, Mr. Atkinson granted a non-exclusive
license to Paging Partners for its use. Since Mr. Atkinson's employment, such
billing software has been updated and revised from time to time. All such
updates and revisions have been written to be "Year 2000 compliant." The
underlying billing software can be revised by Paging Partners' MIS department to
be Year 2000 compliant by December 31, 1999 without material disruption to the
completion of the other normal functions of Paging Partners's MIS department and
without the incurrence of costs in excess of $100,000. Paging Partners has a
valid non-exclusive license to utilize the billing software and any subsequent
modifications.
3.24 Billing System. The computer hardware set forth on Schedule 3.24 of
the Paging Partners Disclosure Schedule and the billing software collectively
comprise the billing system utilized by Paging Partners to perform billing
services.
3.25 Personal Property. Except as reflected on Schedule 3.25 of the
Paging Partners Disclosure Schedule, each of Paging Partners and Newco has good
title to or a valid leasehold or license interest in each item of personal
property used by it in connection with its business, free and clear of all Liens
other than the Motorola Lien and Permitted Liens. The leasehold improvements of
Paging Partners and Newco and all of their respective tangible personal
property, equipment, fixtures and inventories used in the ordinary course of
their respective businesses are in good repair and in good operating condition,
reasonable wear and tear excluded, and are suitable for the purposes for which
they are being used.
3.26 Material Contracts. Schedule 3.26 of the Paging Partners Disclosure
Schedule sets forth a complete and accurate list and description of all of the
following contracts and agreements, whether written or oral, of each of Paging
Partners and Newco:
(a) agreements, contracts or instruments to which Paging Partners or
Newco is a party that (i) involve amounts greater than $25,000 and (ii)
relate to the borrowing of money, the capital lease or purchase on an
installment basis of any property or asset or the guarantee of any of the
foregoing (including without limitation pledged receivables or acquisition
and development credit facilities of Paging Partners or Newco), other than
agreements, contracts or instruments relating to the purchase of pagers in
the ordinary course of business involving less than $200,000 in the
aggregate in any month;
(b) contracts under which the amount payable by Paging Partners or
Newco with respect to its business is dependent on the revenues or income
or similar measure of Paging Partners or Newco or any other Person;
(c) bonding, licenses, leases, contracts and other arrangements with
respect to any material property of Paging Partners or Newco and all
contracts, agreements, commitments, purchase orders or other understandings
or arrangements with respect to which Paging Partners and/or Newco has any
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liability or obligation (contingent or otherwise) involving more than
$100,000 in the aggregate in any month, or which may otherwise have any
continuing effect after the date of this Agreement;
(d) inter-carrier and agency agreements, interLATA circuit contracts
or interconnection agreements with interexchange carriers involving more
than $10,000;
(e) franchise, license, agency, sales representative, marketing,
co-sales arrangements, broker, and similar agreements or any declarations
or covenants, conditions and restrictions, in each case involving more than
$10,000;
(f) forms of reseller agreements involving more than $10,000;
(g) contracts, agreements or other understandings or arrangements
(including without limitation those with respect to compensation) between
Paging Partners or Newco and any stockholder, officer, director,
consultant, agent and/or Affiliate of Paging Partners or Newco (or any
spouse or relative of any of the foregoing);
(h) contracts with any Person (other than BAP) which purport to
restrict the business activities of Paging Partners or Newco or use of
information in its business, including without limitation any covenant not
to compete or any contracts imposing exclusive dealing obligations;
(i) management, operating, service, joint venture, partnership or
limited liability company agreements;
(j) barter, currency, interest rate swap, hedge or broker contracts;
(k) any contract or agreement pursuant to which Paging Partners or
Newco has agreed to indemnify or hold harmless any other Person or to pay
liquidated damages of any kind;
(l) labor, union and similar contracts between Paging Partners or
Newco and its employees;
(m) any contract or agreement between Paging Partners or Newco and
Motorola;
(n) any contract or agreement creating any Lien (other than a
Permitted Lien) on any property or assets of Paging Partners or Newco;
(o) any contract or agreement relating to the capital stock of Paging
Partners or Newco; or
(p) any other material agreement, lease, commitment, instrument, plan,
arrangement or contract entered into by Paging Partners or Newco or to
which any of their respective assets may be subject.
All the foregoing are herein called "Material Contracts." Such list
includes with respect to each Material Contract the names of the parties, the
date thereof, and its title or other general description. The Material Contracts
listed on Schedule 3.26 set forth the entire arrangement and understanding
between Paging Partners and/or Newco and the respective third parties with
respect to the subject matter thereof, and, except as indicated in such
Schedule, there have been no amendments or waivers or side or supplemental
arrangements to or in respect of any Material Contract. Paging Partners and
Newco will furnish any further information that BAP may reasonably request in
connection therewith. Each Material Contract is valid, binding and enforceable
against Paging Partners and, to Paging Partners' knowledge, each other party
thereto, in accordance with its terms and in full force and effect, except as
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally or by general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity and except where failure to be so enforceable would not have a
Material Adverse Effect on Paging Partners and Newco, taken as a whole). Except
for any default by Paging Partners that may exist under the Motorola Credit
Agreement (the "Motorola Default"), there is no event that has occurred or
existing condition that constitutes or that, with notice, the happening of an
event and/or the passage of time, would constitute a default or breach under any
Material Contract by Paging Partners or Newco or would cause the acceleration of
any obligation of any party thereto, give rise to any right of termination or
cancellation or cause the creation of any Lien (other than a Permitted Lien) by
reason of the failure of Paging Partners or Newco to fulfill the obligations
thereunder.
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3.27 Intangible Property Rights. Each of Paging Partners and Newco has
good and marketable title to, or valid and continuing licenses to use, all
trademarks, service marks, trade names, copyrights, franchises, licenses, logos,
customer lists, processes, trade secrets, know-how, and all rights with respect
to the foregoing, that are used in the operation of its business as currently
conducted (collectively, with any application with respect to the issuance or
granting of any of the foregoing, the "Intangible Property"). Schedule 3.27 of
the Paging Partners Disclosure Schedule sets forth a true, correct and complete
list of all Intangible Property owned or used by each of Paging Partners and
Newco (including all registrations and applications with respect to the issuance
or granting of any right). Each of Paging Partners and Newco is the sole and
exclusive owner of all Intangible Property, free and clear of all Liens (other
than Permitted Liens). None of the Intangible Property infringes on any rights
of others.
3.28 Insurance. Schedule 3.28 of the Paging Partners Disclosure Schedule
contains a correct and complete description of all insurance policies held by
Paging Partners or Newco covering Paging Partners or Newco or any of their
respective assets, properties or officers or employees, specifying the type and
amount of coverage, the premium, the insurer and the expiration date of each
such policy (collectively, the "Insurance Policies"). All of the Insurance
Policies are valid and in full force and effect and free of any right of
termination on the part of the insurance carriers. Except as set forth in
Schedule 3.28, all of the liability Insurance Policies are on an "occurrence"
basis. Schedule 3.28 also sets forth a list of all outstanding bonds or other
security arrangements issued or entered into by Paging Partners or Newco.
3.29 Labor Matters. Paging Partners and Newco are in compliance with all
Laws with respect to employment practices and prohibiting discrimination, except
where failure to be in compliance would not have a Material Adverse Effect on
Paging Partners and Newco, taken as a whole. Neither Paging Partners nor Newco
is bound by any union contracts, labor agreements or other similar agreements or
arrangements. There are no pending or threatened claims between Paging Partners
or Newco and any of its employees (including without limitation any claim of
discrimination or harassment), or any unresolved labor grievances or unfair
labor practice or labor arbitration Proceedings pending or threatened relating
to Paging Partners or Newco. Except as set forth on Schedule 3.29 of the Paging
Partners Disclosure Schedule or as provided in Section 4.21 hereof, no present
or former director, officer, partner, stockholder, agent, or employee of or
consultant to Paging Partners or Newco, as a result of any of the transactions
contemplated by this Agreement, is or would be eligible to (a) receive any
bonus, commission, severance pay, lump sum or other payment, compensation or
other remuneration from Paging Partners or Newco of any kind or (b) have the
timing or vesting of any benefit or any increase in the amount of compensation
or other benefits. Except as set forth in Schedule 3.29, there are no employment
or consulting contracts or arrangements by which Paging Partners or Newco is
bound other than those terminable at will with no penalty or other payment
required. Schedule 3.29 of the Paging Partners Disclosure Schedule sets forth a
complete list of all officers and employees of and consultants to Paging
Partners or Newco showing date of hire, hourly rate or salary, commission
arrangements or other basis of compensation. For purposes of this Section 3.29
the term "employee" shall include independent contractors who spend a majority
of their working time on Paging Partners' or Newco's business.
3.30 Transactions With Affiliates. Except as set forth in Schedule 3.30
of the Paging Partners Disclosure Schedule, no officer, employee, director,
Significant Stockholder, partner or agent of or consultant to Paging Partners or
Newco or, to the knowledge of Paging Partners and Newco any of their respective
Affiliates (an "Interested Person"), owned within the past three years, directly
or indirectly, any material interest in, or serves or served as an officer,
employee or director of, any customer, competitor or supplier of Paging Partners
or Newco, or any organization that had or has a material agreement or
arrangement with Paging Partners or Newco, and no Interested Person owns
directly or indirectly any material asset or property used in or necessary to
the business of Paging Partners or Newco. "Significant Stockholder" means any
Person that beneficially owns (within the meaning of the Exchange Act and the
rules and regulations promulgated thereunder) five percent or more of the equity
of the Company on a fully diluted basis.
3.31 Environmental Matters. Environmental Matters. Without limiting any
other representation or warranty contained herein, to the knowledge of Paging
Partners and Newco, each of Paging Partners and Newco, and each of Paging
Partners' and Newco's ownership and use of its premises, the occupancy and
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operation thereof and the conduct of each of Paging Partners and Newco's
business are and have been in compliance with all Environmental Laws, including
without limitation legal requirements relating to the use, storage, handling,
transport and disposal of Hazardous Materials. To the knowledge of Paging
Partners and Newco, none of the real property owned, leased or operated by
Paging Partners or Newco at any time has ever been used as a sanitary land fill
or as a storage or dump site for Hazardous Materials or is contaminated with any
Hazardous Materials. To the knowledge of Paging Partners and Newco, neither
Paging Partners nor Newco nor any other Person has ever caused or permitted any
Hazardous Materials to be disposed of on or under any real property owned,
leased or operated by Paging Partners or Newco in any manner not permitted by
all applicable Laws, and no such real property has ever been used (by Paging
Partners or Newco or any other Person) as (a) a disposal site or permanent
storage site for any Hazardous Materials or (b) a temporary storage site for any
Hazardous Materials which temporary storage resulted in a release of Hazardous
Materials or violated any Environmental Law. To the knowledge of Paging Partners
and Newco, all Hazardous Materials used or generated by Paging Partners or Newco
or any business merged into or otherwise acquired by Paging Partners or Newco
have been generated, accumulated, stored, transported, treated, recycled and
disposed of in compliance with all applicable Environmental Laws. To the
knowledge of Paging Partners and Newco, there are no underground storage tanks
on any real property owned, leased or operated by Paging Partners or Newco. To
the knowledge of Paging Partners and Newco, neither Paging Partners nor Newco
has any liabilities with respect to Hazardous Materials, and no facts or
circumstances exist that could give rise to liabilities under any applicable
Environmental Law. To the knowledge of Paging Partners and Newco, none of this
Agreement, the other Transaction Documents or the transactions contemplated
hereby or thereby will result in any obligations for environmental site
assessment or cleanup, or notification to or consent of any governmental agency
or third party under any transaction-triggered Environmental Law.
3.32 Taxes. Paging Partners has made available to BAP true and correct
copies of all of its tax returns (original and amended) for all open years.
Paging Partners has correctly prepared and filed when due all tax and/or
information returns required by Law to be filed and has paid when due all Taxes,
including without limitation Taxes levied upon any of its properties, assets,
income or franchises, except (i) where the failure to do so will not have a
Material Adverse Effect on Paging Partners and Newco, taken as a whole or (ii)
where Paging Partners is contesting such Taxes in good faith and has made
adequate reserves on its books therefor. All such returns are, and all returns
to be filed from the date hereof until the Effective Time will be true and
correct and show all Taxes owed in respect of Paging Partners for the relevant
periods, except where Paging Partners is contesting such Taxes in good faith and
has made adequate reserves on its books therefor. Except as set forth on
Schedule 3.32, no return of Paging Partners has ever been audited by the
Internal Revenue Service or any other Governmental Authority. Paging Partners
has never filed a consent under sec.341(f) of the Code and has never executed
any waiver that would have the effect of extending any applicable statute of
limitations in respect of any tax liabilities. The charges, accruals and
reserves on Paging Partners' books in respect of Taxes for all fiscal periods
are adequate, and there are no unpaid assessments or any basis for the
assessment of any additional Taxes, penalties or interest for any period for
which the due date has passed or audit thereof by any taxing authority, except
for those (i) that will not have a Material Adverse Effect on Paging Partners
and Newco, taken as a whole or (ii) that Paging Partners is contesting in good
faith or for which Paging Partners has made adequate reserves on its books. All
Taxes that Paging Partners is required by Law to withhold or to collect for
payment have been duly withheld and collected and paid to the proper
governmental entity. There are no tax Liens (other than Permitted Liens) or
claims pending or threatened against Paging Partners or its properties or
assets. There are no outstanding tax sharing agreements or other such
arrangements between Paging Partners and any other Person. The tax basis of the
assets of each of Paging Partners by category including the classification of
such assets as being depreciable or amortizable as reflected in their respective
tax returns and related work papers is true and correct in all material
respects.
3.33 Employee Benefit Plans.
(a) Paging Partners maintains, contributes to or established the "employee
benefit plans," within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), including but not limited to bonus, stock option, stock
purchase, restricted stock, incentive, profit-sharing, pension, retirement,
deferred compensation, severance, medical,
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dental, life, disability, accident, accrued leave, vacation, sick pay, sick
leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments or practices (whether or not insured) set forth in
Schedule 3.33 Each such employee benefit plan is referred to herein as a "Paging
Partners Benefit Plan" and collectively as the "Paging Partners Benefit Plans".
Each Paging Partners Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Code and, to the extent applicable, Section
401(k) of the Code, has been determined by the Internal Revenue Service to be so
qualified. The Paging Partners Benefit Plans have been maintained, operated and
administered in all material respects in accordance with their terms and
applicable law, including without limitation ERISA and the Code. No complete or
partial termination of any Paging Partners Benefit Plan has occurred or is
expected to occur prior to or on the Closing Date or as a result of this
transaction. No event has occurred, or is reasonably expected to occur as a
result of the transactions contemplated by this Agreement, with respect to or
pursuant to any Paging Partners Benefit Plan which will result in any material
liability to BAP.
(b) No Paging Partners Benefit Plan is an "employee pension benefit plan,"
within the meaning of Section 3(2) of ERISA, subject to Section 412 of the Code
or Section 302 of Title IV of ERISA. Paging Partners has never contributed or
had any obligation to contribute to any multi employer pension plan within the
meaning of ERISA and the Code.
(c) Paging Partners does not maintain any Paging Partners Benefit Plan that
is a "group health plan" (as such term is defined in ERISA or the Code) that has
not been administered or operated in all material respects in compliance with
the applicable requirements of Section 601 of ERISA and Section 4980B(f) of the
Code.
3.34 Certain Agreements. The agreements and plans set forth on Schedule
3.34 of the Paging Partners Disclosure Schedule are the only employment,
severance, consulting or similar agreements of Paging Partners containing a
"change of control" provision.
3.35 Brokers. Brokers. No investment bank, broker or finder is entitled
to any fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Paging Partners
or Newco, other than Robert Davidoff and Rochelle King, which shall not exceed
$100,000 in the aggregate.
3.36 Disclosure.
(a) Neither this agreement nor any exhibit or schedule hereto nor any
Transaction Document nor any statement, list or certificate delivered to BAP
pursuant hereto or pursuant to any written request therefor, contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances in which they were made, not misleading.
(b) The Paging Partners Proxy Statement, will not, as of the date the
Paging Partners Proxy Statement is first mailed to stockholders of Paging
Partners and as of the date of the Paging Partners' stockholder meeting, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
(c) The Paging Partners Proxy Statement will, as of the date the Paging
Partners Proxy Statement is first mailed to stockholders of Paging Partners and
as of the date of the Paging Partners' stockholder meeting, comply as to form
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
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ARTICLE IV
COVENANTS
Paging Partners, Newco and BAP hereby covenant and agree to take the
following actions between the date hereof and the Closing and/or, if applicable,
following the Closing:
4.1 Access to Information
(a) Subject to the terms and conditions of the Bell Atlantic Acquisition
Agreement, until the first to occur of the Effective Time or termination of this
Agreement pursuant to Article VI hereof, BAP will, and will cause its officers,
directors, employees, counsel, advisors and representatives to, afford to the
officers, employees, counsel and authorized representatives of Paging Partners
and Newco (including, without limitation, its accountants) such access to the
officers, employees, accountants, properties and business and financial records
and contracts of every kind of BAP as Paging Partners and Newco shall deem
necessary, and shall furnish to Paging Partners and Newco and its authorized
representatives such additional information concerning the proposed management,
operations, properties and business of BAP, the Bell Atlantic Paging Business
and, after the closing of the Bell Atlantic Acquisition, the BAP Paging
Business, as shall be reasonably requested, including without limitation all
such information as shall be necessary to enable Paging Partners and Newco or
its representatives to verify the accuracy of the representations and warranties
contained herein and to prepare the Paging Partners Proxy Statement to be used
in connection with the Paging Partners special meeting. No investigation by
Paging Partners and Newco into BAP, the Bell Atlantic Paging Business, the BAP
Paging Business or the management, business, operations, assets, records or
condition of BAP, the Bell Atlantic Paging Business or the BAP Paging Business
shall diminish or in any way limit any of the representations and warranties of
BAP in this Agreement or in any Transaction Document or writing delivered
pursuant hereto or relieve BAP of any obligation hereunder.
(b) Notwithstanding the foregoing (or any other provision of this Agreement
or the other Transaction Documents), the parties understand that, until the
closing of the Bell Atlantic Acquisition, (i) BAP will not have ownership or
control of the Bell Atlantic Paging Business, (ii) BAP will have only limited
access to information about the Bell Atlantic Paging Business, and (iii) the
Bell Atlantic Acquisition Agreement contains provisions requiring the
maintenance of the confidentiality of, and limiting the public disclosure of
certain information relating to, the Bell Atlantic Acquisition, the Bell
Atlantic Acquisition Agreement and the Bell Atlantic Paging Business and
requiring BAP to obtain the consent of the Bell Atlantic Subsidiaries prior to
the public disclosure of such information (the "Bell Atlantic Confidentiality
Provisions"). If Paging Partners or Newco shall reasonably request information
about the Bell Atlantic Acquisition, the Bell Atlantic Acquisition Agreement or
the Bell Atlantic Paging Business that is not available to BAP or that cannot be
publicly disclosed under the Bell Atlantic Confidentiality Provisions (to be
determined by BAP in its sole discretion), then BAP shall use commercially
reasonable efforts to obtain the requested information or the consent to the
public disclosure of such requested information, as the case may be, from the
Bell Atlantic Subsidiaries. If, however, after using commercially reasonable
efforts, BAP fails to obtain such requested information, or the consent to the
disclosure of such requested information, as the case may be, and if, as a
result of such failure, BAP, Paging Partners and/or Newco are unable to perform
their respective obligations or satisfy their conditions to closing under this
Agreement, including without limitation those under Sections 4.1, 4.5, 4.8, 4.9,
4.11, and 4.14 hereof, then the parties hereto agree that (i) the time for BAP,
Paging Partners and Newco to perform their obligations under this Agreement
shall be extended for such time as Paging Partners shall determine, which shall
not be less than 15 days from the date that BAP gives Paging Partners written
notice of such failure (the "Extension Period") and (ii) none of BAP, Paging
Partners or Newco shall be in breach of this Agreement during the Extension
Period as a result of the circumstances described in this clause (b).
Notwithstanding any other provision of this Agreement or the Transaction
Documents, if BAP cannot obtain the requested information or the consent to the
disclosure of such requested information, and Paging Partners terminates the
Extension Period, then the parties agree that for purposes of Article VI and
Section 8.5 hereof, none of BAP, Paging Partners or Newco shall be in breach of
this Agreement as a result of the circumstances described in this clause (b).
BAP shall use commercially
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reasonable efforts to provide paging Partners or Newco with any such requested
information or consent as soon as practicable following the closing of the Bell
Atlantic Acquisition.
(c) Until the first to occur of the Effective Time or termination of this
Agreement pursuant to Article VI hereof, Paging Partners and Newco will, and
will cause their respective officers, directors, employees, counsel, advisors
and representatives to, afford to the officers, employees, counsel and
authorized representatives of BAP (including, without limitation, its
accountants) such access to the officers, employees, accountants, properties and
business and financial records and contracts of every kind of Paging Partners
and Newco as BAP shall deem necessary, and shall furnish to BAP and its
authorized representatives such additional information concerning the
management, operations, properties and business of Paging Partners and Newco as
shall be reasonably requested, including without limitation all such information
as shall be necessary to enable BAP or its representatives to verify the
accuracy of the representations and warranties contained herein. No
investigation by BAP into Paging Partners or Newco or its management, business,
operations, assets, records or condition shall diminish or in any way limit any
of the representations and warranties of Paging Partners and Newco in this
Agreement or in any Transaction Document or writing delivered pursuant hereto or
relieve Paging Partners and Newco of any obligation hereunder.
4.2 Consents and Approvals Consents and Approvals. Paging Partners, Newco
and BAP shall cooperate in using their commercially reasonable efforts to obtain
as promptly as practicable all governmental and regulatory approvals, consents,
orders and authorizations and transfer of licenses or registrations required in
connection with, and waivers of any violations, breaches and defaults that may
be caused by, the consummation of the transactions contemplated by this
Agreement.
4.3 Conduct of Business of BAP. Except as contemplated by this Agreement
or with the prior written consent of Paging Partners and Newco, during the
period from the date of the closing of the Bell Atlantic Acquisition to the
Effective Time or the termination of this Agreement pursuant to Article VI
hereof, BAP shall operate and carry on the BAP Paging Business only in the
ordinary and usual course consistent with past practice of the Bell Atlantic
Paging Business (subject to any changes resulting from the fact that such
business will not be owned by Bell Atlantic and the Bell Atlantic Subsidiaries
after the Bell Atlantic Acquisition) and in material compliance with all
applicable Laws. Consistent with the foregoing, BAP (including, after the
closing of the Bell Atlantic Acquisition, the BAP Paging Business) shall
maintain its corporate existence and use commercially reasonable efforts to
maintain its business organizations intact, retain its Authorizations, preserve
its existing contracts, pay and discharge when due all taxes, assessments and
governmental charges, keep available the services of its current officers and
employees, preserve its FCC licenses and relationships with customers,
suppliers, contractors, licensors, employees and any other Persons having
business relations with it, and maintain all of the material structures,
equipment and other tangible personal property used in its business in good
repair, order, and condition in all material respects (except for depletion,
depreciation, ordinary wear and tear and damage by unavoidable casualty).
Without limiting the generality of the foregoing and except as expressly
contemplated by this Agreement and the Bell Atlantic Acquisition Agreement, BAP
shall not, directly or indirectly, do any of the following or enter into any
agreement, arrangement or understanding with respect thereto, without the prior
written consent of Paging Partners and Newco:
(a) make any material change in its business, management or operations
or enter into any new line of business or take any action that would
materially adversely affect or detract from the value of BAP or, if
applicable, the BAP Paging Business or terminate the services of any
present key employee, consultant or agent except for good cause or in
connection with the Bell Atlantic Acquisition;
(b) (i) sell, pledge, dispose of or encumber any asset of BAP (except
for sales of assets in the ordinary course of business consistent with past
practice and except in connection with the BAP Debt Agreements and the
transactions contemplated thereby and the Motorola Credit Agreement or the
renegotiation thereof) or (ii) acquire any material assets or properties
(whether by merger, consolidation, acquisition of stock or assets or
otherwise except in connection with the Bell Atlantic Acquisition), (iii)
release or assign any indebtedness owed to it or any claims held by it,
except in the ordinary course of business consistent with past practice or
except in connection with the Bell Atlantic Acquisition, or
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(iv) enter into any agreement granting a preferential right to sell, lease,
license, transfer or otherwise dispose of property, except in the ordinary
course of business consistent with past practice;
(c) (i) incur or assume any indebtedness (other than indebtedness
incurred or assumed in the ordinary course of business and consistent with
past practice, provided that such indebtedness does not relate to borrowed
money) or assume, guarantee, endorse (other than endorsement of accounts
receivable for collection) or otherwise become responsible for the
obligations of any other Person, provided that the foregoing shall not
prevent BAP from incurring indebtedness (i) under the BAP Debt Agreements
in connection with the Bell Atlantic Acquisition and the Merger in an
amount not to exceed $25,500,000 or (ii) in connection with the ownership
and operation of the BAP Paging Business in the ordinary course of business
consistent with past practice of the Bell Atlantic Paging Business;
(d) make, declare or pay any dividend, or declare or make any
distribution on, or directly or indirectly redeem, repurchase or otherwise
acquire, any shares of its outstanding capital stock or any securities
convertible into or exchangeable for such capital stock or issue any shares
of its capital stock (other than pursuant to (i) the issuance and sale of
the BAP Preferred Stock pursuant to the BAP Stock Purchase Agreement, (ii)
the conversion of the BAP Preferred Stock immediately prior to the
consummation of the Merger or the repurchase of capital stock of BAP
pursuant to the Equity Sponsor Agreement); or authorize the creation or
issuance of any additional shares of its capital stock (other than pursuant
to the conversion of the BAP Preferred Stock immediately prior to the
consummation of the Merger) or authorize or grant any options, calls or
commitments relating to its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire from it, any shares of its capital stock; or
split, combine or reclassify any capital stock (other than pursuant to the
BAP Employment Agreements (as defined below) and the BAP Option Agreements
(as defined below));
(e) subject any of its properties or assets to any Lien (other than
Permitted Liens and Liens incurred under the BAP Debt Agreements or in
connection with the Bell Atlantic Acquisition with respect to indebtedness
permitted under paragraph (c) above);
(f) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other
Person, except, after the closing of the Bell Atlantic Acquisition, in the
ordinary course of the BAP Paging Business consistent with the past
practice of the Bell Atlantic Paging Business;
(g) enter into, terminate or cancel any contract, agreement, debt or
claim or modify, amend or make any change in any of its leases, contracts,
agreements, debts or claims or waive any material rights, in any case, that
provides for a commitment on the part of BAP to pay an amount in excess of
$50,000 or that affects in any material respect the business of BAP, other
than (A) the Employment Agreement to be dated as of the Effective Time,
between BAP and D. Brian Plunkett (the "Plunkett Employment Agreement" and,
together with the Adiletta Employment Agreement, the "BAP Employment
Agreements"), (B) the Option Agreement to be entered into between BAP and
John X. Adiletta as contemplated by the Adiletta Employment Agreement (the
"Adiletta Option Agreement"), (C) the Option Agreement to be entered into
between BAP and D. Brian Plunkett (the "Plunkett Option Agreement" and,
together with the Adiletta Option Agreement, the "BAP Option Agreements")
and (D) the Deerfield Agreement, (ii) other than the agreements to be
entered into at the closing of the Bell Atlantic Acquisition as
contemplated by the Bell Atlantic Acquisition Agreement, (iii) other than
the termination of the Bell Atlantic Acquisition Agreement pursuant to the
terms thereof and the termination of this Agreement pursuant to the terms
hereof, and (iv) other than in the ordinary course of the business of BAP
or, if applicable, the BAP Paging Business consistent with the past
practice of BAP or the Bell Atlantic Paging Business.
(h) increase in any manner or change the nature of the compensation or
fringe benefits paid or payable to any director, officer, agent,
representative, independent contractor or consultant of BAP or pay or agree
to pay any commission or bonus payment (other than commissions and bonus
payments to which BAP is now committed or will become committed upon
closing of the Bell Atlantic Acquisition), or pay
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or agree to pay any pension or retirement allowance not required by any
existing plan or agreement to any officers or employees (other than in
connection with the Bell Atlantic Acquisition), or commit itself to any
pension, retirement or profit-sharing plan or agreement or employment
agreement with or for the benefit of any officer, employee or other person
other than in connection with the Bell Atlantic Acquisition;
(i) permit any insurance policy naming BAP or the Bell Atlantic Paging
Business as a beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination or cancellation, replacement policies
providing substantially the same coverage are in full force and effect,
other than in the ordinary course of business and other than in connection
with the Bell Atlantic Acquisition;
(j) propose or adopt any amendment to its charter or bylaws, except in
connection with the Financing, or enter into any agreement the terms of
which would be violated by the consummation of the transactions
contemplated by this Agreement, except as set forth on Schedule 2.10
hereof;
(k) change its methods of accounting or fiscal year or fail to
maintain its books, accounts and records in the usual, regular and ordinary
manner or fail to post all entries therein promptly in compliance with
accepted practice and applicable law;
(l) settle or compromise any suit or claim or threatened suit or claim
relating to the transactions contemplated by this Agreement;
(m) make any tax election or settle or compromise any material income
tax liability;
(n) except as specifically contemplated by this Agreement, the BAP
Employment Agreements, the BAP Option Agreements, the Deerfield Agreement
or the Adiletta Note, enter into any of the foregoing transactions with any
director, officer, stockholder, or employee of BAP; or
(o) take any action (or refrain from taking any action) that would
cause, or might reasonably be expected to cause, any representation or
warranty of BAP contained herein to be inaccurate in any material respect.
4.4 Conduct of Business of Paging Partners and Newco. Except as
contemplated by this Agreement or with the prior written consent of BAP, during
the period from the date hereof to the Effective Time or the termination of this
Agreement pursuant to Article VI hereof, Paging Partners and Newco shall operate
and carry on their business only in the ordinary and usual course consistent
with past practice and in material compliance with all applicable Laws.
Consistent with the foregoing, Paging Partners and Newco shall maintain their
respective corporate existences and use their best efforts to maintain their
business organizations intact, retain their Authorizations, preserve their
existing contracts, pay and discharge when due all taxes, assessments and
governmental charges, keep available the services of their present officers and
employees, preserve their FCC Licenses and relationships with customers,
suppliers, contractors, licensors, employees and any other Persons having
business relations with them, and maintain all of the material structures,
equipment and other tangible personal property used in their business in good
repair, order, and condition in all material respects (except for depletion,
depreciation, ordinary wear and tear and damage by unavoidable casualty).
Without limiting the generality of the foregoing and except as expressly
contemplated by this Agreement, Paging Partners and Newco shall not, directly or
indirectly, do any of the following or enter into any agreement, arrangement or
understanding with respect thereto, without the prior written consent of BAP:
(a) make any material change in its business, management or operations
or enter into any new line of business or take any action that would
materially adversely affect or detract from the value of Paging Partners or
Newco or terminate the services of any present key employee, consultant or
agent except for good cause;
(b) (i) sell, pledge, dispose of or encumber any asset of Paging
Partners or Newco, except for sales of assets in the ordinary course of
business consistent with past practice and involving amounts less than
$25,000 and except for sales, pledges, dispositions or encumbrances of
pagers in the ordinary course of
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business consistent with past practice and involving less than $300,000 in
the aggregate in any month, or (ii) acquire any material assets or
properties (whether by merger, consolidation, acquisition of stock or
assets or otherwise), except for purchases or other acquisitions of pagers
in the ordinary course of business, consistent with past practice, and
involving less than $200,000 in the aggregate in any month, or (iii)
release or assign any indebtedness owed to it or any claims held by it,
except in the ordinary course of business consistent with past practice, or
(iv) enter into any agreement granting a preferential right to sell, lease,
license, transfer or otherwise dispose of property, except in connection
with the sale, lease, license or transfer of pagers in the ordinary course
of business consistent with past practice;
(c) (i) incur or assume any indebtedness (other than indebtedness
incurred or assumed in the ordinary course of business, consistent with
past practice and involving amounts less than $25,000, provided that such
indebtedness does not relate to borrowed money) or (ii) assume, guarantee,
endorse (other than endorsement of accounts receivable for collection) or
otherwise become responsible for the obligations of any other Person, in
each case, provided that the foregoing shall not prevent Paging Partners or
Newco from (x) incurring indebtedness in connection with the purchase of
pagers in the ordinary course of business consistent with past practice
involving less than $200,000 in the aggregate in any month, or (y)
incurring indebtedness under the Motorola Credit Agreement for so long as
Paging Partners and Newco's aggregate indebtedness thereunder (including
any currently outstanding indebtedness) does not at any time exceed
$1,654,189.98 or (z) refinancing indebtedness outstanding under the
Motorola Credit Agreement on terms reasonably satisfactory to Paging
Partners and, to the extent necessary to comply with the terms and
conditions of the BAP Debt Agreements, BAP;
(d) make, declare or pay any dividend, or declare or make any
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its outstanding capital stock; or any securities
convertible into or exchangeable for such capital stock or issue any shares
of its capital stock; or issue or authorize the creation or issuance of any
additional shares of its capital stock other than pursuant to options,
warrants or rights that are outstanding on the date hereof and are
expressly disclosed in the Paging Partners Disclosure Schedule or in this
Agreement or issue or authorize or grant any warrants, options, calls or
commitments relating to its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire from either of them, any shares of their capital
stock; or split, combine or reclassify any capital stock;
(e) subject any of its properties or assets to any Lien (other than
Permitted Liens and Liens incurred under the Motorola Credit Agreement with
respect to indebtedness permitted under paragraph (c) above);
(f) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other
Person, in either case, in excess of $100,000;
(g) enter into, terminate or cancel any contract, agreement, debt or
claim or modify, amend or make any change in any of its leases, contracts,
agreements, debts or claims or waive any material rights, in any case, that
provides for a commitment on the part of Paging Partners and/or Newco to
pay an amount in excess of $25,000 in any case or $100,000 in the aggregate
or that affects in any material respect the business of Paging Partners and
Newco other than the termination of this Agreement pursuant to the terms
hereof;
(h) increase in any manner or change the nature of the compensation or
fringe benefits paid or payable to any director, officer, agent,
representative, independent contractor or consultant of Paging Partners or
Newco or pay or agree to pay any commission or bonus payment (other than
commissions and bonus payments to which Paging Partners is now committed
and which have been disclosed in this Agreement or the Paging Partners
Disclosure Schedule or pay or agree to pay any pension or retirement
allowance not required by any existing plan or agreement to any officers or
employees, or commit itself to any pension, retirement or profit-sharing
plan or agreement or employment agreement with or for the benefit of any
officer, employee or other person;
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(i) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination or
cancellation, replacement policies providing substantially the same
coverage are in full force and effect, other than in the ordinary course of
business;
(j) propose or adopt any amendment to its Certificate of Incorporation
or Bylaws; or enter into any agreement the terms of which would be violated
by the consummation of the transactions contemplated by this Agreement;
(k) change its methods of accounting or fiscal year or fail to
maintain its books, accounts and records in the usual, regular and ordinary
manner or fail to post all entries therein promptly in compliance with
accepted practice and applicable law;
(l) settle or compromise any suit or claim or threatened suit or claim
relating to the transactions contemplated by this Agreement;
(m) make any tax election or settle or compromise any material income
tax liability;
(n) take or allow to be taken or fail to take any action, which action
or omission could jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code;
(o) except as specifically contemplated by this Agreement, enter into
any of the foregoing transactions with any director, officer, stockholder,
or employee of Paging Partners or Newco; or
(p) take any action (or refrain from taking any action) that would
cause, or might reasonably be expected to cause, any representation or
warranty of Paging Partners or Newco contained herein to be inaccurate in
any material respect.
4.5 Confidentiality. Subject to Section 4.1(b) hereof, each of BAP,
Paging Partners and Newco shall (and shall cause its respective officers,
employees and representatives to) keep all information furnished to it pursuant
to or in connection with this Agreement or any of the transactions contemplated
herein confidential (including, without limitation, any of such information
relating to either of BAP's or Paging Partners' respective businesses) and shall
not disclose any of such information to any third party, except, subject to
Section 4.1(b) hereof, the Bell Atlantic Confidentiality Provisions, and the
Bell Atlantic Consent, (i) as contemplated herein or in the Bell Atlantic
Acquisition Agreement or the documents relating to the Financing, (ii) as
required by (A) law (including information disclosures that may be required to
be set forth in the Proxy Statement or other materials furnished to Paging
Partners stockholders, (B) valid judicial or regulatory process to any
governmental authority including but not limited to the FCC, the Federal Trade
Commission and the Department of Justice, or (C) securities exchange rules or
regulations (or comparable rules and regulations of the Nasdaq Small Cap
Market), (iii) for disclosures of such information concerning the transactions
contemplated by this Agreement that are made (A) to BAP's, Paging Partners' or
Newco's respective stockholders (except with respect to disclosures to Paging
Partners' stockholders only in the Paging Partners Proxy Statement), officers,
directors, financial advisors, accountants, counsel or other representatives on
a need-to-know basis or (B) to the Bell Atlantic Subsidiaries as required by the
Bell Atlantic Acquisition Agreement; provided, that such confidentiality
obligations shall not apply to any information (i) that becomes public through
no fault of the receiving party or its representatives or (ii) that the
receiving party can show was already known to it on a non-confidential basis
prior to the disclosure thereof by the other party.
4.6 Exclusive Dealing, Etc.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of the Agreement in accordance with Article VI or
the Effective Time, except as contemplated by this Agreement, BAP shall not
authorize any Person or individual to, directly or indirectly, through any
officer, director, agent, employee or otherwise, (a) entertain, solicit,
initiate or encourage any inquiries or the submission of proposals or offers
from any Person relating to any acquisition or purchase of any of the shares of
the capital stock of BAP and/or all or any material portion of BAP's assets or
any equity interest in BAP or any equity investment, merger, consolidation or
business combination with BAP (including by way of tender offer) or (b)
participate in any discussions or negotiations regarding, or furnish to any
other Person any
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information with respect to, or otherwise cooperate in any way with, or assist
or facilitate or encourage, any effort or attempt by any other Person to do or
seek any of the foregoing, in either case, except in connection with the offer
and sale of equity securities in BAP pursuant to the Financing, provided that
the number of shares of BAP Common Stock outstanding on a fully diluted basis at
the Effective Time shall not exceed 98,000 (excluding shares of BAP Common Stock
issuable upon the exercise of the BAP Options, which shall not exceed 7,000
shares). BAP shall notify Paging Partners and Newco in writing immediately upon
receipt of any inquiry, offer or proposal relating to any of the foregoing, and
such notice shall identify the Person(s) making such inquiry, offer or proposal
and shall describe the material terms thereof.
(b) During the period from the date of this Agreement and continuing until
the earlier of (i) the termination of the Agreement in accordance with Article
VI hereof or (ii) the Effective Time, Paging Partners and Newco shall not
authorize any Person or individual to, directly or indirectly, through any
officer, director, agent, employee or otherwise, (a) entertain, solicit,
initiate or encourage any inquiries or the submission of proposals or offers
from any Person relating to any acquisition or purchase of any of the shares of
the capital stock of Paging Partners or Newco and/or all or any material portion
of Paging Partners' or Newco's assets or any equity interest in Paging Partners
or Newco or any equity investment, merger, consolidation or business combination
with Paging Partners or Newco (including by way of tender offer), or (b)
participate in any discussions or negotiations regarding, or furnish to any
other Person any information with respect to, or otherwise cooperate in any way
with, or assist or facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. Paging Partners and Newco shall
notify BAP in writing immediately upon receipt of any inquiry, offer or proposal
relating to any of the foregoing, and such notice shall identify the Persons
making such inquiry, offer or proposal and shall describe the material terms
thereof.
(c) Notwithstanding anything to the contrary in Section 4.5(b), Paging
Partners may furnish information to, and may participate in discussions or
negotiations with, any person that, unsolicited by Paging Partners, its
officers, directors, agents, or employees, has submitted a written proposal to
the Board of Directors of Paging Partners relating to a Competing Transaction
(as defined below), in each case, to the extent that the Board of Directors
determines in good faith that the failure to do so would cause the Board of
Directors to breach its fiduciary duties to Paging Partners or its stockholders
under applicable Laws after receipt of advice to such effect from legal counsel
and, notwithstanding anything to the contrary contained in this Agreement, any
such furnishing of information and participation in discussions or negotiations
shall not constitute a breach of this Agreement by Paging Partners or Newco;
provided, however, that if Paging Partners shall furnish such information or
participate in such discussions or negotiations, it shall notify BAP promptly of
such action. A "Competing Transaction" means any of the following involving
Paging Partners (other than the transactions contemplated by this Agreement):
(i) a merger, consolidation, share exchange, business combination or other
similar transaction, (ii) any sale, lease, exchange, transfer or other
disposition of 10% or more of the assets of Paging Partners and Newco, taken as
a whole, or (iii) a tender offer or exchange offer for, or any other acquisition
of, 10% or more of the outstanding voting securities of Paging Partners.
4.7 Notification of Certain Matters.
(a) BAP shall promptly inform Paging Partners and Newco in writing of (i)
the occurrence, or failure to occur, of any event, which occurrence or failure
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at any time from the date hereof to
the Effective Time, if such untrue or inaccurate representation and warranty
would be reasonably likely to have a Material Adverse Effect on Paging Partners,
Newco, the Bell Atlantic Acquisition or the Merger; (ii) the failure of BAP to
obtain the Financing for the Bell Atlantic Acquisition as required by Section
5.2(l) hereof; (iii) any failure of BAP or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, which failure would be
reasonably likely to have a Material Adverse Effect on Paging Partners, Newco,
the Bell Atlantic Acquisition or the Merger; (iv) any material adverse change
which shall have occurred or been threatened in the financial condition, results
of operations, business or assets of BAP; and (v) any litigation, or any claim
or controversy or contingent liability that might reasonably be expected to
become the subject of litigation, against BAP or affecting any of its property
to the extent that the result of such litigation, if adversely
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determined, could have a Material Adverse Effect on BAP, the Bell Atlantic
Acquisition or the Merger; provided, however, that no such notification shall
affect the representations or warranties of BAP contained herein or the
conditions to the obligations of Paging Partners and Newco hereunder.
(b) Paging Partners and Newco shall promptly inform BAP in writing of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at any time from the date hereof to
the Effective Time, if such untrue or inaccurate representation and warranty
would be reasonably likely to have a Material Adverse Effect on Paging Partners,
Newco, the Bell Atlantic Acquisition or the Merger; (ii) any failure of Paging
Partners or Newco of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, which failure would be reasonably likely
to have a Material Adverse Effect on BAP, the Bell Atlantic Acquisition or the
Merger; (iii) any material adverse change which shall have occurred or been
threatened in the financial condition, results of operations, business or assets
of Paging Partners or Newco; (iv) any litigation, or any claim or controversy or
contingent liability that might reasonably be expected to become the subject of
litigation, against Paging Partners or Newco or affecting any of their property
to the extent that the result of such litigation, if adversely determined, could
have a Material Adverse Effect on Paging Partners and Newco, taken as a whole,
or on the Merger; and (v) any change in the status of the Motorola Loan;
provided, however, that no such notification shall affect the representations or
warranties of Paging Partners and Newco contained herein or the conditions to
the obligations of BAP hereunder.
4.8 Information for Proxy Statement.
Subject to Section 4.1 (b) hereof, BAP shall furnish to Paging Partners
such information regarding BAP as Paging Partners may reasonably request and as
shall be required or useful, in the sole opinion of Paging Partners, in
connection with the preparation, and the filing and approval by the SEC, of the
Paging Partners Proxy Statement; provided, that if information with respect to
the Bell Atlantic Acquisition, the Bell Atlantic Acquisition Agreement or Bell
Atlantic Paging Business is not available or cannot be provided without the
consent of the Bell Atlantic Subsidiaries pursuant to the terms of the Bell
Atlantic Acquisition Agreement and the Bell Atlantic Consent, BAP shall use
commercially reasonable efforts to obtain the requested information or the
consent to the public disclosure of such information, as the case may be, from
the Bell Atlantic Subsidiaries as soon as practicable after any such request.
If, however, after using commercially reasonable efforts, BAP fails to obtain
such requested information, or the consent to the disclosure of such requested
information, as the case may be, and if, as a result of such failure, BAP,
Paging Partners and/or Newco are unable to perform their respective obligations
or satisfy their conditions to closing under this Agreement, including without
limitation those under Sections 4.1, 4.5, 4.8, 4.9, 4.11, and 4.14 hereof, then
the parties hereto agree that (i) the time for BAP, Paging Partners and Newco to
perform their obligations under this Agreement shall be extended for the
Extension Period and (ii) none of BAP, Paging Partners or Newco shall be in
breach of this Agreement during the Extension Period as a result of the
circumstances described in this Section 4.8. Notwithstanding any other provision
of this Agreement or the Transaction Documents, if BAP cannot obtain the
requested information or the consent to the disclosure of such requested
information, and Paging Partners terminates the Extension Period, then the
parties agree that for purposes of Article VI and Section 8.5 hereof, none of
BAP, Paging Partners or Newco shall be in breach of this Agreement as a result
of the failure to provide information related to the Bell Atlantic Subsidiaries
described in this Section 4.8. BAP shall use commercially reasonable efforts to
provide Paging Partners or Newco with any such requested information or consent
as soon as practicable following the closing of the Bell Atlantic Acquisition.
4.9 Stockholder Approval
Subject to Section 4.1(b) and Section 4.8 hereof, as promptly as
practicable after the date hereof, Paging Partners, Newco and BAP shall prepare
and file with the SEC a preliminary form of the Paging Partners Proxy Statement,
and other proxy materials related thereto, with respect to a meeting of Paging
Partners stockholders to consider approval, in a single vote (unless the SEC
shall request or require otherwise), of the Merger, the issuance of the Paging
Partners Common Stock pursuant to this Agreement and any other related
transactions contemplated by this Agreement (collectively, the "Related
Transactions"), including without
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limitation, (i) the approval, as of the Effective Time, of amendment of the
Certificate of Incorporation of Paging Partners to be as set forth on Exhibit
4.18 hereto, (ii) the election, as of the Effective Time, of the persons set
forth on Exhibit 4.19 hereto as members of the Board of Directors of Paging
Partners to the respective classes indicated therein, (iii) the approval, as of
the Effective Time, of the amendments of the Paging Partners Option Plan to (x)
increase the number of shares of Paging Partners Common Stock available for
issuance thereunder, (y) provide for the "rollover" of the BAP Options under the
Paging Partners Option Plan in accordance with Section 4.25 hereof and (z)
extend the period during which currently outstanding Paging Partners Options may
be exercised after the termination of the directorships or employment or
consulting arrangements of Paging Partners' directors, officers, employees and
consultants to two years following the date of such termination, (iv) the
approval of a reverse stock split on terms sufficient for the Paging Partners
Common Stock to continue to satisfy the requirements for quotation on the Nasdaq
Small Cap Market (the "Reverse Stock Split"), provided that the Board of
Directors of Paging Partners shall have the discretion to implement the Reverse
Stock Split and to determine the terms and conditions thereof provided, however,
that such terms and conditions are reasonably satisfactory to BAP, and (v) the
approval of the transfer of all or substantially all the assets, subject to all
of the liabilities, of Paging Partners to the Surviving Corporation immediately
following the Merger, provided, however, that to the extent required by Finova,
Paging Partners shall use commercially reasonable efforts to cause such transfer
to occur immediately prior to or simultaneously with the closing of the Merger.
As soon as reasonably practicable after the date hereof, Paging Partners, acting
through its Board of Directors shall cause a special meeting of its stockholders
to be duly called and shall give notice of, convene and hold such special
meeting for the purposes of approving this Agreement and the Related
Transactions that require the approval of Paging Partners' stockholders. Paging
Partners shall, after consultation with BAP, respond promptly to any comments of
the SEC relating to the preliminary Paging Partners Proxy Statement and shall
cause the definitive Paging Partners Proxy Statement to be mailed to its
stockholders as soon as practicable after any such comments are resolved to the
satisfaction of the SEC or, if the SEC has indicated that it does not intend to
review the Paging Partners Proxy Statement and the applicable period for review
by the SEC shall have lapsed, as soon as practicable following the lapse of such
review period. Whenever any event occurs that should be set forth in a
supplement to the Paging Partners Proxy Statement or any other filing required
to be made with the SEC, each party will promptly inform the other and cooperate
in filing such supplement with the SEC and/or mailing such supplement to the
stockholders of Paging Partners. The Paging Partners Proxy Statement and all
supplements thereto shall comply with applicable law and shall be in form and
substance reasonably satisfactory to BAP. Paging Partners, acting through its
Board of Directors, shall subject to their fiduciary duties under applicable law
as advised by counsel, include in the Paging Partners Proxy Statement the
unanimous recommendation of its Board of Directors that the stockholders of
Paging Partners vote in favor of the approval and adoption of this Agreement,
the Merger and the Related Transactions and shall use all reasonable efforts to
secure such approval and adoption.
4.10 Commercially Reasonable Efforts, Etc. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use all commercially
reasonable efforts to take or cause to be taken all such action as may be
necessary, proper or advisable under applicable law in order to effectuate the
Merger simultaneously with or as promptly as possible after the closing of the
Bell Atlantic Acquisition. If at any time after the Closing any further action
is necessary or desirable to carry out the purposes hereof, including without
limitation the execution of additional instruments in order to comply with the
DGCL, the officers, directors and partners of each party to this Agreement are
fully authorized to take, and shall take, all such action.
4.11 Public Announcements. Promptly after the execution of this
Agreement, the parties shall issue a press release substantially in the form
attached to the Bell Atlantic Consent (as defined below). Subject to Section 4.1
(b) hereof, the Bell Atlantic Confidentiality Provisions, and the Bell Atlantic
Consent, the parties agree that prior to the Effective Time, Paging Partners and
Newco, on the one hand, and BAP, on the other hand, shall consult with each
other before issuing any press release or other public statement with respect to
the Merger or this Agreement and shall not issue any such press release or make
any such public statement without the prior consent of the other party, which
shall not be unreasonably withheld, and, to the extent required under the Bell
Atlantic Acquisition Agreement, without the prior consent of the Bell Atlantic
Subsidiaries; provided that Paging Partners may, without the prior consent of
BAP, issue such press release or
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make such public statement as may upon the advice of counsel be required by law
if it has used reasonable efforts to consult first with BAP; and provided
further that nothing contained herein shall restrict the ability of Paging
Partners to make such disclosures as may be required under applicable securities
laws or under the applicable rules of NASDAQ. BAP shall use all commercially
reasonable efforts to obtain any such consent required by the Bell Atlantic
Acquisition Agreement and the Bell Atlantic Consent from the Bell Atlantic
Subsidiaries.
4.12 Consents, Approvals and Filings. The parties hereto will make all
necessary filings, as soon as reasonably practicable, including without
limitation those required under applicable securities laws and regulations and
applicable laws and regulations of the FCC, in order to facilitate the prompt
consummation of the Merger and the other transactions contemplated by this
Agreement. The parties hereto will use reasonable efforts and cooperate fully
with each other to (a) comply with all governmental requirements applicable to
the Merger and (b) obtain as promptly as practicable all necessary permits,
consents and approvals of governmental entities and consents of all third
parties necessary for the consummation of the Mergers and the other transactions
contemplated hereby. Without limiting the foregoing, the appropriate parties
hereto shall promptly make all necessary filings with the FCC in connection with
the Merger and the transactions contemplated hereby.
4.13 Current Information. During the period from the date of this
Agreement to the Effective Time, BAP and Paging Partners will cause one or more
of their designated representatives to confer on a regular and frequent basis
(not less than weekly) with each other and to report the general status of the
ongoing operations of each of Paging Partners, Newco, and BAP. BAP will promptly
notify Paging Partners and Newco of any material change in the normal course of
business or in the operation of the properties of BAP and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of significant
litigation involving BAP and will keep Paging Partners and Newco fully informed
of such events. Paging Partners and Newco will promptly notify BAP of any
material change in the normal course of business or in the operation of the
properties of Paging Partners and Newco and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving Paging Partners or Newco and will keep BAP fully informed of such
events.
4.14 Lender Consents. With respect to all loans of Paging Partners, Newco
and BAP that are anticipated to be outstanding as of the Effective Time and for
which a consent of the lender is required in connection with this Agreement,
each of Paging Partners, Newco, and BAP undertakes to seek such consent and,
subject to Section 4.1 hereof, promptly to provide such lenders with such
information as they may require to provide consent. The parties hereto agree to
assist each other in seeking such consents.
4.15 Quotation of Paging Partners Common Stock. Paging Partners shall use
its best efforts to cause the shares of Paging Partners Common Stock to be
issued pursuant to this Agreement to be approved for quotation on the Nasdaq
Small Cap Market, subject to official notice of issuance, prior to the Effective
Time.
4.16 Indemnification of Officers and Directors.
(a) From and after the Effective Time until the tenth anniversary of the
Effective Time (the "Indemnification Period"), Paging Partners shall indemnify
and hold harmless each current and former director and officer of BAP and each
current and former director and officer of Paging Partners (each, an
"Indemnitee") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that BAP or Paging Partners, as applicable, would have been permitted,
under Delaware law and its Certificate of Incorporation and By-laws in effect as
of the date hereof, to indemnify such persons (including the advancing of
expenses as incurred (including the cost of any investigation and preparation
incurred in connection therewith) to the fullest extent permitted under Delaware
law), provided that the Indemnitee to whom such expenses are advanced provides
an undertaking to Paging Partners to repay such advance if it is ultimately
determined that such person is not entitled to indemnification under Delaware
law; provided,
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further, that any determination required to be made with respect to whether an
Indemnitee's conduct complies with the standards set forth under Delaware law
and the Certificate of Incorporation and Bylaws of BAP or Paging Partners, as
applicable, shall be made by independent counsel selected by Paging Partners
(without participation by the Indemnitee and related parties) and reasonably
satisfactory to such Indemnitee ("Independent Counsel"). If any claim or claims
are asserted or made within the Indemnification Period, all rights to
indemnification hereunder in respect of any such claim shall continue until
disposition of any and all such claims, irrespective of whether such disposition
occurs within the Indemnification Period.
(b) An Indemnitee shall give prompt written notice to Paging Partners upon
learning of any claim, action, suit or proceeding for which indemnification
properly may be sought hereunder (although the failure so to notify Paging
Partners shall not relieve Paging Partners from any liability that Paging
Partners may have under this Section 4.16, except to the extent that such
failure actually prejudices Paging Partners), and Paging Partners, through
counsel reasonably satisfactory to the Indemnitee, may assume the defense
thereof; provided, however, that any Indemnitee shall be entitled to participate
in (but not control) any such action, suit or proceeding with counsel of his own
choice but at his own expense; and provided, further, that any Indemnitee shall
be entitled to participate in (and control, with respect to matters pertaining
to such Indemnitee) any such action, suit or proceeding with counsel of his own
choice at the expense of Paging Partners if (in the opinion of Independent
Counsel) representation by Paging Partners's counsel would, or would reasonably
be expected to, present a conflict of interest or if there would be, or there
would reasonably be expected to be, defenses available to the Indemnitee that
could be in conflict or inconsistent with those available to Paging Partners. In
any event, if Paging Partners's counsel fails to assume the defense within a
reasonable time, the Indemnitee may assume such defense and the fees and
expenses of his attorneys (if indemnification for the subject claims was
properly sought hereunder) shall be borne by Paging Partners. No action, suit or
proceeding for which indemnification may be sought shall be compromised or
settled without the consent of Paging Partners, which consent shall not be
unreasonably withheld. Paging Partners shall not, without the consent of the
Indemnitee, (i) compromise or settle any action, suit or proceeding or consent
to the entry of any judgment that does not include as an unconditional term
thereof the delivery by the claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such action, suit or proceeding or (ii)
compromise or settle any action, suit or proceeding in any manner that may
adversely affect the Indemnitee other than as a result of money damages or other
money payments for which Paging Partners is fully responsible with no recourse
by the claimant to the asserts of any Indemnitee.
(c) This Section 4.16 shall survive the consummation of the Merger. The
provisions of this Section 4.16 are intended to be for the benefit of, and shall
be enforceable by, each Indemnitee, his heirs and representatives and shall be
binding upon Paging Partners and Paging Partners and its successors and assigns.
The rights provided to the Indemnitees hereunder shall be in addition to, and
shall not be in lieu of or otherwise diminish in any respect, any rights to
indemnity that such parties may have under the Certificate of Incorporation or
Bylaws of BAP or Paging Partners or any other agreement entered into by an
Indemnitee with BAP prior to the date hereof; provided, that true, complete and
correct copies of such agreements shall have been delivered to Paging Partners
prior to the date hereof.
4.17 Directors and Officers Liability Insurance. Each of the parties
hereby agrees to use all commercially reasonable efforts to take or cause to be
taken all such action as may be necessary, proper or advisable (i) to increase
the amount of Paging Partners' directors and officers liability insurance from
$2 million to $5 million prior to or at the Effective Time, (ii) to continue
coverage thereunder for each current and former director and officer of Paging
Partners, and (iii) to extend coverage thereunder to each current and former
director and officer of BAP at and after the Effective Time.
4.18 Certificate of Incorporation of Paging Partners. Paging Partners
shall take, or cause to be taken, all action necessary so that at or immediately
after the Effective Time, the Certificate of Incorporation of Paging Partners
shall be as set forth in Exhibit 4.18 hereto.
4.19 Directors and Officers of Paging Partners and the Surviving
Corporation.
(a) Paging Partners shall take, or cause to be taken, all action necessary
so that at the Effective Time, the directors and officers of Paging Partners
shall be as set forth on Exhibit 4.19, provided, however, that
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Paging Partners shall nominate its directors prior to the filing of the Paging
Partners Proxy Statement with the SEC, and provided, further, that if, prior to
the Effective Time, Allen & Company Incorporated exercises its right, pursuant
to its Common Stock Purchase Agreement, dated as of May 7, 1996, with Paging
Partners, to appoint two members of the Board of Directors of Paging Partners,
then the number of directors on the Board of Directors of Paging Partners shall
be increased from seven to eleven, and the number of such directors that BAP
shall have the right to designate shall be increased from four to six.
(b) Paging Partners, Newco and BAP shall take, or cause to be taken, all
action necessary so that at or immediately after the Effective Time, the
Directors and Officers of the Surviving Corporation shall be as set forth on
Exhibits 1.6 and 1.7 hereto, respectively.
4.20 BAP Agreements. At the Effective Time, Paging Partners shall assume
the obligations of BAP under the BAP Employment Agreements and the Deerfield
Agreement, whether by amendment or otherwise.
4.21 Employees.
(a) Each of the parties hereby agrees that if any employee of Paging
Partners who is on the payroll of Paging Partners at the Effective Time is
terminated without Cause (as defined below) within 90 days following the
Effective Time, Paging Partners or the Surviving Corporation will pay to such
employee the greater of (i) such employee's salary for 90 days following the
date of his termination or (ii) the proceeds of any retention bonus offered to
such employee prior to the Effective Time. For purposes of this Section 4.21,
Paging Partners or the Surviving Corporation shall have "Cause" to terminate an
employee's employment hereunder upon the employee's (i) continued and willful
refusal or neglect to perform and discharge his material duties and
responsibilities as an employee of Paging Partners or the Surviving Corporation;
(ii) gross misconduct that is materially injurious to Paging Partners or the
Surviving Corporation or that is likely to have a Material Adverse Effect on the
employee's ability to perform his duties and responsibilities as an employee of
Paging Partners or the Surviving Corporation; (iii) fraud, embezzlement or other
acts of dishonesty of the employee with respect to Paging Partners or the
Surviving Corporation or any subsidiary or affiliate thereof; (iv) conviction
of, or a plea of guilty or nolo contendere entered by the employee to, a felony
or a crime, which conviction or plea is likely to have a Material Adverse Effect
on Paging Partners and the Surviving Corporation, taken as a whole, or on the
employee's ability to perform his duties and responsibilities as an employee of
Paging Partners or the Surviving Corporation; (v) willful or prolonged absence
from work by the employee (other than by reason of disability due to physical or
mental illness); or (vi) willful commission of acts by the employee that reflect
adversely, in material respects, upon Paging Partners or the Surviving
Corporation or their business, customers or other employees.
(b) Notwithstanding the foregoing, each of the parties hereby agrees that
Paging Partners and the Surviving Corporation shall comply with the terms and
provisions of the Bell Atlantic Acquisition Agreement relating to BAP's
obligations to the employees of the Bell Atlantic Subsidiaries in connection
with the Bell Atlantic Acquisition.
4.22 Consulting Agreement. Each of the parties hereby agrees that Paging
Partners shall use commercially reasonable efforts to secure the services of
Richard Giacchi as an on-call consultant to Paging Partners for the two year
period commencing at the Effective Time for a consulting fee of $25,000 per year
payable in equal monthly installments.
4.23 Contribution to the Surviving Corporation. Immediately following the
Effective Time, Paging Partners shall transfer all or substantially all of its
assets, subject to its liabilities, to the Surviving Corporation, provided,
however, that to the extent required by Finova, Paging Partners shall use
commercially reasonable efforts, and the parties shall cooperate, to cause such
transfer to occur immediately prior to or simultaneously with the closing of the
Merger.
4.24 Investment Letters. BAP shall cause each of its stockholders to
execute an investment letter prior to the Effective Time, such letter to be
substantially in the form attached hereto as Exhibit 4.24 (the "Investment
Letter").
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4.25 BAP Option Plan.
(a) At the Effective Time, (i) each outstanding BAP Option under the BAP
Option Plan, whether vested or unvested, shall become an option to acquire,
otherwise on the same terms and conditions as were applicable under such BAP
Option, a number of shares of Paging Partners Common Stock equal to the product
(rounded down to the nearest whole share) of (A) the number of shares of BAP
Common Stock issuable upon the exercise of the BAP Option immediately prior to
the Effective Time and (B) the Conversion Number (the "Rollover Options") , and
(ii) the price per share of Paging Partners Common Stock at which such Rollover
Option is exercisable shall be $1.125 (subject to customary adjustments,
including without limitation, upon consummation of the Reverse Stock Split).
(b) As soon as practicable after the Effective Time, Paging Partners shall
deliver to the holders of the Rollover Options appropriate notices setting forth
such participants' rights pursuant thereto, and the grants of the Rollover
Options shall continue in effect on the same terms and conditions as the BAP
Options (subject to the adjustments required by this Section 4.25) after giving
effect to the Merger. Paging Partners shall comply with the terms of the Paging
Partners Option Plan and insure, to the extent required by and subject to the
provisions of, such Paging Partners Option Plan, that BAP Options that qualified
as qualified stock options prior to the Effective Time shall continue to qualify
as qualified stock options after the Effective Time.
(c) Subject to the approval by the stockholders of Paging Partners of
amendments to the Paging Partners Option Plan in accordance with Section 4.9
hereof, Paging Partners shall take all corporate action necessary to authorize
and reserve for issuance a sufficient number of shares of Paging Partners Common
Stock for delivery upon exercise of the Rollover Options under the Paging
Partners Option Plan. As soon as practicable after the Effective Time, Paging
Partners shall file a registration statement on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate forms), or another
appropriate form or amend an existing registration statement on such forms to
register all of the shares of Paging Partners Common Stock subject to the Paging
Partners Option Plan, including the Rollover Options, under the Securities Act
and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Rollover Options (and any other options issued thereunder) remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Paging Partners shall administer the Paging Partners Option in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act.
4.26 Paging Partners Employment Agreements. Paging Partners shall amend
each of its employment agreements with directors, officers, employees and
consultants existing on the date hereof (the "Paging Partners Employment
Agreements") to reflect, effective as of the Effective Time, (i) the resignation
of each such director, officer, employee or consultant from his position with
Paging Partners and Newco and (ii) any necessary change in the title, duties or
responsibilities of such director, officer, employee or consultant with Paging
Partners, Newco or the Surviving Corporation, provided, however, that the
economic terms of each Paging Partners Employment Agreement, as so amended, will
be the same as those in effect prior to the Effective Time.
4.27 Paging Partners Options. Paging Partners shall take all necessary
corporate action so that none of the Paging Partners Options will become subject
to (i) termination or cancellation requiring the payment of any consideration or
(ii) any adjustment in the exercise price thereof (other than in connection with
the Reverse Stock Split), in each case, in connection with or as a result of the
Merger or any other transaction contemplated by this Agreement).
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ARTICLE V
CONDITIONS TO OBLIGATIONS
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of Paging Partners, Newco and BAP to consummate the
transactions contemplated by this Agreement are subject to the satisfaction or
waiver (to the extent permitted by applicable law), at or prior to the Effective
Time, of each of the following conditions:
(a) Stockholder Approval. The stockholders of Paging Partners shall
have taken all necessary action to authorize, approve and adopt the Merger
and the Related Transactions.
(b) No Injunction. As of the Effective Time, no statute, rule,
regulation, order, judgment, injunction, writ or preliminary restraining
order or decree of any nature shall have been issued, enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental authority, which prohibits or restricts the consummation of
the Merger or makes such consummation illegal.
(c) Approvals. All regulatory permits, approvals, filings, waiting
periods and consents required to be obtained or made prior to the
consummation of the Merger under applicable Federal or state law shall have
been obtained, made or expired, as the case may be, and shall remain in
full force and effect. Without limiting the foregoing, all required FCC
approvals and consents (which shall be obtained for purposes of this
Agreement only when they have become Final Orders as defined Article VII)
shall have been obtained.
(d) Consents. (i) Any approval, consent or waiver required to be
obtained under any indebtedness of Paging Partners, Newco, or BAP in order
to consummate the transactions contemplated hereby shall have been obtained
on terms reasonably satisfactory to BAP, Paging Partners and Newco
provided, however, that any approval, consent or waiver obtained under the
Motorola Credit Agreement shall be satisfactory to BAP if it has been
obtained on terms reasonably satisfactory to Paging Partners and Newco and
(ii) any approval or consent of any other third party required as a
condition to the consummation of the Merger shall have been obtained if the
failure to obtain such approval or consent would preclude or prohibit the
consummation of the Merger or would have a Material Adverse Effect on BAP,
Paging Partners, Newco or (assuming and giving effect to consummation of
the Merger) the Surviving Corporation.
(e) Bell Atlantic Acquisition. The closing of the Bell Atlantic
Acquisition shall have occurred.
(f) Nasdaq. The shares of Paging Partners Common Stock issuable in
the Merger shall have been approved for quotation upon notice of issuance
by Nasdaq.
(g) Contribution to the Surviving Corporation. If and to the extent
required by Finova, Paging Partners shall have contributed its assets,
subject to related liabilities, to the Surviving Corporation immediately
prior to or simultaneously with the Effective Time.
5.2 Conditions to Obligations of Paging Partners and Newco. The
obligations of each of Paging Partners and Newco to consummate the transactions
contemplated by this Agreement are also subject to the satisfaction of each of
the following additional conditions, any one or all of which may be waived in
whole or in part by Paging Partners and Newco to the extent permitted by
applicable law:
(a) Representations and Warranties. All representations and
warranties of BAP contained in this Agreement shall be true and correct in
all material respects (other than representations and warranties that
contain materiality qualifications which shall be true and correct in all
respects) as of the date when made and at and as of the Effective Time,
with the same force and effect as though made as of the Effective Time,
except for changes expressly permitted by this Agreement or where such
representations or warranties are expressly limited by their terms to a
prior date.
(b) Performance of Agreement. BAP shall have duly performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this
Agreement to be performed or complied with by it prior to or at the
Effective Time.
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None of the events permitting Paging Partners and Newco to terminate this
Agreement under Article VI hereof shall have occurred and be continuing.
(c) Officer's Certificate. BAP shall have delivered to Paging
Partners and Newco a certificate, dated the Effective Time, of an officer
of BAP certifying that the conditions specified in Section 5.1 (as they
relate to BAP) and Section 5.2(a) and (b) hereof have been fulfilled.
(d) Actions and Proceedings. All actions, proceedings, instruments
and documents required to allow BAP to carry out the transactions
contemplated hereby or incident hereto and all other related legal matters
shall have been satisfactory to and approved by Paging Partners' counsel
(such approval not to be unreasonably withheld), and such counsel shall
have been furnished with such certified copies of such corporate actions
and proceedings and such other instruments as it shall have reasonably
requested.
(e) No Material Adverse Change. From the date hereof to the Effective
Time, there shall not have been any material adverse change in the
condition (financial or otherwise), properties or assets, liabilities,
business or operations of BAP; BAP shall not have sustained any loss or
damage, whether or not insured, that materially and adversely affects its
ability to conduct its business; and Paging Partners and Newco shall have
received a certificate, dated the date of the Effective Time, signed by the
President of BAP, to the foregoing effect.
(f) Absence of Natural Disasters. The business and assets of BAP
shall not have been, and shall not be seriously threatened to be materially
adversely affected in any way as a result of fire, explosion, disaster,
accident, labor dispute, any action by the United States of America or any
other government or governmental authority, flood, riot, act of war, act of
public enemy, civil disturbance, or act of God.
(g) No Litigation. Immediately prior to the Effective Time, no
action, suit, claim or proceeding shall have been commenced and be pending
against BAP by any third party that seeks to prohibit or restrict the
consummation of the Merger, and/or that Paging Partners and Newco, in good
faith and with the advice of counsel, believe makes it undesirable or
unadvisable for Paging Partners or Newco to consummate the Merger.
(h) Receipt of Licenses, Permits and Consents. Paging Partners and
Newco shall have received evidence, in form and substance reasonably
satisfactory to it, that BAP obtained all material waivers, consents,
approvals, licenses, permits, authorizations and transfers of
authorizations that are necessary or desirable in order to consummate the
transactions contemplated by this Agreement. Any consent required for the
consummation of the Merger under any material contract to which BAP is a
party, or for the continued enjoyment by the Surviving Corporation of the
benefits of any such agreement, contract or license after the Merger, shall
have been obtained on terms reasonably satisfactory to Paging Partners and
Newco. Paging Partners and Newco shall have received any and all regulatory
consents and approvals and third party consents and approvals necessary in
order for it to consummate the Merger and the other transactions
contemplated by this Agreement on terms reasonably satisfactory to Paging
Partners and Newco.
(i) Securities Matters. Paging Partners and Newco shall have received
all necessary state securities or "blue sky" permits or authorizations
necessary to issue Paging Partners Common Stock in the Merger or shall have
duly qualified for exemptions from registration thereunder. Paging Partners
and Newco shall have received a duly executed Investment Letter from each
person who shall be a stockholder of BAP as of the Effective Time and who
shall receive any shares of Paging Partners Common Stock in the Merger.
Without limiting the foregoing, Paging Partners and Newco shall be
reasonably satisfied that (i) all certificates representing Paging Partners
Common Stock issued in the Merger shall bear appropriate restrictive
legends and (ii) the issuance of Paging Partners Common Stock in the Merger
is exempt from the registration requirements of the Securities Act by
virtue of the exemption contained in Section 4(2) of such Act and/or Rule
506 of Regulation D adopted thereunder.
(j) BAP Preferred Stock. Immediately prior to or at the Effective
Time, all issued and outstanding shares of BAP Preferred Stock shall have
converted into shares of BAP Common Stock.
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(k) Directors and Officers of the Surviving Corporation. All of the
directors and officers of BAP immediately prior to the Effective Time shall
have submitted their written resignations effective as of the Effective
Time. Prior to or at the Effective Time, BAP shall have taken, or caused to
be taken, all necessary corporate action so that, at or immediately after
the Effective Time, the directors and officers of the Surviving Corporation
shall be as set forth on Exhibits 1.6 and 1.7 hereto, respectively.
(l) BAP Financing. In connection with the Bell Atlantic Acquisition,
BAP shall have obtained (i) debt financing in an aggregate principal amount
of at least $20,350,000 in addition to the Bell Atlantic Note and (ii)
equity financing in an aggregate amount of at least $6,000,000 from the
Equity Participants.
5.3 Conditions to the Obligations of BAP. The obligation of BAP to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver (to the extent permitted by applicable law), at or prior
to the Effective Time, of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Paging Partners and Newco contained in this Agreement shall
be true and correct in all material respects (other than representations
and warranties that contain materiality qualifications, which shall be true
and correct in all respects) as of the date when made and at and as of the
Effective Time, with the same force and effect as though made as of the
Effective Time, except for changes expressly permitted by this Agreement or
where such representations or warranties are expressly limited by their
terms to a prior date.
(b) Performance of Agreement. Paging Partners and Newco shall have
duly performed in all material respects all obligations and agreements and
complied in all material respects with all covenants and conditions
contained in this Agreement to be performed or complied with by them prior
to or at the Effective Time. None of the events permitting BAP to terminate
this Agreement under Article VI hereof shall have occurred and be
continuing.
(c) Officer's Certificate. Paging Partners and Newco shall have
delivered to BAP a certificate, dated the Effective Time, of a officers of
Paging Partners and Newco certifying that the conditions specified in
Section 5.1 (as they relate to Paging Partners and Newco) and Section
5.3(a) and (b) hereof have been fulfilled.
(d) Actions and Proceedings. All actions, proceedings, instruments
and documents required by Paging Partners and Newco to carry out the
transactions contemplated hereby or incident hereto and all other related
legal matters shall have been satisfactory to and approved by BAP and its
counsel (such approval not to be unreasonably withheld), and such counsel
shall have been furnished with such certified copies of such corporate
actions and proceedings and such other instruments as it shall have
reasonably requested.
(e) No Material Adverse Change. From the date hereof to the Effective
Time, there shall not have been any material adverse change in the
condition (financial or otherwise), properties or assets, liabilities,
business or operations of Paging Partners and Newco; neither Paging
Partners nor Newco shall have sustained any loss or damage, whether or not
insured, that materially and adversely affects its ability to conduct its
business; and BAP shall have received a certificate, dated the date of the
Effective Time, signed by the President of Paging Partners and the
President of Newco, to the foregoing effect.
(f) Absence of Natural Disasters. The business and assets of Paging
Partners and Newco shall not have been, and shall not be, seriously
threatened to be materially adversely affected in any way as a result of
fire, explosion, disaster, accident, labor dispute, any action by the
United States of America or any other government or domestic or foreign
governmental authority, flood, riot, act of war, act of public enemy, civil
disturbance, or act of God.
(g) No Litigation. Immediately prior to the Effective Time, no
action, suit, claim or proceeding shall have been commenced and be pending
by any third party against Paging Partners or Newco that seeks to prohibit
or restrict the consummation of the Merger and/or that BAP, in good faith
and with the advice of counsel, believes make it undesirable or unadvisable
for BAP to consummate the Merger.
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(h) Receipt of Licenses, Permits and Consents. BAP shall have
received evidence, in form and substance reasonably satisfactory to it,
that Paging Partners and Newco obtained all material waivers, consents,
approvals, licenses, permits, authorizations and transfers of
authorizations that are necessary or desirable in order to consummate the
transactions contemplated by this Agreement. Any consent required for the
consummation of the Merger under any Material Contract to which Paging
Partners or Newco is a party, or for the continued enjoyment by the
Surviving Corporation of the benefits of any such agreement, contract or
license after the Merger shall have been obtained on terms reasonably
satisfactory to BAP, provided, however, that any approval, consent or
waiver obtained under the Motorola Credit Agreement shall be satisfactory
to BAP if it has been obtained on terms reasonably satisfactory to Paging
Partners and Newco. BAP shall have received any and all regulatory consents
and approvals and third party consents and approvals necessary in order for
it to consummate the Merger and the other transactions contemplated by this
Agreement on terms reasonably satisfactory to BAP.
(i) Registration Rights Agreement. Paging Partners shall have
executed and delivered the Registration Rights Agreement.
(j) Certificate of Incorporation of Paging Partners. Prior to or at
the Effective Time, Paging Partners shall have taken or caused to be taken,
all necessary corporate action so that, at or immediately after the
Effective Time the Certificate of Incorporation of Paging Partners shall be
as set forth in Exhibit 4.18.
(k) Directors and Officers of Paging Partners and the Surviving
Corporation. All of the directors and officers of Paging Partners and
Newco immediately prior to the Effective Time shall have submitted their
written resignations effective as of the Effective Time. Prior to or at the
Effective Time, Paging Partners and Newco shall have taken or caused to be
taken all necessary corporate action so that, subject to Section 4.19
hereof, at or immediately after the Effective Time, the directors and
officers of Paging Partners and the Surviving Corporation shall be as set
forth in Exhibits 4.19, 1.6 and 1.7, respectively.
(l) BAP Agreements. Paging Partners shall have assumed the
obligations of BAP under the BAP Employment Agreements and the Deerfield
Agreement on terms reasonably satisfactory to BAP.
(m) BAP Options. Prior to or at the Effective Time, Paging Partners
shall have taken or caused to be taken, all necessary corporate action so
that, at or immediately after the Effective Time, the BAP Options shall be
"rolled over" under the Paging Partners Option Plan on terms reasonably
satisfactory to BAP in accordance with Section 4.25 hereof.
(n) Paging Partners Indebtedness. At the Effective Time, the
outstanding indebtedness of Paging Partners under the Motorola Credit
Agreement shall not exceed $1,654,189.98.
(o) BAP Indebtedness. Paging Partners and Newco shall have taken or
caused to be taken all necessary action to authorize, approve and adopt the
BAP Debt Agreements and the transactions contemplated thereby.
(p) Paging Partners Employment Agreements. The Paging Partners
Employment Agreements shall have been amended as provided in Section 4.26
hereof.
(q) Paging Partners Options. None of the Paging Partners Options
shall have become subject to (i) any termination or cancellation requiring
the payment of any consideration or (ii) any adjustment in the exercise
price thereof (other than in connection with the Reverse Stock Split), in
each case, in connection with or as a result of the Merger or any other
transaction contemplated by this Agreement.
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ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time, notwithstanding approval
thereof by the stockholders of Paging Partners and BAP, prior to the Effective
Time:
(a) By mutual written consent of BAP, Paging Partners and Newco; or
(b) By BAP or by Paging Partners and Newco, in either case, if without
fault of the terminating party the Effective Time shall not have occurred
on or before March 31, 1999, provided, however, that such date shall be
extended to account for any Extension Period that arises pursuant to
Section 4.1 hereof (i.e., if the Extension Period is ten days, then the
date in this clause (b) shall be April 10, 1999); or
(c) By BAP or by Paging Partners and Newco, in either case, if a court
of competent jurisdiction or other governmental body shall have issued,
enacted, entered, promulgated or enforced an order, judgment, decree,
injunction, restraining order or ruling or taken any action restraining,
enjoining or otherwise prohibiting the Bell Atlantic Acquisition or the
Merger and such judgment, order, decree, injunction, restraining order,
ruling or other action shall have become final and unappealable; or
(d) By BAP or by Paging Partners and Newco, if Paging Partners' Board
of Directors shall have withdrawn, suspended, modified or amended in a
manner adverse to BAP its approval or recommendation of the Merger, this
Agreement or the Related Transactions or promulgates any recommendation
with respect to a Competing Transaction (other than a recommendation to
reject such Competing Transaction) or shall have resolved to do any of the
foregoing; or
(e) By BAP or by Paging Partners and Newco, if the approval by the
stockholders of Paging Partners of the Merger and the Related Transactions
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders or at
any adjournment thereof or by reason of the failure to obtain the required
consents of stockholders in lieu of such a meeting; or
(f) By Paging Partners and Newco, if BAP shall have failed to comply
in any material respect with any of its material covenants or agreements
contained in this Agreement or if any representation or warranty of BAP
made herein fails to be true and complete in any material respect when
given and at any time thereafter, except for (i) changes permitted by this
Agreement and (ii) those representations and warranties that address
matters only as of a particular date (which shall remain true and complete
when given and at any time thereafter as of such date), provided, however,
that if any such failure is curable, notice of such failure shall have been
given to BAP by Paging Partners and Newco and BAP shall not have cured such
failure within 30 days of notice thereof and provided, further, that,
except where such failure relied upon for termination by Paging Partners is
also a failure of BAP under the Bell Atlantic Acquisition Agreement or a
breach of any representation or warranty made by BAP thereunder, Paging
Partners shall not be in material breach of any of its covenants,
agreements or representations and warranties in this Agreement; or
(g) By BAP, if Paging Partners or Newco shall have failed to comply in
any material respect with any of its material covenants or agreements
contained in this Agreement or if any representation or warranty of Paging
Partners or Newco made herein fails to be true and complete in any material
respect when given and at any time thereafter, except for (i) changes
permitted by this Agreement and (ii) those representations and warranties
that address matters only as of a particular date (which shall remain true
and complete when given and at any time thereafter as of such date),
provided, however, that if any such failure is curable, notice of such
failure shall have been given to Paging Partners and Newco by BAP and
Paging Partners and/or Newco shall not have cured such failure within 30
days of notice thereof, and provided, further, that BAP shall not be in
material breach of any of its covenants, agreements or representations and
warranties in this Agreement.
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6.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, all further obligations
of the parties under this Agreement (other than (i) the provisions of this
Section 6.2, (ii) the provisions of Section 8.5, and (iii) the confidentiality
and publicity agreements contained in Section 4.5 and 4.11) shall forthwith be
terminated without any further liability of any party to the other parties, and
the payments provided in Section 8.5 hereof shall constitute liquidated damages
and shall provide the sole remedy upon the termination hereof.
ARTICLE VII
DEFINITIONS
7.1 Defined Terms. As used herein the following terms shall have the
following meanings:
"ACCOUNTS RECEIVABLE" has the meaning assigned to such term in Section 3.18
hereof.
"ADILETTA EMPLOYMENT AGREEMENT" has the meaning assigned to such term in
Section 2.5 hereof.
"ADILETTA NOTE" has the meaning assigned to such term in Section 2.11
hereof.
"ADILETTA OPTION AGREEMENT" has the meaning assigned to such term in
Section 4.3 hereof.
"AFFILIATE" means as to any Person, another Person that controls, is
controlled by or is under common control with, such Person.
"AGREEMENT" has the meaning assigned to such term in the introduction
hereof.
"AUDITED 1997 FINANCIALS" has the meaning assigned to such term in Section
3.9 hereof.
"AUTHORIZATIONS" has the meaning assigned to such term in Section 3.12
hereof.
"BAP" means BAP Acquisition Corp., a Delaware corporation.
"BAP COMMON STOCK" has the meaning assigned to such term in Section 1.8
hereof.
"BAP CREDIT AGREEMENT" has the meaning assigned to such term in Section 2.3
hereof.
"BAP DEBT AGREEMENTS" has the meaning assigned to such term in Section 2.3
hereof.
"BAP DISCLOSURE SCHEDULE" has the meaning assigned to such term in Section
2.2 hereof.
"BAP EMPLOYMENT AGREEMENTS" has the meaning assigned to such term in
Section 4.3 hereof.
"BAP OPTION AGREEMENTS" has the meaning assigned to such term in Section
4.3 hereof.
"BAP OPTION PLAN" has the meaning assigned to such term in Section 2.4
hereof.
"BAP OPTIONS" has the meaning assigned to such term in Section 2.4 hereof.
"BAP PAGING BUSINESS" has the meaning assigned to such term in Section 2.5
hereof.
"BAP PREFERRED STOCK" has the meaning assigned to such term in Section 1.14
hereof.
"BAP STOCK PURCHASE AGREEMENT" has the meaning assigned to such term in
Section 2.5 hereof.
"BAPCO" means Bell Atlantic Paging, Inc., a Delaware corporation.
"BELL ATLANTIC ACQUISITION" has the meaning assigned to such term in the
Recitals hereof.
"BELL ATLANTIC ACQUISITION AGREEMENT" has the meaning assigned to such term
in the Recitals hereof.
"BELL ATLANTIC CONFIDENTIALITY PROVISIONS" has the meaning assigned to such
term in Section 4.1 hereof.
"BELL ATLANTIC CONSENT" means the letter agreement, dated as of November 3,
1998, between BAP and the Bell Atlantic Subsidiaries.
"BELL ATLANTIC NOTE" has the meaning assigned to such term in Section 2.3
hereof.
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"BELL ATLANTIC PAGING BUSINESS" has the meaning assigned to such term in
the Recitals hereof.
"BELL ATLANTIC REPRESENTATIONS AND WARRANTIES" has the meaning assigned to
such term in Section 2.7 hereof.
"BELL ATLANTIC SUBSIDIARIES" means BAPCO and the OTC's, collectively.
"CAUSE" has the meaning assigned to such term in Section 4.21 hereof.
"CERTIFICATE" has the meaning assigned to such term in Section 1.10 hereof.
"CERTIFICATE OF MERGER" has the meaning assigned to such term in Section
1.3 hereof.
"CLOSING" has the meaning assigned to such term in Section 1.13 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended, including, when
appropriate, the statutory predecessor of the Code, and all applicable
regulations under the Code and the statutory predecessor of the code, and any
official published ruling and judicial determinations under the foregoing.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"COMPETING TRANSACTION" has the meaning assigned to such term in Section
4.6 hereof.
"CONTINGENT OBLIGATION" means any obligation of any Person guaranteeing or
otherwise becoming responsible for, in any manner whatsoever, whether directly
or indirectly, any indebtedness, lease, dividend or other obligation of any
other Person, whether or not contingent; provided, however, that the term
"Contingent Obligation" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business.
"CONVERSION NUMBER" has the meaning assigned to such term in Section 1.8
hereof.
"DGCL" has the meaning assigned to such term in Section 1.1 hereof.
"DEERFIELD" means Deerfield Partners LLC, a Delaware limited liability
company.
"DEERFIELD AGREEMENT" has the meaning assigned to such term in Section 2.5
hereof.
"DISSENTING SHARES" has the meaning assigned to such term in Section 1.9
hereof.
"EFFECTIVE TIME" has the meaning assigned to such term in Section 1.3
hereof.
"ENVIRONMENTAL LAWS" means the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, the federal
Water Pollution Control Act, the Toxic Substances Control Act and all other
federal, state and local Laws relating to pollution, hazardous substances,
health, safety and/or the environment.
"EQUIPMENT" has the meaning assigned to such term in Section 3.14 hereof.
"EQUITY PARTICIPANTS" has the meaning assigned to such term in Section 2.8
hereof.
"EQUITY SPONSOR AGREEMENT" has the meaning assigned to such term in Section
2.4 hereof.
"ERISA" has the meaning assigned to such term in Section 3.33 hereof.
"ESCROW ACCOUNT" has the meaning assigned to such term in Section 8.5
hereof.
"ESCROW AGENT" means Solovay Edlin & Eiseman, P. C., as escrow agent under
the Escrow Agreement.
"ESCROW AGREEMENT" means the agreement, dated as of the date hereof, among
BAP, Paging Partners, and the Escrow Agent, as such agreement may be amended or
modified from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" has the meaning assigned to such term in Section 1.10
hereof.
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"EXTENSION PERIOD" has the meaning assigned to such term in Section 4.1
hereof.
"FCC" has the meaning assigned to such term in Section 3.13 hereof.
"FCC LICENSES" has the meaning assigned to such term in Section 3.13
hereof.
"FILL-IN TRANSMITTERS" has the meaning assigned to such term in Section
3.13 hereof.
"FINAL ORDER" means that forty (40) days shall have elapsed from the date
of grant of FCC consent to the transfers of control and/or assignments
contemplated by the relevant applications or requests submitted to the FCC
without the filing of any adverse request, petition or appeal by any party or
third party or by the FCC on its own motion with respect to such consents, or
any resubmissions of any applications or requests for such consents, or, if
challenged, that such FCC consents shall have been reaffirmed or upheld and the
applicable period for seeking further administrative or judicial review shall
have expired without the filing of any action, petition or request for further
review.
"FINANCING" shall have the meaning assigned to such term in Section 2.3
hereof.
"FINOVA" has the meaning assigned to such term in Section 2.3 hereof.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time, applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, and any entity or official exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"HAZARDOUS SUBSTANCES" has the meaning assigned to such term in CERCLA.
"INDEMNIFICATION PERIOD" has the meaning assigned to such term in Section
4.16 hereof.
"INDEMNITEE" means a party entitled to indemnification under Section 4.16
hereof.
"INDEPENDENT COUNSEL" has the meaning assigned to such term in Section 4.16
hereof.
"INSURANCE POLICIES" has the meaning assigned to such term in Section 3.28
hereof.
"INTANGIBLE PROPERTY" has the meaning assigned to such term in Section 3.27
hereof.
"INTERESTED PERSON" has the meaning assigned to such term in Section 3.30
hereof.
"INVESTMENT LETTER" has the meaning assigned to such term in Section 4.24
hereof.
"JUNE 10-Q" has the meaning assigned to such term in Section 3.8 hereof.
"LAWS" has the meaning assigned to such term in Section 3.12 hereof.
"LIEN" means any mortgage, lien, pledge, security interest, conditional
sale or other title retention agreement, charge or other security interest or
encumbrance of any kind.
"MARCH 10-Q" has the meaning assigned to such term in Section 3.8 hereof.
"MATERIAL ADVERSE EFFECT" has the meaning assigned to such term in Section
2.10 hereof.
"MATERIAL CONTRACTS" has the meaning assigned to such term in Section 3.26
hereof.
"MERGER" has the meaning assigned to such term in the recitals hereto.
"MERGER CONSIDERATION" has the meaning assigned to such term in Section 1.8
hereof.
"MOTOROLA" means Motorola, Inc., a Delaware corporation.
"MOTOROLA CREDIT AGREEMENT" has the meaning specified in Section 3.2
hereof.
"MOTOROLA DEFAULT" has the meaning assigned to such term in Section 3.26
hereof.
"MOTOROLA LIEN" has the meaning specified in Section 3.2 hereof.
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"MOTOROLA LOAN" has the meaning specified in Section 3.8 hereof.
"MOTOROLA WARRANTS" has the meaning assigned to such term in Section 3.4
hereof.
"NEWCO" means Paging Partners Merger Corporation, a Delaware corporation
and a wholly owned subsidiary of Paging Partners.
"NEWCO COMMON STOCK" has the meaning assigned to such term in Section 1.8
hereof.
"OFFICERS' CERTIFICATE" means a certificate executed on behalf of BAP or
Paging Partners, as applicable, by its President or by one of its Vice
Presidents, and by its Treasurer, Secretary or by one of its Assistant
Secretaries.
"ORDERS" has the meaning assigned to such term in Section 3.10 hereof.
"OTC'S" shall mean Bell Atlantic-Delaware, Inc., a Delaware corporation
("BA-DE'), Bell Atlantic-Maryland, Inc., a Maryland corporation ("BA-MD"), Bell
Atlantic New Jersey, Inc., a New Jersey corporation ("BA-NJ"), Bell
Atlantic-Pennsylvania, Inc., a Pennsylvania corporation ("BA-PA"), Bell
Atlantic-Virginia, Inc. a Virginia corporation ("BA-VA"), Bell
Atlantic-Washington, D.C., Inc. a New York corporation ("BA-DC"), and Bell
Atlantic-West Virginia, Inc., a West Virginia corporation ("BA-WV"),
collectively.
"PAGERS" means Paging Partners' inventory of pagers including (i) all
pagers held by Paging Partners for the purpose of resale or leasing to
customers, (ii) all pagers under lease by Paging Partners to customers, and
(iii) all pagers formerly under lease by Paging Partners to customers, that have
been disconnected but have not yet been picked up by or returned to Paging
Partners.
"PAGING PARTNERS" means Paging Partners Corporation, a Delaware
corporation.
"PAGING PARTNERS BENEFIT PLAN" has the meaning assigned in Section 3.33
hereof.
"PAGING PARTNERS COMMON STOCK" has the meaning assigned to such term in
Section 1.8 hereof.
"PAGING PARTNERS DISCLOSURE SCHEDULE" has the meaning assigned to such term
in Section 3.2 hereof.
"PAGING PARTNERS EMPLOYMENT AGREEMENTS" has the meaning assigned to such
term in Section 4.26 hereof.
"PAGING PARTNERS FINANCIAL STATEMENTS" has the meaning assigned in Section
3.9.
"PAGING PARTNERS FREQUENCIES" means the frequencies set forth in Exhibit
7.1 hereto.
"PAGING PARTNERS OPTION PLAN" has the meaning assigned to such term in
Section 3.4 hereof.
"PAGING PARTNERS OPTIONS" has the meaning assigned to such term in Section
3.4 hereof.
"PAGING PARTNERS PREFERRED STOCK" has the meaning assigned to such term in
Section 3.4 hereof.
"PAGING PARTNERS PROXY STATEMENT" means the proxy statement to be furnished
to the holders of Paging Partners Common Stock, in each case together with any
amendments or supplements thereto.
"PAGING PARTNERS WARRANT AGREEMENT" has the meaning assigned to such term
in Section 3.4 hereof.
"PAGING PARTNERS WARRANTS" has the meaning assigned to such term in Section
3.4 hereof.
"PERMITTED LIEN" means (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or payable under law or being
contested in good faith by appropriate proceedings, (ii) landlords', carriers',
vendors', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising by operation of law in the ordinary course of business and with
respect to amounts not overdue for a period of more than 90 days or being
contested in good faith by appropriate proceedings, (iii) pledges or deposits in
connection with workers' compensation, unemployment insurance and other social
security legislation; (iv) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of like nature, in each case, incurred in the
ordinary course of
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business, (vi) easements, rights-of-way, restrictions and other similar
encumbrances, (vii) Liens securing capitalized lease obligations and purchase
money obligations permitted under the commitment letter for the BAP Credit
Agreement referred to in Section 2.8 hereof or under the form of Seller Note
attached as Exhibit B to the Bell Atlantic Acquisition Agreement (as amended by
the Bell Atlantic Consent), each as in effect on the date hereof, or (viii) any
extension, renewal or refunding of any Lien referred to in the foregoing clause
(vii).
"PERSON" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"PLUNKETT EMPLOYMENT AGREEMENT" has the meaning assigned to such term in
Section 4.3 hereof.
"PLUNKETT OPTION AGREEMENT" has the meaning assigned to such term in
Section 4.3 hereof.
"POST-CLOSING DEPOSIT" has the meaning assigned to such term in Section 8.5
hereof.
"POST-CLOSING ESCROW FUND" has the meaning assigned to such term in Section
8.5 hereof.
"PRE-CLOSING DEPOSIT" has the meaning assigned to such term in Section 8.5
hereof.
"PRE-CLOSING ESCROW FUND" has the meaning assigned to such term in Section
8.5 hereof.
"PROCEEDINGS" has the meaning assigned to such term in Section 3.10 hereof.
"PUBLIC WARRANTS" has the meaning assigned to such term in Section 3.4
hereof.
"REGISTRATION RIGHTS AGREEMENT" has the meaning assigned to such term in
Section 1.12 hereof.
"RELATED TRANSACTIONS" has the meaning assigned to such term in Section 4.9
hereof.
"REMAINING PRE-CLOSING FUNDS" has the meaning assigned to such term in
Section 8.5 hereof.
"RETAIL OFFICE LEASES" has the meaning assigned to such term in Section
3.21 hereof.
"REVERSE STOCK SPLIT" has the meaning assigned to such term in Section 4.9
hereof.
"ROLLOVER OPTIONS" has the meaning assigned to such term in Section 4.25
hereof.
"SECOND QUARTER FINANCIALS" has the meaning assigned to such term in
Section 3.9 hereof.
"SEC" means the Securities and Exchange Commission.
"SEC FILING" means each and all of the forms, reports or statements filed
by Paging Partners with the SEC, pursuant to the requirements of (i) Section 13
or 14 of the Exchange Act or (ii) the Securities Act, on or after July 1, 1992,
including all exhibits, amendments and supplements thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC from time to time thereunder.
"SENIOR OFFICERS" of Paging Partners or Newco has the meaning set forth in
Section 3.10 hereof.
"SIGNIFICANT STOCKHOLDER" has the meaning assigned to such term in Section
3.30 hereof.
"SITE LEASES" has the meaning assigned to such term in Section 3.16 hereof.
"SUBSIDIARY" means, as to any Person, a corporation of which more than 50%
of the outstanding capital stock having full voting power is at the time
directly or indirectly owned or controlled by such Person.
"SURVIVING CORPORATION" has the meaning assigned to such term in Section
1.1 hereof.
"TAXES" means all taxes, charges, fees, levies or other assessments of
whatever kind or nature, including without limitation all net income, gross
income, gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupancy or
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property taxes, custom duties, fees, assessments or charges of any kind whatever
(together with any interest, penalty or addition to tax) imposed by any
Governmental Authority (foreign or domestic).
"TRANSACTION DOCUMENTS" means this Agreement, the Voting Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Bell Atlantic
Acquisition Agreement, the Certificate of Merger and all other agreements,
certificates and instruments executed and delivered in connection with the
transactions contemplated by this Agreement, in each case, as originally
executed and as amended from time to time.
"TRANSMITTER FACILITIES" has the meaning assigned to such term in Section
3.13 hereof.
"UNIT PURCHASE OPTION" has the meaning assigned to such term in Section 3.4
hereof.
"UNITS" has the meaning assigned to such term in Section 3.4 hereof.
"VOTING AGREEMENT" has the meaning assigned to such term in the recitals
hereto.
"1997 BALANCE SHEET" has the meaning assigned to such term in Section 3.8
hereof.
"1997 10-K" has the meaning assigned to such term in Section 3.8 hereof.
7.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate, report or other document made or delivered
pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(c) all matters of an accounting nature in connection with this Agreement
and the transactions contemplated hereby shall be determined in accordance with
GAAP.
(d) As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine,
where the context so permits.
(e) The words "hereof", "herein" and "hereunder", and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations, Warranties, Covenants and
Agreements. The respective representations, warranties, covenants and
agreements of the parties hereto shall not survive the Effective Time.
Notwithstanding the foregoing, this Section 8.1 shall not limit any covenant or
agreement of the parties hereto that by its terms contemplates performance after
the Effective Time, including without limitation, Sections 1.9, 1.10, 1.11,
4.16, 4.17, 4.21 and 4.25 hereof.
8.2 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Paging
Partners, Newco and BAP at any time prior to the Effective Time with respect to
any of the terms herein, provided that, after approval of the Merger by the
stockholders of Paging Partners, no amendment shall be made after approval of
the Merger by the stockholder of Paging Partners that increases or changes the
form of the Merger Consideration or otherwise adversely affects the stockholders
of Paging Partners without further stockholder approval.
8.3 Waiver of Compliance; Consents. Except insofar as any provision of
this Agreement is non-waivable by its terms or as a matter of law, any failure
of Paging Partners or Newco, on the one hand, or BAP, on the other hand, to
comply with any obligation, covenant, agreement, or condition herein may be
waived by Paging Partners or BAP, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement, or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party
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hereto, such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 8.3.
8.4 Enforceability. If any term or provision of this Agreement, or the
application thereof to any Person or circumstance shall, to any extent, be
invalid or unenforceable, the remaining terms and provisions of this Agreement
or the application thereof to other Persons and circumstances shall not be
invalidated thereby, and such remaining terms and provisions hereof shall remain
in full force and effect and shall be construed to effect the intent of the
parties hereto to the fullest extent permitted by law.
8.5 Fees and Expenses.
(a) On the date hereof, BAP is depositing $1,000,000 (excluding any
interest earned thereon, the "Pre-Closing Deposit") into an interest bearing
escrow account in the name of the Escrow Agent (the "Escrow Account") in
accordance with the terms of the Escrow Agreement, a copy of which is attached
hereto as Exhibit 8.5. The Pre-Closing Deposit, together with all interest and
income thereon and other proceeds thereof, is hereinafter referred to as the
"Pre-Closing Escrow Fund"). If this Agreement is terminated prior to both the
closing of the Bell Atlantic Acquisition and the Effective Time pursuant to:
(i) Section 6.1(a) hereof, then the Pre-Closing Escrow Fund shall be
returned to BAP, and the parties agree that (A) if the Bell Atlantic
Acquisition Agreement is terminated other than as a result of a failure or
breach by BAP, (B) if the FCC or any state regulatory authority does not
approve the transfer of control applications in connection with the Bell
Atlantic Acquisition or the Merger or (C) if the Extension Period is
terminated in accordance with Section 4.1(b) hereof, then the parties will
consent to a termination of this Agreement pursuant to Section 6.1(a); or
(ii) Section 6.1(b) hereof, then the Pre-Closing Escrow Fund shall be
returned to BAP;
(iii) Section 6.1(c) hereof, then the Pre-Closing Escrow Fund shall be
returned to BAP;
(iv) Section 6.1(d) hereof, then (A) the Pre-Closing Escrow Fund shall
be returned to BAP, (B) Paging Partners shall pay BAP $1,000,000 and (C)
upon the closing of any Competing Transaction that occurs within one year
from the date of termination of this Agreement, Paging Partners shall pay
BAP an additional $1,000,000;
(v) Section 6.1(e) hereof, then (A) the Pre-Closing Escrow Fund shall
be returned to BAP and (B) Paging Partners shall pay BAP $1,000,000;
(vi) Section 6.1(f) hereof, then the Pre-Closing Deposit shall be
released to Paging Partners, and the remaining portion of the Pre-Closing
Escrow Fund shall be returned to BAP; provided, however, that the
Pre-Closing Escrow Fund shall be returned to BAP if the failure relied upon
for termination by Paging Partners is also a failure of the Bell Atlantic
Subsidiaries under the Bell Atlantic Acquisition Agreement or a breach of
any representation or warranty made by the Bell Atlantic Subsidiaries
thereunder; or
(vii) Section 6.1(g) hereof, then (A) the Pre-Closing Escrow Fund
shall be returned to BAP and (B) if the failure relied upon by BAP for such
termination occurred as a result of an intentional act by Paging Partners
or an intentional failure to act by Paging Partners, Paging Partners shall
pay BAP $1,000,000.
(b) Notwithstanding anything to the contrary in this Agreement or the
Escrow Agreement, if BAP certifies to Paging Partners and the Escrow Agent that
the Bell Atlantic Acquisition will close prior to the Effective Time of the
Merger, the Escrow Agent shall deliver the Pre-Closing Deposit by certified
check of immediately available funds, or such other manner of delivery as the
parties may agree, to the Bell Atlantic Subsidiaries at the closing of the Bell
Atlantic Acquisition, and the Escrow Agent shall continue to hold any remaining
portion of the Pre-Closing Escrow Fund (the "Remaining Pre-Closing Funds") in
the Escrow Account. If for any reason, after the Escrow Agent has so delivered
the Pre-Closing Deposit, the closing of the Bell Atlantic Acquisition does not
occur, the Pre-Closing Deposit shall be returned in its entirety to the Escrow
Agent, who shall hold it in the Escrow Account pursuant to the terms of the
Escrow Agreement.
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Immediately after the closing of the Bell Atlantic Acquisition, BAP shall
deposit $250,000 (excluding any interest earned thereon, the "Post-Closing
Deposit") into the Escrow Account in accordance with the terms of the Escrow
Agreement. The Remaining Pre-Closing Funds and the Post-Closing Deposit,
together with (i) all interest and income on the Remaining Pre-Closing Funds and
the Post-Closing Deposit and (ii) all other proceeds of the Remaining
Pre-Closing Funds and the Post-Closing Deposit, are hereinafter referred to as
the "Post-Closing Escrow Fund." If this Agreement is terminated after the
closing of the Bell Atlantic Acquisition but prior to the Effective Time
pursuant to:
(i) Section 6.1(a) hereof, then the Post-Closing Escrow Fund shall be
returned to BAP, and the parties agree that (A) if the Bell Atlantic
Acquisition Agreement is terminated other than as a result of a failure or
breach by BAP, (B) if the FCC or any state regulatory authority does not
approve the transfer of control applications in connection with the Bell
Atlantic Acquisition or the Merger or (C) if the Extension Period is
terminated in accordance with Section 4.1(b) hereof, then the parties will
consent to a termination of this Agreement pursuant to Section 6.1(a); or
(ii) Section 6.1(b) hereof, then the Post-Closing Escrow Fund shall be
returned to BAP;
(iii) Section 6.1(c) hereof, then the Post-Closing Escrow Fund shall
be returned to BAP;
(iv) Section 6.1(d) hereof, then (A) the Post-Escrow Fund shall be
returned to BAP, (B) Paging Partners shall pay BAP $1,000,000 and (C) upon
the closing of any Competing Transaction that occurs within one year from
the date of termination of this Agreement, Paging Partners shall pay BAP an
additional $1,000,000;
(v) Section 6.1(e) hereof, then (A) the Post-Closing Escrow Fund shall
be returned to BAP and (B) Paging Partners shall pay BAP $1,000,000;
(vi) Section 6.1(f) hereof, then the Post-Closing Escrow Fund shall be
released to Paging Partners, and BAP shall promptly pay to Paging Partners
the difference between $1,000,000 and the amount of the Post-Closing Escrow
Fund; provided, however, that the Post-Closing Escrow Fund shall be
returned to BAP if the failure relied upon for termination by Paging
Partners is also a failure of the Bell Atlantic Subsidiaries under the Bell
Atlantic Acquisition Agreement or a breach of any representation or
warranty made by the Bell Atlantic Subsidiaries thereunder; or
(vii) Section 6.1(g) hereof, then (A) the Post-Closing Escrow Fund
shall be returned to BAP and (B) if the failure relied upon by BAP for such
termination occurred as a result of an intentional act by Paging Partners
or an intentional failure to act by Paging Partners, Paging Partners shall
pay BAP $1,000,000.
(d) Except as set forth in this Section 8.5, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
(e) Each of Paging Partners and BAP hereby acknowledges and agrees that the
arrangements set forth in this Section 8.5 represent their good faith attempt,
to reach, in advance, a fair resolution of their competing interests, to avoid
the complications, risks and expenses likely to be associated with any need to
establish or prove the presence or absence of actual damages in the event of the
termination of this Agreement, and to determine appropriate compensation that is
not expected by either Paging Partners or BAP to be punitive in effect or to
produce a windfall to either Paging Partners or BAP.
8.6 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied shall confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement, except that the
provisions of Sections 4.16, 4.17, 4.21 and 4.25 hereof shall inure to the
benefit of those persons covered by such Sections.
8.7 Successors and Assigns. Neither this Agreement nor the rights,
interests and obligations of the parties hereto shall be assigned by any of such
parties, by operation of law or otherwise, nor shall any such purported
assignment have any effect for purposes of this Agreement.
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8.8 Communications Act. Nothing in this Agreement is intended or shall be
construed to diminish or affect the control of BAP or of Paging Partners over
any FCC Licenses held by any of them in any manner prohibited by the
Communications Act of 1934, as amended, or the rules and regulations issued by
the FCC.
8.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is agreed accordingly that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity, and each party
acknowledges that neither party shall be required to allege or to prove the
inadequacy of money damages as a remedy to seek any appropriate form of
equitable relief or remedy.
8.10 Notices. Except as otherwise specifically provided in this
Agreement, all communication hereunder shall be in writing (including
telegraphic communication) and shall be sent by first-class mail, telegraph,
facsimile or overnight courier or delivered in person:
to:
BAP Acquisition Corp.
42 Timber Rock Trail
Bernardsville, NJ 07924
Attention: John X. Adiletta
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: William P. Gelnaw, Jr., Esq.
and to Paging Partners and Newco at:
Paging Partners Corporation
4249 Route 9 North
Building 2
Freehold, NJ 07728
Fax: (732) 409-7366
Attention: Leonard Fink
with a copy to:
Solovay Edlin & Eiseman, P. C.
845 Third Avenue
8th Floor
New York, New York 10022
Fax: (212) 355-4608
Attention: Michael B. Solovay, Esq.
or to such other addresses as BAP, Paging Partners or Newco may designate by
notice in writing. Notices shall be deemed to have been given when received.
8.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the conflict
of laws rules thereof.
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8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall constitute an
original but all of which shall constitute one and the same agreement.
8.13 Headings. The article and section headings in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties, and shall not effect in any way the meaning or interpretation of this
Agreement.
8.14 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the documents and instruments referred to herein, embodies
the entire agreement between the parties hereto in respect of the subject matter
hereof. There are no agreements, restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
8.15 Schedules. The parties agree that Paging Partners shall deliver
Schedules 3.14 and 3.24 of the Paging Partners Disclosure Schedule prior to the
Effective Time.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered on its behalf by one of its duly authorized officers,
all as of the day and year first above written.
BAP ACQUISITION CORP.
By: /s/ JOHN X. ADILETTA
------------------------------------
Name: John X. Adiletta
Title President
PAGING PARTNERS CORPORATION
By: /s/ RICHARD J. GIACCHI
------------------------------------
Name: Richard J. Giacchi
Title: President and CEO
PAGING PARTNERS MERGER CORPORATION
By: /s/ LEONARD FINK
------------------------------------
Name: Leonard Fink
Title: President
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<PAGE>
EXHIBIT B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13002
PAGING PARTNERS CORPORATION
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-3281446
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
FREEHOLD OFFICE PLAZA 07728
4249 ROUTE 9 NORTH, BUILDING 2 (ZIP CODE)
FREEHOLD, NEW JERSEY
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
Registrant's telephone number, including area code: (732) 409-7088
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF
1934:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
COMMON STOCK, $0.01 PAR VALUE BOSTON STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934: NONE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the securities Exchange Act of 1934 during the past 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. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ] Yes [X] No
The revenues of registrant for the fiscal year ended December 31, 1998 were
$9,902,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of February 18, 1999, was approximately $5,000,000 based upon
a last sales price of $1.31.
As of February 18, 1999, there were 6,327,000 shares of the registrant's
Common Stock outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
B-1
<PAGE>
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B-2
<PAGE>
PART I
ITEM 1. BUSINESS
MERGER
On November 6, 1998, Paging Partners Corporation (the "Company" or "Paging
Partners") entered into a Merger Agreement with Aquis Communications, Inc.,
("Aquis") whereby Aquis will merge (the "merger") with a wholly owned subsidiary
of the Company. Upon consummation of the merger the current shareholders of
Aquis will own approximately 58.5% of the outstanding shares of the Company's
common stock.
Consummation of the merger is subject to several conditions, including,
approval by the shareholders of the Company, finalization of all financing
commitments and the approval of the Federal Communications Commission to the
transfer of control of the Company. Management believes that the merger will be
completed within approximately 90 days.
On December 31, 1998, Aquis acquired licenses and other assets relating to
the paging business of the Bell Atlantic Corporation (the "Paging Business")
subject to certain liabilities relating to the Paging Business. The purchase
price for the Paging Business was approximately $28,000,000 which was financed
by a blend of senior debt, seller financing and equity. As of December 31, 1998,
the Paging Business served approximately 250,000 users.
Upon consummation of the merger, the ongoing entity will provide local
paging service on six frequencies over a combined service area covering most of
the densely populated portions of the Northeast and Mid-Atlantic regions of the
United States. Under the terms of a reseller agreement, Cellco Partnership, a
partnership doing business as Bell Atlantic Mobile ("BAM") acts as a
non-exclusive reseller for Aquis. Aquis also acts as a reseller, offering
nationwide and regional paging services through its relationships with other
paging carriers.
The following description of the Company's business is based on its
operation during 1998 through the date of this report and on plans conceived by
the current management team. After the consummation of the above merger, the
Company's current business will be overseen by Aquis executives. While the
Company's management is not aware of any significant changes planned by Aquis,
management can give no assurance that such changes will not, in fact, occur.
GENERAL
Paging Partners operates technologically advanced paging systems which
provide one-way wireless messaging services. The Company's Metro system, which
broadcasts on 931.7875 MHz (The "Metro System"), initially focused on the New
York Metropolitan area and currently provides service over portions of seven
states (New York, New Jersey, Connecticut, Pennsylvania, Maryland, Virginia and
Delaware) and Washington, D.C.
During 1994 the Company obtained licenses from the Federal Communications
Commission ("FCC") to construct a paging system (its "Corridor System")
operating on a single frequency (929.6375 MHz) in the territory extending along
Interstate I-95 from Baltimore/Washington to Boston (the "Northeast Corridor").
The Company has completed sufficient construction of the Corridor system to
ensure exclusive operation on the 929.6375 MHz frequency throughout the
Corridor, including the metropolitan areas of Baltimore/ Washington, D.C.,
Philadelphia, New York, and Boston and now provides continuous service from
Boston to Washington, D.C. Through a reciprocal arrangement with another
carrier, the Company will also offer coverage in the Southeastern United States.
Because the Corridor System is independent of the company's Metro System, the
Company continues to operate both Systems, and has the flexibility to provide
Resellers customized access to service on either System.
The Company also obtained licenses from the FCC for a third 900 MHz
frequency covering most of the I-95 Northeast Corridor. The Company entered into
a sharing agreement with another carrier which was
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granted licenses for the frequency covering substantially the same territory.
Pursuant to this sharing agreement, the Company may use up to 50 percent of the
available air-time.
From inception, the Company's principal operating strategy has been to act
as a wholesaler and market access to its paging systems exclusively to paging
service companies, retailers, and other third parties which, in turn, directly
solicit and service subscribers. The Company also solicits private network
operators, radio common carriers and other service providers (collectively, with
the paging service companies, retailers and other parties described in the
preceding sentence, "Resellers"), which have a need for access to transmission
facilities in the territories served by the Company's Systems. This strategy
permits the Company to operate with less personnel than vertically integrated
paging companies. In addition, this strategy removes the threat of competition
between the Company and substantially all of its Resellers which, management
believes, makes Resellers more likely to sell the Company's services than those
of vertically integrated paging companies, though there can be no assurance that
this, in fact, is the case.
Another key strategy of the Company has been to concentrate on providing
high quality data and information transmission services targeted toward "higher
end" pagers which receive alphanumeric messages (i.e., messages consisting of
both numbers and letters). One aspect of this strategy has been the Company's
focus on developing technologically advanced systems designed for alphanumeric
paging services. Another has been the Company's efforts to supply its Resellers
with multiple "information streams" to be marketed to subscribers. Successful
marketing of alphanumeric services requires the ability to deliver a signal
which will not be corrupted and the development of a system and software which
can format and transmit large quantities of information received from multiple
sources. The Company's Metro and Corridor systems were designed and constructed
to address the needs of alphanumeric subscribers. The success of the Company's
efforts to stress its alphanumeric capabilities is evidenced by the fact that
the proportion of alphanumeric pagers which it services exceeds the proportion
of alphanumeric pagers in service throughout the industry.
The Company's emphasis on alphanumeric services is highlighted by its
AlphaPlus(R) software and services, and its agreement with Motorola whereby the
Company broadcasts over its systems branded information services made available
to it by Motorola. AlphaPlus allows subscribers to select from information
services provided by the Company (such as customized message dispatch, traffic,
sports, weather, financial updates, and news headlines), the content to be
received by their pagers.
Another element of the Company's strategy is its willingness to adapt its
transmission facilities for applications demanded by the marketplace. Because
the Company acts as a wholesaler, it does not dictate the services offered
subscribers or the uses made of its Systems by parties with a need for bulk
paging. By maintaining flexible, technologically advanced Systems, the Company
hopes to be able to satisfy the evolving needs of the wireless marketplace.
In the immediate future, the Company intends to continue to expand by
adding Resellers and hence new subscribers to its Metro and Corridor Systems. As
part of its strategy to increase the penetration of its Systems the Company will
continue to seek to increase and customize the information services available to
subscribers.
In addition to providing paging services in the Northeast Corridor, the
Company, from time to time, may consider entering new geographical markets. Such
expansion could occur through the acquisition of new licenses in auctions
conducted by the FCC or the acquisition of existing paging systems, including
licenses, from current license holders.
PAGING OPERATIONS
Subscriber Services
The pagers currently used by subscribers to the Company's Systems provide
two basic types of service, digital display and alphanumeric display -- each of
which can be combined with a variety of enhancements to increase a pager's
utility. A digital display pager permits a caller, utilizing a touch tone
telephone, to transmit to the subscriber a numeric message consisting of a
series of numbers, such as a telephone number, an account number or coded
information. Digital display pagers have the capacity to store several numeric
messages that can be recalled on demand. An alphanumeric display pager allows
subscribers to receive and store messages
B-4
<PAGE>
consisting of both numbers and letters. Alphanumeric pagers common in the
industry today have sufficient memory to store thousands of characters.
Digital display paging service represents a majority of the pagers in
service today. Alphanumeric display service constitutes a relatively small
portion of the pagers in use, primarily due to the difficulty of accurately
inputting the message to be delivered and in ensuring accurate receipt of the
message by the subscriber's pager. The success of the Company's focus on
alphanumeric services is evidenced by the fact that of the pagers served by the
Company, 20% are alphanumeric as compared to an industry average of
approximately 15%.
Traditionally, the message to be delivered to an alphanumeric pager was
transcribed by an operator of the paging company during a telephone conversation
with the party desiring to send the message. Today, a properly equipped
facility, such as the Company's, permits callers to input messages directly into
the transmission system either by using a personal computer equipped with a
modem or a dedicated input device such as an AlphaMate(TM) manufactured by
Motorola. For parties lacking such equipment, the Company links its subscribers
to a dispatch center selected by the subscriber which will input a message into
the Company's systems when a party calls the subscriber's pager telephone number
seeking to send an alphanumeric message. To ensure that data transmitted is
received accurately by the subscriber's pager, the Company designs and operates
its system so that its transmitters send out a synchronized radio signal. This
reduces interference and increases the probability that the message will be
received accurately.
During 1998, the Company introduced a new message delivery
mechanism -- AlphaPlus(R) E-mail. A subscriber selecting this service has the
ability to receive his E-mail on his pager while it is simultaneously being
forwarded to his usual E-mail address.
Message Mail is an enhancement that allows a Reseller to add a custom
greeting to a pager and which gives the subscriber the ability to retrieve the
last ten numeric messages that were sent to the pager. In addition, the Company
provides a feature that enables a caller to leave a voice (voice mail) message
for a subscriber which the subscriber can retrieve by calling his voice mail box
at the Company's facility. A subscriber's pager displays a numeric code alerting
the subscriber whenever a voice mail message is left.
The Company's programming software allows the subscriber (through its
Reseller) to select any of the enhancements offered by the Company at the
initial programming of a pager or at any time that the pager is in service. In
addition, because the Company has incorporated Motorola's FLEX(TM) OTA (over the
air) technology into its systems, a subscriber need not bring his pager to the
Reseller for adjustments when he decides to add on new enhancements. The Company
constantly monitors the paging market to determine what new enhancements it
might successfully sell to Resellers.
As part of its AlphaPlus(R) service, the Company transmits a variety of
information services which Resellers can sell to their subscribers. This service
allows subscribers to receive information on their alphanumeric pagers which
they can review at their convenience. Currently, the information provided by the
Company includes headline news stories, hourly financial updates, sports scores
and a variety of other "infotainment" items purchased by the Company from
various third party information providers. The Company provides additional
premium information services, including more detailed sports, weather,
financial, traffic and emergency information, which Resellers can sell to
individual subscribers. The Company has entered into an arrangement with
Motorola's InfoPower Division whereby the Company makes available branded
information services developed by Motorola through its alliance with leading
information service providers. The Company intends to transmit additional
information services as they are made available by Motorola, as well as services
supplied by other providers, including SportsBox and ScoreQuest. ScoreQuest's
offerings include MVP, FastTrax and Daily Racing Form(R) information services.
Network Services
In addition to marketing its paging Systems and related services to
Resellers, the Company also markets these Systems to private network operators,
radio common carriers ("RCC") and service providers which have a need for bulk
paging or data transmission services in the territories serviced by the
Company's
B-5
<PAGE>
transmission facilities. The Company has entered into arrangements with other
RCCs and private network customers, permitting such parties to "network" their
systems with the Company's and expand the coverage offered to their end users.
More recently, the Company has allowed Resellers to directly connect their
switches into the Company's terminal, permitting Resellers to service their
subscribers through the Company's Systems. The Company charges for such access
on either a fixed fee or per-usage basis.
The Company has also entered into arrangements with specialized information
providers (for example, sports scores/lines, stock quotes, emergency
information) which have a "niche" subscriber base but which do not have their
own transmission facilities, whereby the Company transmits data selected by the
information provider for receipt by that provider's customers. Each of these
arrangements differs depending upon the amount of data to be transmitted and
time of transmission. By maintaining technologically sophisticated flexible
transmission systems, the Company hopes to profit from new applications of
wireless information services as they are developed.
Resellers which rely upon the Company exclusively for transmission services
are typically given direct electronic access to the Company's facilities. In
addition, these Resellers typically operate their own switching equipment and
procure their own telephone numbers. Day-to-day servicing of these accounts
requires minimal intervention by the Company's personnel. Consequently, by
marketing to these Resellers, the Company increases its revenue with little
incremental costs.
MARKETING
Rather than solicit and service individual subscribers directly, the
Company recruits Resellers which, in effect, act as the Company's salesforce.
The Resellers purchase from the Company, on a wholesale basis, access to its
transmission system which, in the case of paging service providers and
retailers, they provide to individual members of the general public. The Company
recruits Resellers through industry contacts, its seminar program, and a small
sales force.
Management believes that Resellers are attracted to the Company because of
the quality of coverage provided by its paging systems, the computerized nature
of the Company's operations, which allows the Reseller 24-hour access to its
accounts, and the responsiveness of the Company to each of its Resellers. As
part of its marketing efforts, the Company conducts seminars for Resellers,
potential Resellers and other interested members of the paging industry. These
programs give the Company an opportunity to maintain contact with its Resellers.
Further, they afford the Company the opportunity to update Resellers on service
enhancements available. The Company provides technical, marketing, sales and
operations support to its Resellers and will participate with Resellers in their
efforts to solicit large volume subscribers. The Company employs sales
representatives to directly solicit Resellers in their respective territories.
The Company's current Resellers are from both within and without the
communications industry. The Resellers include specialty and mass market
retailers, answering services, two-way radio companies and other participants in
the communications industry seeking to expand the services offered to their
customers; nationwide paging companies which rely upon the Company to service
their customers in territories serviced by the Company's Systems; private
network operators and other radio common carriers which supplement their
transmission facilities by networking into the Company's facilities; retailers,
electronics distributors and other specialty retail outlets seeking to
supplement their product lines and information providers which rely on the
Company to transmit information to their subscribers. The Company has
constructed both of its paging Systems as a series of interconnected modules,
which allows the Company to give Resellers the ability to offer services to
subscribers in only those portions of the service area which the subscriber
designates. The Company makes such subregional services available at rates below
those for service throughout the Company's service area.
When a Reseller decides to market the Company's services, it is provided
with on-line access to the Company's computer terminal and can directly
activate, deactivate or modify the services provided to a subscriber's pager.
Because the Reseller, through its computer terminal, interacts directly with the
Company's computers, there is no incremental cost to the Company. Further,
because the Company's computers are active 24 hours a day, Resellers can service
accounts at their convenience.
B-6
<PAGE>
As a convenience to its Resellers, the Company maintains an inventory of
pagers and Resellers can either purchase pagers from industry suppliers or
purchase pagers from the Company. Each Reseller maintains its own sales,
marketing and accounting staff and directly services, bills and collects
payments from its subscribers. The Company derives the majority of its revenue
from a per-unit monthly fee, not dependent on usage, charged to Resellers for
each active pager. This fee, along with any other amounts due for incremental
services provided to a subscriber, must be paid by the Reseller regardless of
whether the subscriber pays the Reseller. Because each Reseller has direct
access to the Company's computers, billing disputes between the Company and its
Resellers, common throughout the industry, are virtually eliminated.
The Company is not dependent on any single Reseller. No single Reseller
accounts for more than 5% of the Company's gross revenues.
SOURCES OF EQUIPMENT
The Company does not manufacture any of the equipment used in its
operations, all of which is available from a variety of sources. Due to the high
degree of compatibility among different models of transmitters, computers and
other paging and voice mail equipment, the Company has been able to design its
paging networks so as not to be dependent upon any single source for such
equipment. The Company periodically evaluates its purchasing arrangements for
pagers to be sure that the equipment it is offering to its Resellers is current
and is available at appropriate prices.
The Company currently purchases its transmitters and paging network
equipment from Motorola. The Company's terminal equipment has a modular design,
which will allow significant future expansion by adding or replacing modules
rather than replacing the entire system. The Company believes that its
investment in technologically advanced transmission equipment reduces its cost
of maintenance and system expansion over the long term. The Company believes
that its paging system equipment is among the most technologically sophisticated
in the paging industry.
DATA RECEIPT AND TRANSMISSION
A key strategy of the Company has been to emphasize the utility of pagers
and devices equipped with paging receivers to receive large volumes of data on a
timely and economical basis. In furtherance of this strategy, the Company
transmits a variety of information streams, including headline news stories,
hourly financial updates, sports scores, traffic, weather and an assortment of
what is referred to as "infotainment," for receipt by its subscribers.
Additional categories of information are added periodically in response to
market demand.
As part of its emphasis on data transmission, the Company continues to seek
to develop software capable of receiving large volumes of information, analyzing
the information to determine what is relevant to a particular subscriber and
then reformatting the information for transmission over the Company's systems
for receipt by subscribers. Fully developed, such software would allow a paging
receiver to function as a personal information device receiving an
individualized data stream selected by the subscriber and broadcast over the
Company's systems.
To increase the visibility of its AlphaPlus(R) services, the Company
entered into an agreement with Motorola whereby the Company will make available
to subscribers branded information services through its alliances with leading
service providers. During 1998, the Company introduced AlphaPlus(R) E-Mail. A
subscriber selecting this service has the ability to receive his E-mail on his
pager while it is simultaneously being forwarded to his usual E-mail address.
The Company's Systems currently allow a Reseller to select the enhancements
offered by the Company at the initial programming of a pager or at any time
thereafter.
In addition to attracting subscribers to the Company's Systems, management
believes that the software developed in connection with the Company's
AlphaPlus(R) services may be of interest to other radio paging system operators.
Consequently, the Company will seek to profit from the information market by
distributing
B-7
<PAGE>
to other system operators preprocessed information for transmission to their
subscribers or processing software developed by the Company.
In addition to information services broadcast by the Company, the Company's
systems have been designed to allow subscribers to send information for receipt
on their pagers. Developments in software and information processing equipment,
such as the Motorola AlphaMate(TM), allow subscribers to a properly equipped
facility, such as the Company's, to receive messages sent by an appropriate
device directly to the operator's facility for transmission to the subscriber.
Such a facility allows a subscriber to receive messages directly from his office
without the possibility of transcription errors. In addition, existing
technology permits information broadcast over a paging system to be received on
a computer equipped with a paging modem. Management anticipates that as paging
systems evolve they will be capable of transmitting virtually all electronic
data currently transmitted over traditional telephone lines.
COMPETITION
The Company faces intense competition from operators of other wireless
transmission systems in its efforts to recruit Resellers. Such competition is
based upon price, as well as on the quality and variety of services offered, and
the geographic area covered. The Company's Resellers in turn face intense
competition from operators of other wireless message transmission systems as
well as the Resellers representing such systems. Many of the competitors of the
Company and its Resellers, which include local, regional and national paging
companies, possess greater financial, technical and other resources than the
Company. Certain competitors offer wider coverage than does the Company and
certain competitors follow a low-price discounting strategy to expand market
share.
Management believes that the quality of the service the Company provides,
as well as the variety of enhancements offered, appeal to Resellers. To date,
the Company has focused its efforts on providing higher end alphanumeric and
data transmission services. The merits of this strategy are attested to by the
fact that the proportion of the pagers served by the Company which are
alphanumeric exceeds the proportion of pagers throughout the industry which are
alphanumeric. Moreover, management believes that because the Company
concentrates on Resellers and does not maintain a competitive sales force,
Resellers are more likely to rely upon the Company than on its competitors,
although there can be no assurance this, in fact, is the case.
The Company's Metro System competes with at least ten other paging system
operators in the New York metropolitan area and others throughout its coverage
area. These include systems operated by Paging Network, Inc., Page Mart,
MetroCall, and SkyTel, as well as systems operated by privately owned companies.
The Company's Corridor System competes with several or more competitors in all
regions of the Northeast Corridor. Some of these competitors are small,
privately owned companies serving only one market area, while others are larger
companies, including those mentioned above, that provide service in more than
one market and, in some cases, continuous coverage throughout the Northeast
Corridor or the entire United States.
A number of technologies, including cellular telephone service, personal
communications service ("PCS"), enhanced specialized mobile radio, low-speed
data networks and mobile satellite services are competitive forms of technology
used in, or projected to be used for, wireless one- and two-way communications.
Management believes that paging will remain one of the lowest-cost forms of
wireless messaging due to the low-cost infrastructure associated with paging
systems, as well as advances in technology that will provide for reduced paging
costs.
Future technological developments in the wireless communications industry
and the enhancement of current technologies will likely create new products and
services competitive with the paging services currently offered by the Company.
There can be no assurance that the Company will not be adversely affected by
such technological changes.
REGULATION
The Company's paging operations are subject to regulation by the Federal
Communications Commission ("FCC") under the Communications Act of 1934, as
amended ("the Communications Act") and the
B-8
<PAGE>
Telecommunications Act of 1996 ("1996 Act"). The Company is required to obtain
licenses from the FCC to use the radio frequencies necessary for its paging
operations. These authorizations specify the particular locations and
frequencies authorized for use by the Company and set forth technical parameters
such as power, tower height and antenna specifications under which the Company
is permitted to use its frequencies.
The Company's current frequencies are in the 929-931 MHz band and its
operations are governed under the Commission's Rules covering commercial mobile
radio services ("CMRS"). CMRS licensees must provide interconnection upon
reasonable request, must not engage in any unreasonably discriminatory practices
and are subject to complaints regarding any unlawful practices. The Company is
also subject to provisions that authorize the FCC to provide remedial relief to
an aggrieved party upon finding of a violation of the Communications Act and
related customer protection provisions.
The Company's FCC licenses are issued for ten years. At the end of the ten
year term, the Company must file applications for renewal of its authorizations.
The Company can expect renewal if it has met minimum service requirements. While
there can be no assurance that any future renewal applications filed by the
Company will be approved, based upon its experience to date, the Company knows
of no reason to believe that such renewal applications would not be routinely
approved.
The Communications Act requires prior FCC approval for the transfer of
control of a Company that holds FCC radio licenses as well as prior consent to
the assignment of such licenses to another entity. Although there can be no
assurances that any such future applications filed by the Company will be
approved or acted upon in a timely manner by the FCC, the Company, based on its
past experience, knows of no reason to believe that any future transfer or
assignment applications would not be ultimately approved.
The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees which the Company is required to pay with respect
to its licenses. These fees are revised on an annual basis. The Company believes
that these regulatory fees will not have a material adverse effect on the
Company's business.
The Communications Act also limits foreign ownership in FCC licensed CMRS
entities to no more than twenty percent (20%) direct ownership and, without
Commission consent, no more than twenty-five (25%) indirect ownership. However,
as the result of the World Trade Organization ("WTO") Agreement on Basic
Telecommunications Service entered into February 15, 1997 and effective February
5, 1998, the Commission liberalized foreign participation in the U.S.
telecommunications market by action taken November 25, 1997. This action allows
for an expedited process of approving indirect ownership over the 25% level for
WTO signatories.
The FCC, under the Communications Act, has authority to revoke or modify
licenses issued by it. Any such revocation can only occur after notice and
opportunity for hearing based upon egregious misconduct by the licensee. No
license of the Company has ever been revoked or modified involuntarily.
Paging authorizations, such as those held by the Company, have
traditionally been issued on a site-specific basis. However, the FCC, on
February 19, 1997, adopted an Order looking to fundamental changes in its
regulation of the paging industry. Specifically, the FCC will, in the future,
issue most paging licenses on a geographic basis. The FCC has defined these as
Economic Areas ("EAs"). The future licensees will be given operating authority
on particular frequencies within these geographic areas, subject only to
protection of incumbent operators from interference. The FCC proposes to award
these future paging licenses by competitive bidding (auctions). The Company, as
an incumbent licensee, will be entitled to interference protection from such
auction winners for its existing operations. However, the Company's ability to
expand its service territories will be affected by these new policies.
Because the auctions are new to paging, the Company cannot predict their
impact on its business. Initially, auctions or competitive bidding may increase
the Company's cost of obtaining authorizations from the FCC. The FCC's new
wide-area licensing and auction Rules may also serve as a barrier to new
participants to the paging industry. On the other hand, the more flexible
licensing scheme should save on application costs associated with making changes
to facilities within the wide area should the Company be successful and bid for
wide areas or within its incumbent geographic areas. On the other hand, if the
Company
B-9
<PAGE>
is not a winner in the auctions for broad geographic areas, its ability to
expand its service territories will be affected by these new policies.
In the future, the Congress may modify or amend the Communications Act and
the FCC may modify its Rules or Policies in ways that could have a material
adverse effect on the Company's business. Such actions may effect the scope and
manner of the Company's operations and delivery of its service. As a result of
the enactment of the 1996 Act, the Company has incurred additional financial
obligations. In November 1996, in response to a directive in the 1996 Act, the
FCC adopted new rules that govern compensation to be paid to pay phone
providers. After these rules were vacated by the U.S. Court of Appeals for the
D.C. Circuit, the FCC released an order mandating that long distance carriers
compensate pay phone providers 28.4 cents for each 800 Number call during a
two-year interim period. The long distance carriers have either passed this cost
through to the paging companies that provide toll-free service to their
subscribers or have blocked payphone calls to toll-free Numbers. This has
increased the cost of providing certain toll-free messaging services and limited
the utility of toll-free Number service. Petitions for review and stay of this
order have been filed with a federal appellate court. Also, in response to
changes made by the 1996 Act, the FCC has adopted new rules regarding payments
by telecommunications firms into a revamped fund that will provide for the
widespread availability of telecommunications services, including to low-income
consumers ("Universal Service"). Prior to the implementation of the 1996 Act,
Universal Service obligations largely were met by local telephone companies.
Under the new rules, all telecommunications carriers, including paging
companies, are required to contribute to the Universal Service Fund. Payments
into the fund have increased the cost of doing business and could make the
Company's service less competitive with the other services. For example, under
the 1996 Act, local exchange carriers are prohibited from charging paging
carriers for the "transport and termination" of local exchange carrier
originated traffic. This has already led to substantial savings for the Company.
In addition, paging carriers may be entitled to compensation from other
telecommunications carriers that terminate a call on a paging network. This
could lead to additional revenue for the Company. Of course, the Company cannot
predict the final outcome of any FCC proceedings, any court challenges to any
FCC Rules or Policies or predict what Congress may, in the future, propose in
the way of changes to the telecommunications laws.
In connection with state regulations, under the amendments to the
Communications Act included in the Budget Act, the Congress preempted state and
local rate and entry regulation of all CMRS providers. Entry regulation
typically refers to the process whereby an entity's right to provide service in
a particular market is subject to the prior approval by a regulatory body such
as the state public service commission. Rate regulation traditionally concerns
the amount, terms and conditions that an operator may charge for its services.
These items were usually included in tariffs subject to approval by the state
regulatory body. While state and local regulatory bodies have been preempted
from rate and entry regulation, they may still regulate other aspects of the
Company's service offerings. This apparently has not created any burdensome
state or local regulation since the enactment of the 1993 Budget Act. However,
there can be no assurances that state and local governments will not attempt in
the future to expand their regulatory scope.
The Company is subject to the state and local laws applicable to any
business enterprise. The 1996 Amendments to the Communications Act, however,
have limited the application of state and local zoning regulations requiring
that they not be unreasonably discriminatory among providers of functionally
equivalent wireless services and shall not have the effect of prohibiting the
provision of wireless services.
The foregoing description of certain regulatory considerations does not
purport to be a complete summary of all present federal and state regulatory
requirements nor of all proposed legislation and regulations pertaining to the
Company's present operations.
EMPLOYEES
As of February 18, 1999, the Company had 20 full-time and three part-time
employees. The Company believes that its relationships with its employees are
generally good.
B-10
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ITEM 2. PROPERTY
The Company's principal office is located in approximately 4,300 square
feet of leased space at Freehold Office Plaza, 4249 Route 9 North, Building 2,
Freehold, New Jersey. The fixed rent on the lease, which expires August 31,
1999, is currently approximately $80,000 per year. In addition to fixed rent,
the lease requires the Company to pay its proportionate share of certain
maintenance expenses and any increase in real estate taxes and insurance costs.
The Company leases approximately 230 locations for its transmitters on
commercial broadcast towers, buildings and other fixed structures. In addition,
the Company leases space in New York, Pennsylvania, Maryland, and Massachusetts,
primarily to house equipment related to its paging systems. The rental payable
for such leases, together with those for the Company's transmitter locations,
aggregated approximately $145,000 per month, as of February 18, 1999.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded over the counter on the NASDAQ
SmallCap Market under the Symbol PPAR. In April 1997, the Company's Warrants
were delisted from NASDAQ due to an absence of market makers for this security.
Over the counter market quotations reflect inter-dealer prices without mark-up,
mark-down or commissions, and may not represent actual transactions. The
quarterly high and low bid prices for the Company's Common Stock for the past
two years as reported by the National Association of Securities Dealers, Inc.,
are as follows:
<TABLE>
<CAPTION>
1997
COMMON STOCK
------------
QUARTER HIGH LOW
- ------- ---- ----
<S> <C> <C>
First Quarter............................................... 2.06 0.75
Second Quarter.............................................. 1.68 0.69
Third Quarter............................................... 1.69 1.00
Fourth Quarter.............................................. 1.50 1.00
</TABLE>
<TABLE>
<CAPTION>
1998
COMMON STOCK
------------
QUARTER HIGH LOW
- ------- ---- ----
<S> <C> <C>
First Quarter............................................... 1.81 0.69
Second Quarter.............................................. 1.75 1.00
Third Quarter............................................... 1.50 0.88
Fourth Quarter.............................................. 3.19 0.69
</TABLE>
On February 18, 1999, the closing price of the Company's Common Stock was
$1.31. As of this date, there were approximately 100 record holders of the
Company's Common Stock. The number of record holders does not reflect the number
of beneficial owners of the Company's Common Stock for whom shares are held by
banks, brokerage firms and others. Based on information requests received from
representatives of such beneficial owners, management believes that there are at
least 1,000 beneficial holders of the Company's Common Stock.
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<PAGE>
DIVIDENDS
The payment of dividends is contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition. The
payment of dividends is currently prohibited by the Company's Credit Agreement
with Motorola. It is the present intention of the Company's Board of Directors
to retain its earnings, if any, for use in the Company's business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SELECTED FINANCIAL DATA
The following table sets forth-summary historical financial information and
operating data for each of the five fiscal years ended December 31, 1998. The
financial information and operating data were derived from, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in this Report.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE NUMBERS )
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................... $ 9,902 $ 9,069 $ 6,910 $ 5,474 $ 3,951
Operating expenses....................... 10,596 10,286 9,466 7,819 4,418
------- ------- ------- ------- -------
Operating loss........................... (694) (1,217) (2,556) (2,345) (467)
Other expense (income)................... 453 200 160 (7) 188
------- ------- ------- ------- -------
Net loss................................. (1,147) (1,417) (2,716) (2,338) (655)
------- ------- ------- ------- -------
Net loss per common share................ $ (0.18) $ (0.23) $ (0.50) $ (0.49) $ (0.16)
------- ------- ------- ------- -------
BALANCE SHEET DATA (AT YEAR END):
Total assets............................. $ 5,318 $ 6,723 $ 6,691 $ 7,746 $11,178
Long-term debt, less current
maturities............................. $ 1,146 $ 1,590 $ 1,335 $ 930 $ 1,800
OTHER DATA (AT YEAR END) (UNAUDITED)
EBITDA(1)................................ $ 578 $ (47) $(1,500) $(1,555) $ (107)
Equivalent units in service (2).......... 181 151 83 59 37
</TABLE>
- ---------------
(1) EBITDA represents earnings (excluding interest and non-operating items)
before taxes, depreciation and amortization EBITDA is a financial measure
commonly used in the paging industry EBITDA is not derived pursuant to
generally accepted accounting principles ("GAAP") and therefore should not
be construed as an alternative to operating income, as an alternative to
cash flows from operating activities (as determined in accordance with GAAP)
or as a measure of liquidity. The calculation of EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the financial operations and liquidity of
the Company as determined in accordance with GAAP.
(2) The Company reports its units in service on the basis of "(equivalent) units
in service". Certain of the Company's customers are serviced and billed on a
measurement basis other than one which relates to the number of units in
service. In such case the number of units reported is based upon the monthly
revenue received converted into units at the lowest unit pricing given to
any of the Company's customers for equivalent service. The number of units
in service excludes subscribers receiving AlphaPlus data services but not
subscribing to basic paging services.
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<PAGE>
RESULTS OF OPERATIONS -- 1998 TO 1997
The Table below presents certain items in the Company's statements of
operations in dollars and as percentages of total revenues and changes therein
for the years ended December 31, 1998 and 1997. The table also presents certain
key operating statistics (unaudited) for the same periods.
<TABLE>
<CAPTION>
1998 1997 CHANGE
------------------- ------------------- -------------------
$ % $ % $ %
---------- ----- ---------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service.................... 7,542,000 76.2 7,012,000 77.3 530,000 7.6
Equipment Sales............ 2,360,000 23.8 2,057,000 22.7 303,000 14.7
---------- ----- ---------- ----- -------- -------
Total Revenue........... 9,902,000 100.0 9,069,000 100.0 833,000 9.2
---------- ----- ---------- ----- -------- -------
Operating Expenses:
Service.................... 1,875,000 18.9 1,635,000 18.0 240,000 14.7
Technical.................. 2,575,000 26.0 2,500,000 27.6 75,000 3.0
Cost of Equipment Sold..... 2,422,000 24.4 2,270,000 25.0 152,000 6.7
Selling.................... 511,000 5.2 783,000 8.6 (272,000) (34.7)
General and
Administrative.......... 1,941,000 19.6 1,928,000 21.3 13,000 0.7
Depreciation and
Amortization............ 1,272,000 12.9 1,170,000 12.9 102,000 8.7
---------- ----- ---------- ----- -------- -------
10,596,000 107.0 10,286,000 113.4 310,000 3.0
---------- ----- ---------- ----- -------- -------
Loss from operations......... (694,000) (7.0) (1,217,000) (13.4) 523,000 43.0
Merger Costs................. 151,000 1.5 0 0.0 151,000 --
Emergency Satellite Transfer
Costs...................... 100,000 1.0 0 0.0 100,000 --
Interest expense............. 202,000 2.0 200,000 2.2 2,000 1.0
---------- ----- ---------- ----- -------- -------
Net loss..................... (1,147,000) (11.5) (1,417,000) (15.6) 270,000 19.1
---------- ----- ---------- ----- -------- -------
OTHER DATA
EBITDA*...................... $578,000 5.9 $(47,000) (0.5) $625,000 1,329.8
Equivalent Units
Reseller................... 116,000 111,000 5,000 4.5
Transmission Only.......... 65,000 40,000 25,000 62.5
Average Monthly per Unit
Revenue**
Reseller................... $4.85 $5.71 $ .86 (15.1)
Transmission Only.......... $0.95 $1.16 $ .21 (18.1)
</TABLE>
- ---------------
* Profit (loss) from operations before depreciation and amortization.
** Average (monthly) service revenue per unit.
The increase in the Company's service revenues reflects increases in the
number of (equivalent) units in service offset in part by reduced service
revenue per unit. Service revenue per unit on reseller units has declined due in
part to continued competitive pricing in the industry. Additionally, the portion
of the Company's revenues generated by transmission-only services has increased.
The Company charges a lower unit price to customers for transmission-only
services as the customers operate their own switching terminal equipment and
procure their own telephone numbers from local exchange carriers and are only
using the Company's radio transmission network. In turn, the Company incurs
virtually no incremental telecommunications, selling, customer service, or
capital costs from servicing these units. Service revenue per unit for
transmission-only units has declined because early customers were alphanumeric
information providers who were charged a fixed monthly fee for use of the
Company's systems. Since the Company began
B-13
<PAGE>
active marketing of transmission-only capability in early 1997, new customers
have mostly added numeric paging units with lower revenue per unit.
The Company reports its units in service on the basis of "(equivalent)
units in service". Certain of the Company's customers are serviced and billed on
a measurement basis other than one which relates to the number of units in
service. In such case the number of units reported is based upon the monthly
revenue received converted into units at the lowest unit pricing given to any of
the Company's customers for equivalent service. The number of units in service
excludes subscribers receiving AlphaPlus(R) data services but not subscribing to
basic paging services.
Service cost represents outlays to third party providers of alphanumeric
message dispatch service. These costs increased in 1998 as compared to 1997 due
to a greater number of alphanumeric units in service.
Technical expenses include transmission site rentals, telephone
interconnect services, and the costs (mostly personnel-related) of the Company's
engineering function. The increases in technical costs in 1998 as compared to
1997 are attributable to increased telephone interconnect costs and increased
transmission site rental prices as well as an increase in the number of
transmission sites.
Equipment sales increased during 1998 as compared to 1997 due to new
product introductions by the Company's primary supplier (Motorola) as well as
price increases and decreased availability from certain competitors. The Company
continues to sell pagers as an accommodation to Resellers and not as a source of
profit. However, lessened competition has permitted narrower loss margins on
pager sales during 1998 than in previous years.
Selling expenses decreased in 1998 as compared to 1997. This reflects lower
promotional expenditures, lower sales commissions due to lower intra-quarter
sales growth, and lower salary expense due to a sales department reorganization
more fully described in the Current Trends section below.
EBITDA reflects the Company's earnings (excluding interest and
non-operating items) before taxes, depreciation and amortization and measures
the Company's operating cash flows, which the Company considers to be a
significant measure of performance. EBITDA is commonly used in the paging
industry and by financial analysts and others who follow the industry to measure
operating performance, but should not be considered in isolation or as an
alternative to measures of operating performance or cash flows pursuant to
generally accepted accounting principles. EBITDA improved significantly during
1998 as compared to 1997 reflecting the fact that the increase in service
revenue exceeded the resulting increase in cost of service while other operating
costs declined. Now that the Company's paging systems are built-out, increases
in service revenues should not result in proportional increases in operating
expenses.
Interest expense primarily reflects the Company's equipment financing with
Motorola.
Depreciation increased as the Company put into service equipment purchased
in 1997 for the Metro System upgrade.
Net loss decreased due to the improvement in EBITDA noted above, offset in
part by increased depreciation and the emergency satellite transfer and merger
costs described below.
EMERGENCY SATELLITE TRANSFER COSTS
The Company relies on a satellite for dissemination of its paging signal
from its paging hub in Freehold, New Jersey to its network of over 240 radio
transmitters in the Eastern United States. On the evening of May 19, 1998, the
unprecedented sudden failure of the Galaxy IV satellite used by the Company (as
well as most other large paging carriers) caused the suspension of paging
service. Within 24 hours, the Company made a successful transition to an
alternate satellite (SBS-6) on which it had previously reserved backup time.
However, the Company had to engage subcontractors to reorient the satellite
receiver on each transmission tower to receive radio signals from the new
satellite. The Company incurred approximately $100,000 of such expenses during
1998 to cover the costs of these realignments.
B-14
<PAGE>
CURRENT TRENDS
Although higher than 1997, on a "run-rate" basis service revenue did not
grow during 1998, due primarily to a reduction in alphanumeric and message
dispatch units and revenue. Management believes that a significant factor in
such reduction was a new per-call charge instituted in October 1997 under the
Telecommunications Act of 1996 for calls to toll-free numbers made from pay
phones. This charge has disrupted the cost structures of the Company's message
dispatch providers which either have had to absorb the cost (approximately $.30
per call) or pass it on to the Company which would likely, in turn, seek to pass
it on to the Company's resellers (and ultimately to end users). Rather than
elect to absorb the new cost without knowing whether it could successfully be
recovered from end-users, the Company, with its major dispatch providers, has
determined to block calls originating from pay phones to the toll free numbers
maintained by the dispatch providers to receive messages for end users. The
inability to receive messages from callers using pay phones may have caused some
end-users to stop obtaining message dispatch (and possibly numeric and
alphanumeric) service from the Company's resellers.
Additionally, in an effort to reduce the impact of the new per call charge,
certain of the Company's dispatchers switched long distance carriers or made
programming changes to their internal switches. In some cases this may have
interfered with the quality of service provided to the Company's end-users,
which may have caused them to seek an alternative service provider. Management
also believes that decreasing wireless phone charges may also account for some
portion of the alphanumeric unit decreases. Consistent with an industry-wide
trend, revenue growth from numeric display paging slowed during 1998.
The paging industry experienced substantial consolidation during 1997 as
well as announcements of additional transactions during 1998. There have also
been significant management changes at many of the larger companies in the
industry. In response to investor dissatisfaction, management at several major
paging companies announced their intention to shift from a price competitive
strategy intended to increase subscriber base, towards a strategy intended to
increase operating margins.
In an effort to capitalize on any opportunity that may result from its
competitors' strategy shifts and offset the impact of the negative trends
discussed above, the Company has made several changes in how it markets its
services and supports its resellers and, in turn, end-users. The Company has
restructured its salaried sales force emphasizing less costly internal support
personnel servicing existing resellers and soliciting increased business from
smaller accounts. The Company has also recently introduced several attractively
priced service bundles and annual paging packages and now offers E-mail based
messaging on alphanumeric (text) pagers.
Senior management continues to solicit large, established resellers and
carriers for transmission-only service. Although the Company's per unit revenues
for such service are lower, the Company incurs no incremental costs and the
Company is partnered with organizations having the financial and management
strength to purchase and maintain their own paging terminals.
YEAR 2000
Much of the Company's operating software was designed specifically for use
by the Company. As the services provided by the Company change, certain
underlying programs are updated. The Company's MIS personnel have informed the
Board of Directors that the code for all such updates is written to be "Year
2000 compliant". MIS personnel have further informed the Board that during 1998,
they investigated the balance of the underlying programs and revised remaining
programs requiring revision to become "Year 2000 compliant."
B-15
<PAGE>
1997 TO 1996 RESULTS OF OPERATIONS
The Table below presents certain items in the Company's statements of
operations in dollars and as percentages of total revenues and changes therein
for the years ended December 31, 1997 and 1996. The table also presents certain
key operating statistics (unaudited) for the same periods.
<TABLE>
<CAPTION>
1997 1996 CHANGE
------------------- ------------------- ------------------
$ % $ % $ %
----------- ----- ----------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service....................... 7,012,000 77.3 4,950 000 71.7 2,062,000 41.7
Equipment Sales............... 2,057,000 22.7 1,960,000 28.3 97,000 4.9
----------- ----- ----------- ----- ---------- -----
Total Revenue.............. 9,069,000 100.0 6,910,000 100.0 2,159,000 31.2
----------- ----- ----------- ----- ---------- -----
Operating Expenses:
Service....................... 1,635,000 18.0 868,000 12.6 767,000 88.4
Technical..................... 2,500,000 27.6 2,548,000 36.8 (48,000) 1.9
Cost of Equipment Sold........ 2,270,000 25.0 2,136,000 30.9 134,000 6.3
Selling....................... 783,000 8.6 927,000 13.5 (144,000) (15.5)
General and Administrative.... 1,928,000 21.3 1,931,000 27.9 (3,000) (0.2)
Depreciation and
Amortization............... 1,170,000 12.9 1,056,000 15.3 114,000 10.8
----------- ----- ----------- ----- ---------- -----
10,286,000 113.4 9,466,000 137.0 820,000 8.7
----------- ----- ----------- ----- ---------- -----
Loss from operations............ (1,217,000) (13.4) (2,556,000) (37.0) 1,339,000 (52.4)
Interest expense................ 200,000 2.2 160,000 2.3 40,000 25.0
----------- ----- ----------- ----- ---------- -----
Net loss........................ (1,417,000) (15.6) (2,716,000) (39.3) 1,299,000 47.8
----------- ----- ----------- ----- ---------- -----
OTHER DATA:
EBITDA*......................... $ (47,000) (0.5) $(1,500,000) (21.7) $1,453,000 96.9
Equivalent Units (end of
year)......................... 151,000 83,000 68,000 81.9
ARPU**.......................... $ 4.99 $ 5.73 $ (.74) (12.9)
</TABLE>
- ---------------
* Loss from operations before depreciation and amortization.
** Average (monthly) service revenue per unit.
The increase in the Company's service revenues reflects a substantial
increase in the number of (equivalent) units in service offset in part by
reduced service revenue per unit. Service revenue per unit has declined due in
part to continued competitive pricing in the industry, offset in part by
increased market penetration by the Company of higher (per unit) revenue
alphanumeric messaging. Additionally, the portion of the Company's revenues
generated by transmission-only services has increased. The Company generally
charges a lower unit price to customers for transmission-only services as the
customers operate their own switching terminal equipment and procure their own
telephone numbers from local exchange carriers and are only using the Company's
radio transmission network. In turn, the Company incurs virtually no incremental
telecommunications, selling, customer service, or capital costs from servicing
these units.
Recent unit growth has resulted from factors which include:
- Increased penetration of transmission-only services (see below)
- Overall wireless messaging industry growth, particularly in the Company's
target market sector -- alphanumeric (as opposed to numeric) messaging.
- Increased penetration of add-on services to alphanumeric messaging
(message dispatch, sports, business and news offerings)
- Improved responsiveness to industry price competition in a selective
manner through price simplification and discounting incremental units in
service.
- Upgraded sales force.
B-16
<PAGE>
The Company reports its units in service on the basis of "(equivalent)
units in service". Certain of the Company's customers are serviced and billed on
a measurement basis other than one which relates to the number of units in
service. In such case the number of units reported is based upon the monthly
revenue received converted into units at the lowest unit pricing given to any of
PPC's customers for equivalent service. The number of units in service excludes
subscribers receiving AlphaPlus(R) data services but not subscribing to basic
paging services.
Service cost represents outlays to third-party providers of alphanumeric
dispatch service. These costs increased in 1997 as compared to 1996 based on
continued market penetration of alphanumeric paging.
Technical expenses include transmission site rentals, telephone
interconnect services, and the costs (mostly personnel-related) of the Company's
engineering function. The decrease in technical costs during 1997 are
attributable to a decrease in telephone interconnect service costs resulting
from the Telecommunications Act of 1996. However, other provisions of the
Telecommunications Act, when they become effective, could partially or fully
offset such decreases. The telecommunications cost decreases were offset in part
by increased site rental prices and personnel costs.
Equipment sales increased during 1997 as compared to 1996 due to new
product introductions by the Company's supplier (Motorola) as well as price
increases by certain competitors. These changes occurred during the second half
of 1997. The Company continues to sell pagers as an accommodation to Resellers
and not as a source of profit.
Selling expenses decreased in 1997 as compared to 1996 as a result of the
elimination of the position of Vice President Sales and Marketing during 1996
and due to one-time promotional expenses incurred in the second quarter of 1996
which were not repeated in 1997.
EBITDA reflects the Company's earnings (excluding interest and
non-operating items) before taxes, depreciation and amortization and measures
the Company's operating cash flows, which the Company considers to be a
significant measure of performance. EBITDA is commonly used in the paging
industry and by financial analysts and others who follow the industry to measure
operating performance, but should not be considered in isolation or as an
alternative to measures of operating performance or cash flows pursuant to
generally accepted accounting principles. EBITDA improved significantly during
1997 reflecting the fact that the increase in service revenue exceeded the
resulting increase in cost of service. Now that the Company's paging systems are
built-out, increases in service revenues should not result in proportional
increases in operating expenses.
Interest expense primarily reflects the Company's equipment financing with
Motorola and has increased as a result of 1996 and 1997 capital expenditures.
Depreciation increased as the Company put into service equipment purchased
for the final portion of the Corridor System as well as the Metro System upgrade
described below.
Net loss decreased consistent with the improvement in EBITDA noted above,
partially offset by increased depreciation and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
By relying primarily upon resellers to build its subscriber base, the
Company has been able to avoid many of the expenses associated with the
solicitation and servicing of subscribers. Nevertheless, the construction and
initial operation and marketing of a paging system requires substantial
expenditures which can only be recouped, if at all, from the subsequent
operation of the system. At this point, the Company anticipates that it will
from time to time make substantial capital expenditures to upgrade its Systems
to assure that they remain technologically current, but the level of such
expenditures should be less than those associated with the initial construction
of its Systems. During 1997, the Company incurred approximately $750,000 of net
capital expenditures, primarily for technological upgrades of the Metro System,
substantially all of which was financed by Motorola. During 1998, the Company
incurred $258,000 of capital expenditures and expects
B-17
<PAGE>
spending to remain at a comparable level in 1999. However, capital needs could
change as a result of the planned merger described below.
On November 6, 1998, the Company agreed to merge with BAP Acquisition
Corporation ("BAP"), later renamed Aquis Communications, Inc. ("Aquis").
Effective December 31, 1998, Aquis purchased substantially all the paging assets
of Bell Atlantic. After the merger is complete, the current shareholders of
Aquis would own approximately 58.5% of the Company's common stock. The merger is
subject to the approval of the Company's shareholders as well as FCC approval of
the transfer of the Company's radio (paging) licenses.
The Aquis asset purchase from Bell Atlantic was financed by a blend of
senior debt, seller financing, and equity. Based on the individual performances
of the Bell Atlantic paging business and the Paging Partners business,
management believes that the combined entity should generate sufficient
operating cash flow to finance its combined debt service and capital
expenditures with funds left over for acquisitions or early debt retirement.
Through December 31, 1998 the Company incurred $151,000 of professional and
related costs arising directly from the merger.
The Company's only long-term debt is a note to Motorola with a balance of
$1,590,000 as of December 31, 1998. Although the Company has been repaying the
note in accordance with its terms, 1998 revenues did not grow sufficiently to
enable the Company to meet certain covenants in its Loan Agreement with
Motorola, as amended. To facilitate the merger described above, Motorola has
agreed to waive any past or future covenant violations occurring prior to
merger. However, if the merger is not consummated, it is possible that the
Company would again be out of compliance with the loan covenants.
FORWARD-LOOKING STATEMENTS
The foregoing discussion of the Company's Financial Condition and Results
of Operations, and other portions of this Report contain forward-looking
statements including, but not limited to, statements regarding the Company's
future financial condition, results of operations, growth strategies, product
development and revenues. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including the competitive conditions in the markets for the
Company's services, the further development of products, such as wireless
telephones, PCS and other products which are competitive with the Company's
services and the willingness of the providers of such services to engage in
aggressive pricing strategies designed to expand markets, the Company's ability
to complete the anticipated merger with Aquis, the Company's ability to
consolidate its operations with those of Aquis and the continued market
penetration of the Company's products and services.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements, Page 18.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
B-18
<PAGE>
PAGING PARTNERS CORPORATION
INDEX
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... 19
Balance Sheets.............................................. 20
Statements of Operations.................................... 21
Statements of Changes in Stockholders' Equity............... 22
Statements of Cash Flows.................................... 23
Notes to Financial Statements............................... 24
</TABLE>
B-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Paging Partners Corporation
Freehold, NJ
We have audited the accompanying balance sheets of Paging Partners
Corporation as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years ended
December 31, 1998, 1997, and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paging Partners Corporation
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the years ended December 31, 1998, 1997, and 1996 in conformity with
generally accepted accounting principles.
/s/ BERENSON & COMPANY LLP
New York, NY
January 22, 1999
B-20
<PAGE>
PAGING PARTNERS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 558,000 $ 752,000
Accounts receivable (net of allowances of $47,000 and
$61,000)............................................... 397,000 522,000
Inventory................................................. 120,000 106,000
Other current assets...................................... 108,000 194,000
------------ ----------
Total current assets................................... 1,183,000 1,574,000
Property and equipment...................................... 3,693,000 4,608,000
Licenses (less accumulated amortization of $906,000 and
$775,000)................................................. 442,000 541,000
------------ ----------
$ 5,318,000 $6,723,000
============ ==========
LIABILITIES
Current liabilities:
Current maturities of notes payable....................... $ 444,000 $ 384,000
Accounts payable.......................................... 506,000 582,000
Accrued expenses.......................................... 422,000 381,000
Deferred revenue.......................................... 162,000 26,000
------------ ----------
Total current liabilities.............................. 1,534,000 1,373,000
Notes payable (less current maturities)..................... 1,146,000 1,590,000
------------ ----------
2,680,000 2,963,000
------------ ----------
Commitments
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 20,000,000 shares
authorized................................................ 63,000 63,000
Preferred stock, $0.01 par value, 1,000,000 shares
authorized (none issued)..................................
Additional paid-in capital.................................. 12,668,000 12,643,000
Accumulated deficit......................................... (10,093,000) (8,946,000)
------------ ----------
2,638,000 3,760,000
------------ ----------
$ 5,318,000 $6,723,000
============ ==========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
B-21
<PAGE>
PAGING PARTNERS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Service........................................... $ 7,542,000 $ 7,012,000 $ 4,950,000
Equipment sales................................... 2,360,000 2,057,000 1,960,000
----------- ----------- -----------
9,902,000 9,069,000 6,910,000
----------- ----------- -----------
Expenses:
Service........................................... 1,875,000 1,635,000 868,000
Technical......................................... 2,575,000 2,500,000 2,548,000
Cost of equipment sold............................ 2,422,000 2,270,000 2,136,000
Selling........................................... 511,000 783,000 927,000
Administrative.................................... 1,941,000 1,928,000 1,931,000
Depreciation and amortization..................... 1,272,000 1,170,000 1,056,000
----------- ----------- -----------
10,596,000 10,286,000 9,466,000
----------- ----------- -----------
Loss from operations................................ (694,000) (1,217,000) (2,556,000)
Merger costs........................................ 151,000 -0- -0-
Emergency satellite transfer costs.................. 100,000 -0- -0-
Interest expense.................................... 202,000 200,000 160,000
----------- ----------- -----------
NET LOSS............................................ $(1,147,000) $(1,417,000) $(2,716,000)
=========== =========== ===========
NET LOSS PER COMMON SHARE........................... $ (0.18) $ (0.23) $ (0.50)
=========== =========== ===========
Weighted average common shares outstanding.......... 6,305,000 6,180,000 5,371,000
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
B-22
<PAGE>
PAGING PARTNERS CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
--------- ------- ----------- ------------
<S> <C> <C> <C> <C>
BALANCE -- JANUARY 1, 1996................ 4,800,000 $48,000 $10,663,000 $ (4,813,000)
Net proceeds of private placement....... 857,000 9,000 1,291,000
Net loss................................ (2,716,000)
Other................................... 16,000 0 90,000
--------- ------- ----------- ------------
BALANCE -- DECEMBER 31, 1996.............. 5,673,000 57,000 12,044,000 (7,529,000)
Net proceeds of private placement....... 541,000 5,000 495,000
Net loss................................ (1,417,000)
Other................................... 87,000 1,000 104,000
--------- ------- ----------- ------------
BALANCE -- DECEMBER 31, 1997.............. 6,301,000 63,000 12,643,000 (8,946,000)
Net loss................................ (1,147,000)
Other................................... 26,000 0 25,000
--------- ------- ----------- ------------
BALANCE DECEMBER 31, 1998................. 6,327,000 $63,000 $12,668,000 $(10,093,000)
========= ======= =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
B-23
<PAGE>
PAGING PARTNERS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $(1,147,000) $(1,417,000) $(2,716,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation................................... 1,140,000 1,038,000 928,000
Amortization................................... 132,000 132,000 128,000
Merger costs................................... 151,000 -0- -0-
Non-cash compensation.......................... -0- -0- 34,000
Changes in operating assets and liabilities:
Decrease in accounts receivable net of
allowances and deferred revenue.............. 125,000 33,000 41,000
(Increase) decrease in other current assets.... 86,000 (125,000) (12,000)
(Increase) decrease in inventory............... (14,000) (13,000) 289,000
Increase in accounts payable and accrued
expenses..................................... 101,000 471,000 269,000
----------- ----------- -----------
Net cash provided (used) by operating
activities................................ 574,000 119,000 (1,039,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and licenses... (258,000) (213,000) (292,000)
----------- ----------- -----------
Net cash used by investing activities........ (258,000) (213,000) (292,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private equity placement........ -0- 500,000 1,300,000
Merger costs...................................... (151,000) -0- -0-
Proceeds from stock option exercise............... 25,000 9,000 46,000
Repayment of notes payable........................ (384,000) (170,000) (61,000)
----------- ----------- -----------
Net cash provided (used) by financing
activities................................... (510,000) 339,000 1,285,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... (194,000) 245,000 (46,000)
Cash and cash equivalents -- beginning of year.... 752,000 507,000 553,000
----------- ----------- -----------
Cash and cash equivalents -- end of year.......... $ 558,000 $ 752,000 $ 507,000
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest......................... $ 202,000 $ 200,000 $ 150,000
Debt incurred for the purchase of equipment.... -0- 741,000 540,000
Common stock issued in exchange for services... -0- 96,000 -0-
Other.......................................... -0- -0- 10,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
B-24
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY:
Paging Partners Corporation ("The Company") operates two paging systems
providing one-way wireless messaging services in portions of ten states from New
Hampshire to Virginia.
2. MERGER:
On November 6, 1998, the Company entered into a merger agreement with BAP
Acquisition Corporation ("BAP"), which subsequently changed its name to Aquis
Communications, Inc. ("Aquis"). Aquis has conducted no operations to date, but
purchased substantially all of the assets of the Paging Division of Bell
Atlantic on December 31, 1998. After the merger is complete, the current
shareholders of Aquis would own a majority of the Company's stock. The merger is
subject to the approval of the Company's shareholders and the FCC (regarding
transfer of the Company's radio paging licenses).
For accounting purposes, the Company plans to account for the merger as if
Aquis is the acquiror (a reverse acquisition) of the Company using the purchase
method of accounting. Under the purchase method of accounting, the purchase
price is allocated to the assets and liabilities acquired based upon the
estimated fair values of such assets and liabilities on the date of acquisition.
Any excess of the fair market value of the consideration given over the fair
market value of the identifiable net assets acquired is reported as goodwill.
The 1998 statement of operations includes costs incurred that are directly
related to the merger.
3. CAPITALIZATION:
a. Initial Public Offering:
In May 1994, the Company completed an initial public offering of 1,800,000
units at $6.00 per unit. Each unit consists of one share of common stock and one
redeemable common stock purchase warrant. The Company issued the units to the
underwriter for a total of $10,800,000. Net proceeds to the Company after
underwriting costs was $8,942,000.
In connection with the initial public offering, the Company sold to the
representative of the underwriters, for an aggregate of $100, the right to
purchase up to an aggregate of 170,000 units. The units are identical to those
described herein except that the warrants are not redeemable and have an
exercise price equal to 122% of the exercise price of the warrants described
below.
Each warrant entitles the holder to purchase one share of common stock of
the Company for $6.60, subject to adjustment in certain circumstances, at any
time during the period commencing May 19, 1995 and ending on May 19, 1999. The
Company may call the warrants for redemption, in whole or in part, at a price of
$.01 per warrant at any time after they become exercisable upon 30 days' notice
if the last sale price of the common stock has been at least 175% of the then
exercise price of the warrants for the 20 consecutive trading days ending on the
third day prior to the date on which the notice of redemption is given.
b. Private Equity Placements:
In May 1996 the Company completed a private placement of 857,000 shares of
its Common Stock for gross proceeds of $1.5 million yielding net proceeds of
$1,300,000 after deduction of placement agent and professional fees, including
$130,000 of placement agent fees paid to affiliates of one of the Company's
directors.
In March 1997, the Company completed a private placement of 515,000 shares
of its Common Stock for gross proceeds of $532,000, yielding estimated net
proceeds of $500,000 after deduction of professional fees and other expenses.
115,000 of the shares were purchased by members of the Company's Board of
Directors. 26,000 additional shares of stock were issued in payment of
professional fees in connection with this transaction.
B-25
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
c. Options:
The Company has a stock option plan (the "Plan"), pursuant to which options
to purchase shares of the Company's common stock, intended to qualify as
"incentive stock options", may be granted to employees and directors of the
Company and independent contractors providing services to the Company. A total
of 450,000 shares of common stock have been reserved for issuance under the
Plan. Options are exercisable for terms of six months to ten years from the date
granted. Details are as follows:
<TABLE>
<CAPTION>
NUMBER OPTION
OF SHARES PRICE RANGE
--------- ------------
<S> <C> <C>
1996
Outstanding, January 1...................................... 210,500 $2.75 - 6.25
Granted..................................................... 176,700 $1.38 - 4.38
Exercised................................................... (16,000) $2.88
Cancelled................................................... (110,600) $2.75 - 6.00
--------
Outstanding, December 31.................................... 260,600 $1.38 - 6.25
--------
Exercisable, December 31.................................... 129,350 $2.75 - 6.25
--------
1997
Outstanding, January 1...................................... 260,600 $1.38 - 6.25
Granted..................................................... 128,500 $0.88 - 1.38
Exercised................................................... (10,000) $0.88
Cancelled................................................... (37,150) $1.38 - 6.25
--------
Outstanding, December 31.................................... 341,950 $0.88 - 6.25
--------
Exercisable, December 31.................................... 254,050 $0.88 - 6.25
--------
1998
Outstanding, January 1...................................... 341,950 $0.88 - 6.25
Granted..................................................... 216,100 $1.38 - 4.38
Exercised................................................... 25,750 $0.88 - 1.00
Cancelled................................................... 180,150 $0.88 - 6.25
--------
Outstanding, December 31.................................... 352,150 $0.88 - 4.19
--------
Exercisable, December 31.................................... 342,150 $0.88 - 4.19
--------
</TABLE>
In consideration of the pending merger (Note 2), exercisable options as of
December 31, 1998 include options that actually become exercisable on February
13, 1999 and options that become exercisable upon a change in control.
The Company continues to measure compensation cost pursuant to APB No. 25,
as permitted by the Financial Accounting Standards Board (FASB) Statement No.
123. Had compensation cost been determined
B-26
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
on the basis of FASB Statement No. 123, net income and earnings per share would
have been reduced as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Loss:
As reported............................... $(1,147,000) $(1,417,000) $(2,716,000)
Pro forma................................. $(1,160,000) $(1,445,000) $(2,733,000)
Net Loss per Common Share:
As reported............................... $ (0.18) $ (0.23) $ (0.50)
Pro forma................................. $ (0.18) $ (0.23) $ (0.51)
</TABLE>
The fair value of compensation was computed using an option-pricing model
which took into account the following factor as of the grant date:
- the exercise price and expected life of the option
- the current price of the stock and its expected volatility
- expected dividends, if any, on the stock
- the risk-free interest rate for the expected term of the option using the
Treasury Note rate with a remaining term equal to the expected life of
the options.
4. SIGNIFICANT ACCOUNTING POLICIES:
a. Cash and Cash Equivalents:
Investments in liquid, marketable securities with original maturities of
less than three months are considered to be cash equivalents and are carried at
amortized cost.
b. Inventory:
Inventory is stated at the lower of cost (first-in, first-out basis) or
market, and consists of pagers for resale.
c. Property and Equipment:
Property and equipment are recorded at cost. The Company provides for
depreciation using the straight-line method over the estimated useful lives
ranging from 5 to 10 years.
d. Licenses:
Licenses are amortized using the straight-line method over their terms (10
years).
e. Revenue Recognition:
Deferred revenue represents advance billings for services not yet
performed. Such revenue is recognized in the month in which the service is
provided.
f. Income Taxes:
Income taxes for the Company have been provided for the tax effects of
transactions reported in the financial statements and will consist of taxes
currently due plus deferred taxes related primarily to differences between the
basis of assets for financial and income tax reporting.
B-27
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
g. Concentration of Risk:
The Company maintains its cash and cash equivalents in one commercial bank
and one money market fund which invests solely in securities issued by the US
government. The Company's accounts receivable are due from resellers located in
the Northeast and Mid-Atlantic regions of the United States and the ability to
collect is based upon economic conditions in the area. The Company purchases
substantially all of its paging system equipment and pagers for resale from
Motorola. However, such items are also available from Motorola's competitors.
h. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
i. Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximate fair value
because of the short maturity of these instruments. The carrying amounts of
notes payable approximate fair value because of similar current rates at which
the Company could borrow funds with consistent remaining maturities.
j. Reclassification of Certain Expenses
Certain operating expense components for 1996 and 1997 have been
reclassified to conform to current year classifications.
5. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Transmission and other paging equipment..................... $6,680,000 $6,570,000
Telephone and computer equipment............................ 685,000 590,000
Other....................................................... 154,000 134,000
---------- ----------
7,519,000 7,294,000
Less accumulated depreciation.......................... 3,826,000 2,686,000
---------- ----------
$3,693,000 $4,608,000
========== ==========
</TABLE>
6. NOTES PAYABLE
Since June 1995, Motorola has agreed to provide financing for equipment to
complete the build-out of the Company's Corridor paging system and the upgrade
of its Metro paging system. $1,590,000 remains due to Motorola under this
arrangement as of December 31, 1998, bearing interest at the 90-day commercial
paper rate +6%. Borrowings are collateralized by all of the Company's assets.
This arrangement has been subject to certain covenants measured by the Company's
financial condition and performance. These covenants have been suspended until
March 31, 1999 pending the anticipated completion of the merger with Aquis (see
Note 2 above). However, if the Company's planned merger is terminated, the
Company will be in violation of some of these covenants.
B-28
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Principal maturities of notes payable are as follows:
<TABLE>
<S> <C>
1999............................................... 444,000
2000............................................... 504,000
2001............................................... 504,000
2002............................................... 138,000
</TABLE>
7. LEASES:
The Company leases office space, satellite transmission services, and
transmitter sites both on a month-to-month basis and under noncancelable
operating leases which provide for increased rentals based upon increases in
real estate taxes, operating costs or selected price indices. Minimum annual
rentals under leases expiring at various times through January 2006 are as
follows:
<TABLE>
<S> <C>
1999.............................................. 1,538,000
2000.............................................. 1,140,000
2001.............................................. 651,000
2002.............................................. 494,000
2003.............................................. 242,000
Thereafter........................................ 214,000
</TABLE>
Rent expense was $1,749,000, $1,676,000, and $1,483,000 for 1998, 1997, and
1996, respectively.
8. INCOME TAXES:
The Company is permitted to recognize currently the future benefit of its
net operating loss carryforwards and future tax deductions for expenses
previously recorded for financial reporting purposes. At December 31, 1998, the
Company had available net operating loss carryforwards of approximately
$8,700,000 expiring through 2013.
As of December 31, 1998, the recorded deferred tax asset, representing the
expected benefit from the future realization of the net operating losses, net of
the valuation allowance, was $-0-. The sources of the deferred tax asset and the
tax effect is as follows:
<TABLE>
<S> <C>
Net operating loss carry forward benefit.................... $ 3,500,000
Valuation allowance......................................... (3,500,000)
-----------
Deferred tax asset.......................................... $ -0 -
===========
</TABLE>
B-29
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Information with respect to Item 9 is set forth in the Company's Proxy
Statement for its 1999 Annual Meeting of Stockholders (the "1999 Proxy
Statement") and is incorporated herein by reference
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to Item 10 is set forth in the 1999 Proxy
Statement and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Item 11 is set forth in the 1999 Proxy
Statement and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Item 12 is set forth in the 1999 Proxy
Statement and is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
2 Agreement and Plan of Merger with BAP Acquisition Corp.,
(now Aquis Communications, Inc.)(1)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant(2)
3.2 Revised By-Laws of the Registrant(2)
4.1 Form of Common Stock Certificate(2)
4.2 Form of Warrant Certificate(2)
4.3 Form of Unit Purchase Option granted to GKN Securities
Corp.(2)
4.4 Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant(2)
10.9 1994 Incentive Stock Option Plan(2)
23 Consent of Independent Auditor(3)
27 Financial Data Schedule(3)
</TABLE>
- ---------------
(1) Incorporated by reference to the Company's Current Report on Form 8-K dated
November 6, 1998.
(2) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (Registration No. 33-76744).
(3) Filed herewith.
REPORTS ON FORM 8-K
On November 6, 1998 the Company filed a current report on Form 8-K to
report its Merger Agreement with BAP Acquisition Corporation (since renamed
Aquis Communications, Inc.).
B-30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: February 22, 1999
PAGING PARTNERS CORPORATION
(Registrant)
By: /s/ RICHARD J. GIACCHI
------------------------------------
Richard J. Giacchi, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LEONARD D. FINK Chairman of the Board of Directors February 22, 1999
- ---------------------------------------------
Leonard D. Fink
/s/ RICHARD J. GIACCHI President, Director and Principal February 22, 1999
- --------------------------------------------- Executive Officer
Richard J. Giacchi
/s/ JEFFREY M. BACHRACH Vice President, Treasurer, February 22, 1999
- --------------------------------------------- Secretary, and Principal
Jeffrey M. Bachrach Financial and Accounting Officer
/s/ ROBERT DAVIDOFF Director February 22, 1999
- ---------------------------------------------
Robert Davidoff
/s/ MONTE ENGLER Director February 22, 1999
- ---------------------------------------------
Monte Engler
/s/ ROCHELLE B. KING Director February 22, 1999
- ---------------------------------------------
Rochelle B. King
</TABLE>
B-31
LOAN AGREEMENT
between
FINOVA CAPITAL CORPORATION,
as Agent and Lender,
and
AQUIS COMMUNICATIONS, INC.
as Borrower
Dated as of December 31, 1998
<PAGE>
TABLE OF CONTENTS
Page
Number
------
PRELIMINARY STATEMENT........................................................1
ARTICLE IDEFINITIONS AND DETERMINATIONS......................................1
1.1 Definitions......................................................1
1.2 Time Periods....................................................27
1.3 Accounting Terms and Determinations.............................27
1.4 References......................................................27
1.5 Lender's or Agent's Discretion..................................27
1.6 Borrower's Knowledge............................................28
ARTICLE IILOAN AND TERMS OF PAYMENT.........................................28
2.1 Loan............................................................28
2.1.1 Aggregate Loan Amount....................................28
2.1.2 Initial Portion..........................................28
2.1.3 Merger Portion...........................................28
2.1.4 Subsequent Portion.......................................28
2.1.5 Acquisition Portion......................................28
2.1.6 Use of Proceeds..........................................28
2.1.7 Note.....................................................29
2.1.8 Reborrowing..............................................29
2.2 Interest........................................................29
2.2.1 Interest Rate............................................29
2.2.2 Interest Computation.....................................30
2.2.3 Maximum Interest.........................................30
2.3 LIBOR Loans.....................................................31
2.3.1 Election by Borrower.....................................31
2.3.2 LIBOR Limitations........................................31
2.3.3 Eurodollar Deposits Unavailable or Interest Rate
Unascertainable .........................................31
2.3.4 Tax and Other Laws.......................................32
2.3.5 Changes in Law Rendering LIBOR Loans Unlawful............32
2.3.6 Indemnity................................................33
2.4 Principal and Interest Payments.................................33
2.4.1 Interest.................................................33
2.4.2 Principal................................................33
2.5 Default Rate....................................................34
2.6 Late Charges....................................................34
2.7 Loan Fees.......................................................34
2.7.1 Closing Loan Fee.........................................34
2.7.2 Subsequent Portion Loan Fee..............................34
2.7.3 Acquisition Portion Loan Fees............................34
2.8 Prepayments.....................................................34
<PAGE>
2.8.1 Voluntary Prepayments....................................34
2.8.2 Mandatory Prepayments....................................35
2.8.3 Prepayment Premium.......................................36
2.8.4 Involuntary Prepayment...................................37
2.9 Payments after Event of Default.................................37
2.10 Method of Payment; Good Funds...................................37
ARTICLE III SECURITY; LETTERS OF CREDIT.....................................37
3.1 Security........................................................37
3.2 Letters of Credit...............................................37
3.2.1 Draws on Letters of Credit...............................37
3.2.2 Application of Draw Proceeds.............................38
3.2.3 Release of Letters of Credit.............................38
ARTICLE IV CONDITIONS OF CLOSING............................................38
4.1 Closing Conditions for Each Disbursement........................38
4.1.1 Representations and Warranties...........................38
4.1.2 Performance; No Default..................................38
4.1.3 Licenses.................................................39
4.1.4 Financial Statements and Projections.....................39
4.1.5 Insurance................................................39
4.1.6 Environmental Audit......................................39
4.1.7 Indebtedness to be Refinanced............................40
4.1.8 Approval of Instruments and Security Interests; Consents.40
4.1.9 Security Interests.......................................40
4.1.10 Use of Assets............................................40
4.1.11 Proceedings and Documents................................40
4.1.12 Material Adverse Change..................................40
4.1.13 Broker Fees..............................................41
4.1.14 Fees and Expenses........................................41
4.2 Closing Conditions for Initial Portion..........................41
4.2.1 Equity Capitalization....................................41
4.2.2 Maximum Leverage.........................................41
4.2.3 Consummation of Bell Atlantic Acquisition................41
4.2.4 Delivery of Documents....................................41
4.2.5 Opinions of Counsel; Direction for Delivery..............43
4.2.6 Appraisal................................................43
4.3 Conditions to Disbursement of the Merger Portion................43
4.3.1 Disbursement of Initial Portion..........................43
4.3.2 Maximum Leverage.........................................43
4.3.3 Consummation of Paging Partners Merger...................43
4.3.4 Delivery of Documents....................................43
4.3.5 Opinions of Counsel; Direction for Delivery..............45
4.4 Conditions to Disbursement of the Subsequent Portion............45
4.4.1 Disbursement of Initial Portion..........................45
<PAGE>
4.4.2 Maximum Leverage.........................................45
4.4.3 Bell Atlantic Seller Note Payment........................45
4.4.4 Delivery of Documents....................................45
4.5 Conditions to Disbursement of Acquisition Portion...............46
4.5.1 Disbursement of Initial Portion..........................46
4.5.2 Maximum Leverage.........................................46
4.5.3 Amount and Frequency of Advances.........................46
4.5.4 Purpose of Advance.......................................46
4.5.5 Information Regarding Subsequent Acquisitions............46
4.5.6 Consent to Subsequent Acquisition........................47
4.5.7 Consummation of Subsequent Acquisition...................47
4.5.8 Delivery of Documents....................................47
4.5.9 Opinions of Counsel; Direction for Delivery..............49
ARTICLE V REPRESENTATIONS AND WARRANTIES....................................49
5.1 Existence and Power.............................................49
5.2 Authority.......................................................49
5.3 Borrower Capital Stock and Related Matters......................49
5.3.1 Borrower Capital Stock...................................50
5.3.2 Restrictions.............................................50
5.4 Binding Agreements..............................................50
5.5 Business and Property of Borrower...............................50
5.5.1 Business and Property....................................50
5.5.2 Licenses.................................................50
5.5.3 Operating Agreements.....................................51
5.5.4 Facility Sites...........................................51
5.5.5 Leases...................................................51
5.5.6 Real Estate..............................................51
5.5.7 Operation and Maintenance of Equipment...................51
5.6 Title to Property; Liens........................................51
5.7 Projections and Financial Statements............................52
5.7.1 Financial Statements.....................................52
5.7.2 Projections..............................................52
5.8 Litigation......................................................52
5.9 Defaults in Other Agreements; Consents; Conflicting Agreements..52
5.10 Taxes...........................................................53
5.11 Compliance with Applicable Laws.................................53
5.12 Patents, Trademarks, Franchises, Agreements.....................53
5.13 FCC Matters.....................................................53
5.14 Environmental Matters...........................................54
5.15 Application of Certain Laws and Regulations.....................54
5.15.1 Investment Company Act...................................54
5.15.2 Holding Company Act......................................54
5.15.3 Foreign or Enemy Status..................................54
5.15.4 Regulations as to Borrowing..............................54
<PAGE>
5.16 Margin Regulations..............................................55
5.17 Other Indebtedness..............................................55
5.18 No Misrepresentation............................................55
5.19 Employee Benefit Plans..........................................55
5.19.1 No Other Plans...........................................55
5.19.2 ERISA and Code Compliance and Liability..................55
5.19.3 Funding..................................................55
5.19.4 Prohibited Transactions and Payments.....................56
5.19.5 No Termination Event.....................................56
5.19.6 ERISA Litigation.........................................56
5.20 Employee Matters................................................56
5.20.1 Collective Bargaining Agreements; Grievances.............56
5.20.2 Claims Relating to Employment............................56
5.21 Burdensome Obligations..........................................57
5.22 Broker Fees.....................................................57
5.23 Pagers in Service...............................................57
5.24 Insurance.......................................................57
5.25 Representations and Warranties in Certain Documents.............57
5.26 Year 2000 Problem...............................................57
ARTICLE VI AFFIRMATIVE COVENAN..............................................58
6.1 Legal Existence; Good Standing..................................58
6.2 Inspection......................................................58
6.3 Financial Statements and Other Information......................58
6.3.1 Monthly Statements.......................................58
6.3.2 Quarterly Statements and Agings..........................58
6.3.3 Annual Statements........................................59
6.3.4 Officer's Certificates...................................59
6.3.5 Accountants' Certificate.................................59
6.3.6 Audit Reports............................................60
6.3.7 Business Plans...........................................60
6.3.8 Notice of Defaults; Loss.................................60
6.3.9 Notice of Suits; Adverse Events..........................60
6.3.10 Reports to Shareholders, Creditors and Governmental
Bodies...................................................60
6.3.11 ERISA Notices and Requests...............................61
6.3.12 Other Information........................................62
6.4 Reports to Governmental Bodies and Other Persons................62
6.5 Maintenance of Licenses and Other Agreements....................62
6.6 Insurance.......................................................62
6.6.1 Maintenance of Insurance.................................62
6.6.2 Claims and Proceeds......................................63
6.7 Future Leases...................................................63
6.8 Future Acquisitions of Real Property............................63
6.9 Environmental Matters...........................................64
6.9.1 Compliance...............................................64
<PAGE>
6.9.2 Certification............................................64
6.10 Compliance with Laws............................................64
6.11 Taxes and Claims................................................64
6.12 Maintenance of Properties.......................................64
6.13 Governmental Approvals..........................................65
6.14 Payment of Indebtedness.........................................65
6.15 Year 2000 Problem...............................................65
6.16 Bell Atlantic Interest Account..................................65
ARTICLE VII NEGATIVE COVENANTS..............................................65
7.1 Borrowing.......................................................65
7.2 Liens...........................................................65
7.3 Merger and Acquisition..........................................66
7.4 Contingent Liabilities..........................................66
7.5 Distributions...................................................66
7.6 Capital Expenditures............................................66
7.7 Payments of Indebtedness for Borrowed Money.....................66
7.7.1 Permitted Senior Indebtedness............................67
7.7.2 Motorola Indebtedness....................................67
7.7.3 Bell Atlantic Seller Indebtedness........................67
7.7.4 Letters of Credit Indebtedness...........................67
7.7.5 Deferred Payment Indebtedness............................68
7.8 Obligations as Lessee Under Operating Leases....................68
7.9 Investments, Loans..............................................68
7.10 Fundamental Business Changes....................................69
7.11 Facility Sites..................................................69
7.12 Sale or Transfer of Assets......................................69
7.13 Amendment of Certain Agreements.................................69
7.14 Acquisition of Additional Properties............................69
7.15 Equity Sales....................................................69
7.16 Transactions with Affiliates....................................70
7.17 Compliance with ERISA...........................................70
7.18 Senior Leverage Ratio...........................................71
7.19 Total Leverage Ratio............................................71
7.20 Senior Debt Service Coverage Ratio..............................72
7.21 Certain Agreements..............................................72
ARTICLE VIII DEFAULT AND REMEDIES...........................................73
8.1 Events of Default...............................................73
8.1.1 Default in Payment.......................................73
8.1.2 Breach of Covenants......................................73
8.1.3 Breach of Warranty.......................................73
8.1.4 Default Under Other Indebtedness for Borrowed Money......73
8.1.5 Bankruptcy...............................................73
8.1.6 Judgments................................................74
<PAGE>
8.1.7 Impairment of Licenses; Other Agreements.................74
8.1.8 Collateral...............................................74
8.1.9 Interruption of Operations...............................75
8.1.10 Plans....................................................75
8.1.11 Change in Control........................................75
8.2 Acceleration of Borrower's Obligations..........................76
8.3 Remedies on Default.............................................76
8.3.1 Enforcement of Security Interests........................76
8.3.2 Other Remedies...........................................76
8.4 Application of Funds............................................76
8.4.1 Expenses.................................................76
8.4.2 Borrower's Obligations...................................76
8.4.3 Surplus..................................................77
8.5 Performance of Borrower's Obligations...........................77
ARTICLE IX ADDITIONAL LENDERS AND PARTICIPANTS; THE AGENT...................77
9.1 Assignment to Other Lenders.....................................77
9.1.1 Assignment...............................................77
9.1.2 Effect of Loan Assignment................................77
9.1.3 Register.................................................78
9.1.4 Substitution of Notes....................................78
9.1.5 Inspections...............................................78
9.2 Participations..................................................78
9.3 Set Off and Sharing of Payments.................................78
9.4 Lenders' Decisions..............................................79
9.5 Appointment of Agent............................................79
9.6 Delegation of Duties............................................79
9.7 Nature of Duties; Independent Credit Investigation..............79
9.8 Instructions from Lenders.......................................80
9.9 Exculpatory Provisions..........................................80
9.10 Reimbursement and Indemnification by Lenders of Agent...........80
9.11 Reliance by Agent...............................................81
9.12 Notice of Default...............................................81
9.13 Release of Collateral...........................................81
9.14 Lenders in Their Individual Capacities..........................81
9.15 Holders of Notes................................................81
9.16 Successor Agent.................................................81
9.17 Delivery of Information.........................................82
9.18 Beneficiaries...................................................82
ARTICLE X CLOSING...........................................................82
ARTICLE XI EXPENSES AND INDEMNITY...........................................82
11.1 Attorney's Fees and Other Fees and Expenses.....................82
11.1.1 Fees and Expenses for Preparation of Loan Instruments....83
<PAGE>
11.1.2 Fees and Expenses in Enforcement of Rights or Defense
of Loan Instrument ......................................83
11.2 Indemnity.......................................................83
11.2.1 Brokerage Fees...........................................83
11.2.2 General..................................................83
11.2.3 Operation of Collateral; Joint Venturers.................84
11.2.4 Environmental Indemnity..................................84
ARTICLE XII MISCELLANEOUS...................................................84
12.1 Notices.........................................................84
12.2 Survival of Loan Agreement; Indemnities.........................85
12.3 Further Assurance...............................................86
12.4 Taxes and Fees..................................................86
12.5 Severability....................................................86
12.6 Waiver..........................................................86
12.7 Modification of Loan Instruments................................86
12.8 Captions........................................................86
12.9 Successors and Assigns..........................................86
12.10 Remedies Cumulative.............................................87
12.11 Entire Agreement; Conflict......................................87
12.12 APPLICABLE LAW..................................................87
12.13 JURISDICTION AND VENUE..........................................87
12.14 WAIVER OF RIGHT TO JURY TRIAL...................................88
12.15 TIME OF ESSENCE.................................................88
12.16 Estoppel Certificate............................................88
12.17 Consequential Damages...........................................89
12.18 Counterparts....................................................89
12.19 No Fiduciary Relationship.......................................89
12.20 Confidentiality.................................................89
12.21 Governmental Approval...........................................89
<PAGE>
List of Exhibits to Loan Agreement
Schedule I - Commitments
Exhibit 1.1(A) - Compliance Certificate
Exhibit 1.1(B) - Environmental Compliance Certificate
Exhibit 1.1(C) - LIBOR Election Notice
Exhibit 1.1(D) - Pager Certificate
Exhibit 1.1(E) - Notice of Borrowing
Exhibit 1.1(F) - Other Permitted Liens
Exhibit 5.3.1 - Borrower Capital Stock
Exhibit 5.3.2 - Restrictions
Exhibit 5.5.2 - Licenses
Exhibit 5.5.3 - Operating Agreements
Exhibit 5.5.4 - Facility Sites
Exhibit 5.5.5 - Leases
Exhibit 5.5.5 - Leases
Exhibit 5.5.6 - Real Estate
Exhibit 5.7.2 - Projections
Exhibit 5.8 - Litigation
Exhibit 5.19.1 - Employee Benefit Plans
Exhibit 5.20.1 - Collective Bargaining Agreements; Grievances
Exhibit 6.6.1 - Insurance Letter Agreement
XIV
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LOAN AGREEMENT
This LOAN AGREEMENT, dated as of December 31, 1998, is between AQUIS
COMMUNICATIONS, INC., a Delaware corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), in its individual capacity and
as agent for all Lenders (this and all other capitalized terms used herein are
defined in Section 1.1 below).
PRELIMINARY STATEMENT:
Borrower desires to borrow up to $30,000,000 from Lenders, which funds
shall be used (i) to consummate the Bell Atlantic Acquisition, (ii) to make the
Paging Partners Escrow Deposit, (iii) to make payments permitted hereunder on
the Bell Atlantic Seller Indebtedness, the Motorola Indebtedness, the Letters of
Credit Indebtedness and the Deferred Payment Indebtedness, (iv) for Subsequent
Acquisitions, (v) to pay transaction costs and (vi) for working capital. Lenders
have agreed to make the Loan upon the terms and subject to the conditions herein
set forth.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS AND DETERMINATIONS
1.1 Definitions. As used in this Loan Agreement and in the other Loan
Instruments, unless otherwise expressly indicated herein or therein, the
following terms shall have the following meanings (such meanings to be
applicable equally to both the singular and plural forms of the terms defined):
Accountants: PriceWaterhouseCoopers or any other independent
certified public accounting firm selected by Borrower and reasonably
satisfactory to Lenders.
Accounting Changes: as defined in Section 1.3.
Accounts Decrease: for any period, the excess of the Eligible
Accounts at the beginning of such period over the Eligible Accounts at the
end of such period.
Accounts Increase: for any period, the excess of Eligible Accounts
at the end of such period over the Eligible Accounts at the beginning of
such period.
Acquisition Portion: a portion of the Loan in an amount not to
exceed the sum of (i) $8,000,000 plus (ii) if the Bell Atlantic Seller
Note Payment Date occurs on or before June 30, 2000, the amount of the
Subsequent Portion as of the Bell Atlantic Seller Note Payment
<PAGE>
Date in excess of the proceeds of the Subsequent Portion actually used to
make the Bell Atlantic Seller Note Payment and to pay the Subsequent
Portion Loan Fee.
Acquisition Portion Availability Period: the period (i) commencing
on the date which is 10 days after Agent receives the financial statements
required under subsection 6.3.1 for the period ending June 30, 1999 and
(ii) ending on June 30, 2000.
Acquisition Portion Loan Fees: the fees payable by Borrower to
Lenders pursuant to subsection 2.7.3.
ADA: the Americans with Disabilities Act of 1990, as amended, any
successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
Additional Principal Payment: the product of (i) 0.25 multiplied by
(ii) the portion of the Base Principal Payment financed with the proceeds
of Indebtedness for Borrowed Money.
Additional Sums: as defined in subsection 2.2.3.
Adiletta Loan: the loan in the original principal amount of $240,000
made by Borrower to John Adiletta.
Adiletta Note: the promissory note dated December, 1998 in the
original principal amount of $240,000 made by John Adiletta in favor of
Borrower.
Advance: an advance of the Acquisition Portion.
Affiliate: any Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common
control with another Person. The term "control" means possession, direct
or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities or equity interests, by contract or otherwise. For the
purposes hereof any Person which owns or controls, directly or indirectly,
30% or more of the securities or equity interests, as applicable, whether
voting or non-voting, of any other Person shall be deemed to "control"
such Person.
Agent: FINOVA, as agent for all Lenders.
Applicable Margin: shall have the meaning assigned to that term in
subsection 2.2.1.
Asset Acquisition: an acquisition of the assets of a Paging
Business, including the related FCC Licenses.
Asset Sale: the sale of all or any Property of Borrower not
permitted pursuant to clauses (i) and (ii) of Section 7.12.
<PAGE>
Asset Sale Proceeds: the gross proceeds payable to Borrower in
connection with any Asset Sale, less (i) all reasonable, customary and
documented costs and expenses of such Asset Sale and (ii) all taxes
payable by Borrower as a result of the consummation of such Asset Sale .
Assignee: any Person (i) who is a financial institution organized
under the laws of the United States of America or any State thereof or
maintains a domestic lending office in the United States of America and
(ii) to which a Loan Assignment is made in compliance with the provisions
of subsection 9.1.1.
Assignment and Acceptance: an assignment and acceptance agreement to
be executed in connection with each Loan Assignment, in form and substance
reasonably satisfactory to Agent.
Assignment of Bell Atlantic Acquisition Instruments: a collateral
assignment of Borrower's rights under the Bell Atlantic Acquisition
Instruments executed by Borrower in favor of Agent and consented to by the
Bell Atlantic Sellers.
Assignment of Leases: a collateral assignment of leases executed by
Borrower in favor of Agent.
Assignment of Paging Partners Merger Instruments: a collateral
assignment of Borrower's rights under the Paging Partners Merger
Instruments executed by Borrower in favor of Agent and consented to by
Paging Partners.
Assignment of Subsequent Acquisition Instruments: a collateral
assignment of Borrower's rights under the applicable Subsequent
Acquisition Instruments executed by Borrower in favor of Agent and
consented to by the Subsequent Acquisition Seller.
Available Excess Cash Flow: for any year, the lesser of (a) the
Excess Cash Flow for such year and (b) the amount by which the Cash
Equivalents exceed $1,000,000 as of the end of such year.
Bankruptcy Code: the United States Bankruptcy Code and any successor
statute thereto, and the rules and regulations issued thereunder, as in
effect from time to time.
BAPCO: Bell Atlantic Paging, Inc., a Delaware corporation.
BAP Investors: collectively, all holders of the Borrower Capital
Stock prior to the consummation of the Paging Partners Merger.
BAP Investors Pledge Agreement: a pledge agreement executed by BAP
Investors in favor of Agent covering the Borrower Capital Stock.
3
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Base Principal Payment: the $1,200,000 principal payment due on
March 31, 2000 pursuant to the Bell Atlantic Seller Note.
Base Rate: the per annum rate of interest announced or published
publicly from time to time by Citibank, N.A. in New York, New York as its
corporate base (or equivalent) rate of interest, which rate shall change
automatically without notice and simultaneously with each change in such
corporate base rate. The Base Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer by Citibank, N.A. in New York, New York.
Base Rate Portion: the Principal Balance other than the portion
thereof consisting of LIBOR Loans.
Basic Financial Statements: as defined in subsection 6.3.3.
Bell Atlantic Acquisition: the acquisition by Borrower from the Bell
Atlantic Sellers of the Bell Atlantic System and the other Property to be
sold to Borrower pursuant to the terms and conditions of the Bell Atlantic
Acquisition Instruments.
Bell Atlantic Acquisition Instruments: the Asset Purchase Agreement
dated as of July 2, 1998 among the Bell Atlantic Sellers and Borrower, and
all documents, instruments and agreements executed and delivered in
connection therewith.
Bell Atlantic Interest Account: a segregated deposit account
maintained by Borrower at a Qualified Depository.
Bell Atlantic Reseller Agreement: a reseller agreement between
Borrower and Bell Atlantic NYNEX Mobile.
Bell Atlantic Seller Note: the promissory note dated the Closing
Date in the original principal amount of $4,150,000 made by Borrower
payable to BAPCO.
Bell Atlantic Seller Note Payment: the Required Bell Atlantic
Principal Payment, together with all accrued and unpaid interest on the
Bell Atlantic Seller Indebtedness through the date the Required Bell
Atlantic Principal Payment is made, to the extent such accrued and unpaid
interest is then due and payable.
Bell Atlantic Seller Note Payment Date: the date the Bell Atlantic
Seller Note Payment has been paid in full.
Bell Atlantic Seller Indebtedness: the Indebtedness for Borrowed
Money owed by Borrower to BAPCO pursuant to the Bell Atlantic Seller
Indebtedness Instruments, in an original principal amount not to exceed
$4,150,000.
4
<PAGE>
Bell Atlantic Seller Indebtedness Instruments: the Bell Atlantic
Seller Note and all other documents, instruments and agreements
evidencing, governing the terms of repayment of or securing the repayment
of the Bell Atlantic Seller Indebtedness executed or delivered in
connection therewith.
Bell Atlantic Seller Indebtedness Liens: the Liens granted by
Borrower to BAPCO to secure the Bell Atlantic Seller Indebtedness.
Bell Atlantic Sellers: collectively, Bell Atlantic - Delaware, Inc.,
a Delaware corporation, Bell Atlantic - Maryland, Inc., a Maryland
corporation, Bell Atlantic - New Jersey, Inc., a New Jersey corporation,
Bell Atlantic - Pennsylvania, Inc., a Pennsylvania corporation, Bell
Atlantic - Virginia, Inc., a Virginia corporation, Bell Atlantic -
Washington, D.C., Inc., a New York corporation, Bell Atlantic - West
Virginia, Inc., a West Virginia corporation, and BAPCO.
Bell Atlantic Seller Subordination Agreement: a subordination
agreement among BAPCO, Agent and Borrower pertaining to the Bell Atlantic
Seller Indebtedness.
Bell Atlantic System: the portion of the System acquired by Borrower
as a result of the Bell Atlantic Acquisition.
Borrower: has the meaning assigned to that term in the Preamble to
this Loan Agreement.
Borrower Capital Stock: all of the issued and outstanding capital
stock of and other equity interests in Borrower and all warrants, options
and other rights to purchase capital stock of and other equity interests
in Borrower.
Borrower's Obligations: (i) any and all Indebtedness due or to
become due, now existing or hereafter arising, of Borrower to Lenders
and/or Agent pursuant to the terms of this Loan Agreement or any other
Loan Instrument, including, without limitation, the Loan Fees, and (ii)
the performance of the covenants of Borrower contained in the Loan
Instruments.
Business Day: (i) except as provided in clause (ii), any day other
than a Saturday, Sunday or other day on which banks in Phoenix, Arizona or
Parsippany, New Jersey are required to close, and (ii) with respect to all
notices, determinations, fundings and payments in connection with a LIBOR
Loan, any day which is a Business Day described in clause (i) and which is
also a day for trading among banks in Dollar deposits in the London
interbank eurodollar market.
Business Insurance: such property, casualty, liability, business
interruption and other insurance as Agent from time to time requires
Borrower to maintain.
5
<PAGE>
Capital Expenditures: payments that are made or liabilities that are
incurred by a Person for the lease, purchase, improvement, construction or
use of any Property, the value or cost of which under GAAP is required to
be capitalized and appears on such Person's balance sheet in the category
of property, plant or equipment, without regard to the manner in which
such payments or the instruments pursuant to which they are made are
characterized, and shall include, without limitation, payments for or
liabilities incurred with respect to the installment purchase of Property
and payments under Capitalized Leases. Except for the purpose of
determining Excess Cash Flow, a Capital Expenditure shall be deemed to be
made as of the time the Property which is the subject thereof is put into
service.
Capitalized Lease: any lease of Property, the obligations for the
rental of which are required to be capitalized in accordance with GAAP.
Cash Equivalents: at any date, the remainder of (i) the aggregate of
Borrower's (A) cash on hand or in any bank or trust company, and checks on
hand and in transit, (B) monies on deposit in any money market account,
and (C) treasury bills, certificates of deposit, commercial paper and
readily marketable securities at current market value having, in each
instance, a maturity of not more than 90 days, minus (ii) the amount
required under Section 6.16 to be maintained by Borrower on deposit in the
Bell Atlantic Interest Account as of such date.
Closing: the disbursement of the Initial Portion.
Closing Certificate: a closing certificate executed by Borrower to
Agent.
Closing Date: the date upon which the Closing occurs.
Closing Loan Fee: the fee payable by Borrower to Lenders pursuant to
subsection 2.7.1.
Code: the Internal Revenue Code of 1986, as amended, any successor
statute thereto, and the rules and regulations issued thereunder, as in
effect from time to time.
Collateral: (i) all existing and after-acquired Property of
Borrower, including without limitation all existing and after-acquired
accounts, equipment, inventory and general intangibles, (ii) the Borrower
Capital Stock and (iii) all proceeds of the foregoing.
Commitment: shall mean, as to any Lender at any time, the amount
initially set forth opposite its name in the column labeled "Commitment"
on Schedule I, as adjusted from time to time to reflect any Assignment and
Acceptances.
Communications Act: the Communications Act of 1934 as amended, any
successor statute thereto, and the rules, regulations and legally binding
policies of the FCC promulgated thereunder, as amended and in effect from
time to time.
6
<PAGE>
Compliance Certificate: a compliance certificate executed by
Borrower in the form of Exhibit 1.1(A) attached hereto.
Deerfield Partners: Deerfield Partners, LLC, a Delaware limited
liability company.
Deerfield Partners Note: the promissory note dated January 4, 1999
in the original principal amount of $150,000 made by Borrower in favor of
Deerfield Partners providing for interest on the outstanding principal
balance thereof at 15% per annum and a fee payable to Deerfield Partners
in the amount of $15,000.
Default Rate: with respect to (i) the Base Rate Portion and all
other Borrower's Obligations other than LIBOR Loans, a per annum rate
equal to the Base Rate in effect from time to time plus the Applicable
Margin plus 2.0% per annum and (ii) each LIBOR Loan, a per annum rate
equal to the LIBOR Rate applicable thereto plus the Applicable Margin plus
2.0% per annum.
Default Rate Period: a period of time commencing on the date that an
Event of Default has occurred and ending on the date that such Event of
Default is cured or waived.
Deferred Payment Parties: collectively, PCS Management, Deerfield
Partners and Select Capital.
Deferred Payment Indebtedness Instruments: the PCS Management Note,
the Deerfield Partners Note and the Select Capital Note.
Deferred Payment Indebtedness: all Indebtedness for Borrowed Money
owed by Borrower to the Deferred Payment Parties pursuant to the Deferred
Payment Indebtedness Instruments.
Deferred Payment Parties Subordination Agreement: a subordination
agreement among the Deferred Payment Parties, Agent, BAPCO and Borrower
pertaining to the Deferred Payment Indebtedness.
Dollars: lawful currency of the United States.
Eligible Accounts: at any given time, the aggregate of the face
amount of the accounts receivable of Borrower not over 60 days past due,
net of applicable reserves with respect to such accounts and Trade Out
Transactions.
Employee Benefit Plan: any employee benefit plan within the meaning
of Section 3(3) of ERISA which (i) is maintained for employees of Borrower
or any ERISA Affiliate or (ii) has at any time within the preceding six
years been maintained for the employees of Borrower or any current or
former ERISA Affiliate.
7
<PAGE>
Engineer: an engineer selected by Borrower and acceptable to Agent.
Environmental Audit: (i) a Phase I audit report with respect to a
parcel of real estate and such other studies and reports as Agent deems
necessary after review of the results of such Phase I audit, including, if
required by Agent, soil and ground water tests, each such report and study
to be in form and content and issued by Persons acceptable to Agent and
(ii) a letter from each Person issuing each such report or study entitling
Lenders to rely thereon.
Environmental Certificate: an environmental certificate executed by
Borrower to Agent.
Environmental Compliance Certificate: an environmental compliance
certificate in the form of Exhibit 1.1(B).
Environmental Laws: any and all federal, state and local laws that
relate to or impose liability or standards of conduct concerning public or
occupational health and safety or protection of the environment, as now or
hereafter in effect and as have been or hereafter may be amended or
reauthorized, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C ss.9601
et seq.), the Hazardous Materials Transportation Act (42 U.S.C. ss.1802 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss.6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss.1251 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.), the
Clean Air Act (42 U.S.C. ss.7901 et seq.), the National Environmental
Policy Act (42 U.S.C. ss.4231, et seq.), the Refuse Act (33 U.S.C. ss.407,
et seq.), the Safe Drinking Water Act (42 U.S.C. ss.300(f) et seq.), the
Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.), and all
rules, regulations, codes, ordinances and guidance documents promulgated
or published thereunder, and the provisions of any licenses, permits,
orders and decrees issued pursuant to any of the foregoing.
Equity Acquisition: an acquisition of the capital stock or other
equity interest of a Person or Persons which owns a Paging Business and
the related FCC Licenses.
Equity Sale: the issuance or sale by Borrower of any equity
securities in Borrower.
Equity Sale Proceeds: the gross proceeds payable to Borrower in
connection with any Equity Sale, less all reasonable, customary and
documented costs and expenses of such Equity Sale.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
issued thereunder, as in effect from time to time.
8
<PAGE>
ERISA Affiliate: any Person who is a member of a group which is
under common control with Borrower, who together with Borrower is treated
as a single employer within the meaning of Section 414(b), (c) and (m) of
the Code.
Eurocurrency Reserve Requirements: for any day as applied to a LIBOR
Loan, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System of the United States or other Governmental Body
having jurisdiction with respect thereto) prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation
D of such Board) maintained by a member bank of the Federal Reserve
System.
Event of Default: any of the Events of Default set forth in Section
8.1.
Excess Cash Flow: for any period, (i) the Operating Cash Flow for
such period, (ii) plus, the Accounts Decrease, if any, for such period and
(iii) minus, the sum of the following for such period: (A) Total Debt
Service actually paid or accrued during such period with respect to
Indebtedness for Borrowed Money of Borrower permitted hereunder, (B)
amounts actually paid by Borrower with respect to Capital Expenditures for
such period permitted pursuant to Section 7.6, whether or not such Capital
Expenditures were incurred during such period, but excluding any such
amounts paid from the proceeds of Indebtedness for Borrowed Money and (C)
the Accounts Increase, if any, for such period.
Excess Interest: as defined in subsection 2.2.3.
FCC: the Federal Communications Commission or any Governmental Body
succeeding to its functions.
FINOVA: has the meaning assigned to that term in the Preamble to
this Loan Agreement.
Funding Date: as the context requires, the date of disbursement of
the Initial Portion, the Merger Portion, the Subsequent Portion or any
Advance, or, for purposes of determining the satisfaction of the
conditions set forth in Sections 4.1 and 4.3, the date the Paging Partners
Merger is consummated.
GAAP: generally accepted accounting principles as in effect from
time to time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or any
successor thereto.
Good Funds: United States Dollars available in federal funds to
FINOVA at or before 12:00 noon, Phoenix time, on a Business Day.
9
<PAGE>
Governmental Body: any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Hazardous Materials: any hazardous, toxic, dangerous or other waste,
substance or material defined as such in, regulated by or for purposes of
any Environmental Law.
Incipient Default: any event or condition which, with the giving of
notice or the lapse of time, or both, would become an Event of Default.
Indebtedness: all liabilities, obligations and reserves, contingent
or otherwise, which, in accordance with GAAP, would be reflected as a
liability on a balance sheet or would be required to be disclosed in a
financial statement, including, without duplication: (i) Indebtedness for
Borrowed Money, (ii) obligations secured by any Lien upon Property, (iii)
guaranties, letters of credit and other contingent obligations, and (iv)
liabilities in respect of unfunded vested benefits under any Pension Plan
or in respect of withdrawal liabilities incurred under ERISA by Borrower
or any ERISA Affiliate to any Multiemployer Plan.
Indebtedness for Borrowed Money: without duplication, all
Indebtedness (i) in respect of money borrowed, (ii) evidenced by a note,
debenture or other like written obligation to pay money (including,
without limitation, all of Borrower's Obligations and Permitted Senior
Indebtedness), (iii) in respect of rent or hire of Property under
Capitalized Leases or for the deferred purchase price of Property, (iv) in
respect of obligations under conditional sales or other title retention
agreements, and (v) all guaranties of any or all of the foregoing.
Indebtedness to be Refinanced: all Indebtedness for Borrowed Money
not permitted to exist hereunder which would be assumed or owed by
Borrower upon the consummation of the Bell Atlantic Acquisition, the
Paging Partners Merger or any Subsequent Acquisition.
Indemnification Proceeds: the gross proceeds payable to Borrower
resulting from the assertion of a claim by Borrower arising from a breach
or default by another party under the Bell Atlantic Acquisition
Instruments, the Paging Partners Merger Instruments or any Subsequent
Acquisition Instruments, less all reasonable, customary and documented
costs and expenses of the assertion and prosecution of such claim,
including, without limitation, the expenses and reasonable fees of counsel
retained by Borrower.
Initial Loan Instruments:
(i) Loan Agreement;
(ii) Note;
(iii) Bell Atlantic Seller Subordination Agreement;
10
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(iv) Letters of Credit Account Parties Subordination
Agreement;
(v) Deferred Payment Parties Subordination Agreement;
(vi) Security Agreement;
(vii) BAP Investors Pledge Agreement;
(viii) Assignment of Leases;
(ix) Assignment of Bell Atlantic Acquisition Instruments;
(x) Closing Certificate;
(xi) Solvency Certificate;
(xii) Environmental Certificate;
(xiii) Notice of Borrowing with respect to the Initial
Portion;
(xiv) Uniform Commercial Code financing statements required by
Agent; and
(xv) such other instruments and documents as Agent and
Lenders reasonably may require in connection with the
transactions contemplated by this Loan Agreement.
Initial Portion: a portion of the Loan in an amount up to
$20,000,000.
Instruments: collectively, the Loan Instruments, the Bell Atlantic
Acquisition Instruments, the Bell Atlantic Seller Indebtedness
Instruments, the Bell Atlantic Reseller Agreement, the Letters of Credit
Indebtedness Instruments, the Deferred Payment Indebtedness Instruments,
the Paging Partners Merger Instruments, the Motorola Indebtedness
Instruments and the Subsequent Acquisition Instruments.
Interest Period: a period (i) commencing (A) on the applicable
Funding Date, if Borrower prior thereto has elected pursuant to subsection
2.3.1 to have all or a portion of the portion of the Loan to be disbursed
on such date bear interest from such date at a LIBOR Rate, (B) with
respect to the conversion of all or a portion of the Base Rate Portion to
a LIBOR Loan, on the Business Day specified by Borrower in the applicable
LIBOR Election Notice and (C) with respect to the continuation as a LIBOR
Loan of all or a portion of a then existing LIBOR Loan after the
expiration of the Interest Period applicable to such existing LIBOR Loan,
on the last day of the Interest Period applicable to such existing LIBOR
Loan,
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and (ii) ending 30, 60 or 90 days thereafter, as selected by Borrower in
its LIBOR Election Notice; provided, however:
(1) if any Interest Period otherwise would end on a day that
is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, unless the result of such extension would
be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Business Day; and
(2) any Interest Period that otherwise would extend beyond the
Maturity Date shall end on the Maturity Date.
Interest Rate Determination Date: the date for determining a LIBOR
Rate, which date shall be one Business Day prior to the date of
commencement of the applicable Interest Period.
Landlord: a lessor under a Lease.
Landlord Consent and Waiver: a landlord consent and waiver in form
and substance satisfactory to Agent.
Lease: any lease of real estate under which Borrower is the lessee.
Leasehold Property: any real estate which is the subject of a Lease.
Lender Addition Agreement: an agreement executed by a Lender and an
Assignee in connection with a Loan Assignment.
Lenders: FINOVA and each Assignee.
Lenders' Decisions: all determinations to be made by Lenders
pursuant to the terms of the Loan Instruments, including, without
limitation, any amendment or modification of any of the Loan Instruments,
determinations with respect to the declaration of Events of Default and
acceleration of Borrower's Obligations or any other obligation arising
under the Loan Instruments, waivers of affirmative or negative covenants
or other provisions of the Loan Instruments, advancement of funds pursuant
to any of the Loan Instruments or the exercise of any rights or remedies
granted to Lenders or Agent pursuant to the terms of any of the Loan
Instruments.
Lenders' Ratable Share: as of any date of determination, the
proportion that the Principal Balance then outstanding bears to the sum of
(i) the principal balance of the Motorola Indebtedness then outstanding
plus (ii) the Principal Balance then outstanding.
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Letters of Credit: unconditional, irrevocable stand-by letters of
credit issued by a Qualified Depository for the benefit of Agent having an
expiry date not earlier than June 30, 1999, in an aggregate face amount
equal to the amount of the Initial Portion disbursed on the Closing Date
in excess of $18,000,000 and otherwise in form and substance satisfactory
to Agent.
Letters of Credit Account Parties: collectively, each Person for
whose account any of the Letters of Credit is issued.
Letters of Credit Account Parties Agreement: collectively, the
Letter of Credit Account Party Agreements, each dated the Closing Date,
between Borrower and each Letter of Credit Account Party pertaining to the
Letters of Credit.
Letters of Credit Account Parties Payment: an amount equal to the
sum of (i) 10% of the aggregate face amount of the Letters of Credit as of
the Closing Date, plus (ii) 10% of the aggregate amount drawn on the
Letters of Credit as of the Letters of Credit Account Parties Payment Date
plus (iii) an amount equal to the product of (A) the aggregate face amount
of the Letters of Credit as of the Closing Date multiplied by (B) 15.0%
per annum multiplied by (C) a fraction, the (x) numerator of which is the
number days elapsed from the Closing Date through the Letters of Credit
Account Parties Payment Date and (y) denominator of which is 365.
Letters of Credit Account Parties Payment Date: the date which is
the earlier of (i) the date any Letter of Credit is fully drawn and (ii)
the date the Letters of Credit are released pursuant to subsection 3.2.3.
Letters of Credit Account Parties Subordination Agreement: a
subordination agreement among the Letters of Credit Account Parties,
Agent, BAPCO and Borrower pertaining to the Letters of Credit
Indebtedness.
Letters of Credit Indebtedness: all Indebtedness for Borrowed Money
owed by Borrower to the Letters of Credit Account Parties arising as a
result of any draw on the Letters of Credit.
Letters of Credit Indebtedness Instruments: the Letters of Credit
Account Party Agreement, the Letters of Credit Indebtedness Note and all
other documents, instruments and agreements evidencing, governing the
terms of repayment of or securing the repayment of the Letters of Credit
Indebtedness executed or delivered in connection therewith.
Letters of Credit Indebtedness Note: collectively, the promissory
notes, each dated the Closing Date, made by Borrower in favor of the
Letters of Credit Account Parties to evidence the Letters of Credit
Indebtedness.
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LIBOR Election Notice: a notice by Borrower to Agent to have a
portion of the Principal Balance bear interest at a LIBOR Rate, in the
form of Exhibit 1.1(C).
LIBOR Loan: each portion of the Principal Balance which bears
interest determined by reference to a LIBOR Rate.
LIBOR Rate: means for each Interest Period a rate of interest equal
to (i) the rate per annum determined by Agent (rounded upwards to the
nearest 1/100th of 1%) at which deposits of Dollars approximately equal in
amount to the amount of the LIBOR Loan specified in the applicable LIBOR
Election Notice are offered to Agent by prime banks in the London
interbank eurodollar market at approximately 11:00 a.m., London time, on
the applicable Interest Rate Determination Date for the relevant Interest
Period, divided by (ii) 1.00 minus the Eurocurrency Reserve Requirements
in effect on the applicable Interest Rate Determination Date. The LIBOR
Rate shall be adjusted with respect to any LIBOR Loan outstanding on the
effective date of any change in the Eurocurrency Reserve Requirements as
of such effective date. Agent shall give prompt notice to Borrower of the
LIBOR Rate as determined or adjusted in accordance herewith, which
determination shall be conclusive absent manifest error.
Licenses: all licenses, permits, consents, approvals and authority
issued by any Governmental Body in connection with the operation of
Borrower's Paging Business, including without limitation, all FCC
Licenses.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or
security interest of any kind, or the interest of a vendor or lessor under
any conditional sale agreement, Capitalized Lease or other title retention
agreement.
Loan: the term loan to be made by Lenders to Borrower in the maximum
principal amount of $30,000,000 pursuant to Section 2.1.
Loan Agreement: this Loan Agreement and any amendments or
supplements hereto.
Loan Assignment: the assignment by a Lender of (i) any portion of
such Lender's interest in Borrower's Obligations and (ii) any of such
Lender's other rights under any of the Loan Instruments.
Loan Fees: the Closing Loan Fee, the Subsequent Portion Loan Fee and
the Acquisition Portion Loan Fees.
Loan Instruments: collectively, the Initial Loan Instruments, the
Paging Partners Merger Additional Loan Instruments and the Subsequent
Acquisition Additional Loan Instruments.
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Loan Year: a period of time from the Closing Date or any anniversary
of the Closing Date to the immediately succeeding anniversary of the
Closing Date.
Management Holders: John X. Adiletta, Patrick M. Egan, John B.
Freiling, R. A. Ortenzio or any Person over which any of the foregoing
individuals, directly or indirectly, exercises voting control, including,
without limitation, the right to direct the management and policies of
such Person and the right to elect a majority of the Board of Directors or
similar governing authority for such Person.
Material Adverse Effect: (i) a material adverse effect upon the
business, operations, Property, profits or financial condition of Borrower
or upon the validity, enforceability or priority of the Security Interests
or (ii) a material impairment of the ability of Borrower to perform its
obligations under any Loan Instrument to which it is a party or of Agent
or any Lender to enforce or collect any of Borrower's Obligations.
Maturity Date: the earlier of (i) December 31, 2003 or (ii) or the
date on which Borrower's Obligations are accelerated pursuant to this Loan
Agreement.
Maximum Rate: as defined in subsection 2.2.3.
Merger Portion: a portion of the Loan in an amount equal to
$500,000.
Mortgage: a mortgage or deed of trust executed by Borrower in favor
of Agent encumbering each parcel of Real Estate owned by Borrower, in each
case in form and substance satisfactory to Agent.
Motorola: Motorola Inc.
Motorola Indebtedness: the Indebtedness for Borrowed Money owed by
Borrower to Motorola pursuant to the Motorola Indebtedness Instruments, in
a principal amount not to exceed $1,300,000.
Motorola Indebtedness Instruments: all documents, instruments and
agreement executed and delivered to or by Motorola evidencing, governing
the terms of repayment of or securing the Motorola Indebtedness.
Motorola Intercreditor Agreement: an intercreditor agreement among
Motorola, Agent and Borrower in form and substance satisfactory to Agent.
Motorola Liens: the Liens granted by Paging Partners to Motorola to
secure the Motorola Indebtedness.
Motorola Ratable Share: as of any date of determination, the
proportion that the principal balance of the Motorola Indebtedness then
outstanding bears to the sum of (i) the
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principal balance of the Motorola Indebtedness then outstanding plus (ii)
the Principal Balance as of such date.
Multiemployer Plan: any multiemployer plan as defined pursuant to
Section 3(37) of ERISA to which Borrower or any ERISA Affiliate makes, or
accrues an obligation to make, contributions, or has made, or been
obligated to make, contributions within the preceding six years.
Net Excess Cash Flow: for any year, the remainder of (i) the
Available Excess Cash Flow for such year minus (ii) the Required Excess
Cash Flow Prepayment for such year.
Net Principal Balance: as of any date of determination, the
Principal Balance as of such date less (i) prior to the Paging Partners
Merger Closing Date, the aggregate undrawn face amount of the Letters of
Credit and (ii) from and after the Paging Partners Merger Closing Date,
zero.
Notice of Borrowing: a notice of borrowing/disbursement request from
Borrower to Agent in the form of Exhibit 1.1(E).
Note: the promissory notes executed by Borrower payable to the order
of each Lender in the amount of such Lender's Commitment, each dated as of
the Closing Date and in form and substance satisfactory to Agent, and any
notes issued in substitution therefor pursuant to subsection 9.1.4.
Obligors: collectively, Borrower and each other Person (other than
Agent) which is a party to any Security Instrument.
Operating Agreement: any material tower or transmitter site lease or
license, office lease, control point lease, equipment lease, reseller
agreement, advertising contract, pager contract, telephone contract, voice
mail contract, maintenance or repair contract, employment agreement,
collective bargaining agreement or other similar agreement or contract
relating to the operation of Borrower's Paging Business.
Operating Cash Flow: for any period, without duplication, the net
income of Borrower for such period:
(i) plus the sum of the following, to the extent deducted in
determining such net income for such period:
(A) losses from sales, exchanges and other dispositions
of Property not in the ordinary course of business;
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(B) interest paid or accrued on Indebtedness, including,
without limitation, interest on Capitalized Leases that is
imputed in accordance with GAAP;
(C) depreciation and amortization of assets during such
period;
(D) income taxes which are accrued, but not paid, during
such period; and
(E) expenses incurred in connection with Trade Out
Transactions;
(ii) minus the sum of the following, to the extent included in
determining such net income for such period:
(A) gains from sales, exchanges and other dispositions
of Property or other extraordinary gains not in the ordinary
course of business;
(B) proceeds of Business Insurance; and
(C) revenue received in connection with Trade Out
Transactions.
Operating Lease: any lease which, under GAAP, is not required to be
capitalized.
Pager: any pager owned, leased or otherwise used by a Person to
receive radio communication access or other services from Borrower.
Pager Certificate: a certificate in the form of Exhibit 1.1(D) with
respect to the number of Pagers in Service executed by Borrower and
delivered pursuant to subsection 6.3.1.
Pagers in Service: Pagers for which Borrower is receiving a monthly
payment, with respect to which no such payment is delinquent by more than
90 days, unless the monthly payments to Borrower are being paid by Persons
such as Fortune 500 companies, Governmental Bodies or not-for-profit
corporations, in which case no such payment is delinquent by more than 180
days.
Paging Business: the business of owning, operating and managing
mobile common carrier paging systems, mobile communications systems,
control terminals and switches, antenna and transmitter sites, or
telephone systems, including, but not limited to, the ownership and
operation by Borrower of the System.
Paging Partners: Paging Partners Corporation, a Delaware
corporation.
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Paging Partners Escrow: the escrow established pursuant to the
Paging Partners Escrow Agreement.
Paging Partners Escrow Deposit: the $250,000 escrow deposit into the
Paging Partners Escrow described in the Paging Partners Escrow Agreement
as the "Post-Closing Deposit."
Paging Partners Escrow Agreement: the Escrow Agreement dated as of
November 6, 1998 among Paging Partners, Paging Partners Merger Sub,
Borrower and Solovay Edlin & Eiseman, P.C., as escrow agent.
Paging Partners Merger: the merger of Paging Partners Merger Sub
with and into Borrower with Borrower as the surviving corporation pursuant
to the terms and conditions of the Paging Partners Merger Instruments.
Paging Partners Merger Closing Date: the date the Paging Partners
Merger is consummated as permitted pursuant to Section 7.3.
Paging Partners Merger Sub: Paging Partners Merger Corporation, a
Delaware corporation.
Paging Partners Merger Agreement: the Agreement and Plan of Merger
dated as of November 6, 1998 by and among Borrower, Paging Partners and
Paging Partners Merger Sub.
Paging Partners Merger Instruments: the Paging Partners Merger
Agreement, the Paging Partners Escrow Agreement and all other documents,
instruments and agreements executed or delivered in connection with the
Paging Partners Merger.
Paging Partners Merger Additional Loan Instruments: collectively,
the following documents to be executed and delivered by Borrower in
connection with the Paging Partners Merger:
(i) the Motorola Intercreditor Agreement, the Paging Partners
Pledge Agreement, the Assignment of Paging Partners Merger
Instruments, a Notice of Borrowing with respect to the disbursement
of the Merger Portion, any amendments to the Loan Instruments and
such UCC Financing Statements and any other mortgages, security
agreements and other agreements required by Agent to (A) reflect the
effect of the Paging Partners Merger and (B) grant to Agent a
perfected Lien, subject in priority only to Permitted Prior Liens,
upon all existing and after-acquired Property acquired by Borrower
as a result of the consummation of the Paging Partners Merger and,
to the extent permitted by applicable law, the FCC Licences (and the
proceeds thereof) transferred to Borrower in connection with the
Paging Partners Merger;
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(ii) an Environmental Certificate covering any real estate
acquired or leased by Borrower in connection with the Paging
Partners Merger;
(iii) a Landlord's Consent executed by the Landlord under such
Leases assumed or executed by Borrower in connection with the Paging
Partners Merger as Agent may require;
(iv) such assignments and third party consents with respect to
any agreements related to the Paging Business acquired by Borrower
as a result of the Paging Partners Merger as Agent reasonably shall
request; and
(v) such other instruments, documents, certificates, consents,
waivers and opinions as Agent reasonably may require in connection
with the Paging Partners Merger.
Paging Partners Pledge Agreement: a pledge agreement executed by
Paging Partners in favor of Agent covering the Borrower Capital Stock
acquired by Paging Partners as a result of the Paging Partners Merger.
Paging Partners System: the portion of the System acquired by
Borrower as a result of the Paging Partners Merger.
Participant: any Person to which a Lender sells or assigns a
Participation.
Participation: a sale or any assignment by a Lender of a
participating interest in (i) any portion of such Lender's interest in
Borrower's Obligations and (ii) any of such Lender's other rights under
any of the Loan Instruments.
Participation Agreement: an agreement executed by a Lender and a
Participant pursuant to Section 9.2.
Pay-Off Letter: a pay-off letter from each holder of the
Indebtedness to be Refinanced addressed to Agent.
PBGC: the Pension Benefit Guaranty Corporation or any Governmental
Body succeeding to the functions thereof.
PCS Management: PCS Management Group, a sole proprietorship of John
X. Adiletta.
PCS Management Note: the promissory note dated January 4, 1999 in
the original principal amount of $75,000 made by Borrower in favor of PCS
Management providing for interest on the outstanding principal balance
thereof at 15% per annum and a fee payable to PCS Management in the amount
of $7,500.
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Pension Plan: any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Part 3 of Title I of ERISA,
Title IV of ERISA, or Section 412 of the Code and which (i) is maintained
for employees of Borrower or any ERISA Affiliate, or (ii) has at any time
within the preceding six years been maintained for the employees of
Borrower or any of its current or former ERISA Affiliates.
Permitted Liens: any of the following Liens:
(i) the Security Interests;
(ii) the Motorola Liens, provided Motorola and Borrower have
executed and delivered to Agent the Motorola
Intercreditor Agreement;
(iii) the Bell Atlantic Seller Indebtedness Liens;
(iv) the Permitted Senior Indebtedness Liens;
(v) Liens for taxes, assessments or other governmental
charges or levies, which either are (A) not delinquent
or (B) being contested diligently and in good faith by
appropriate proceedings, and as to which Borrower has
set aside reserves on its books in accordance with GAAP;
(vi) statutory Liens, such as landlord's, vendor's,
repairman's, mechanic's, materialman's, warehouseman's,
carrier's or other like Liens, arising by operation of
law and incurred in good faith in the ordinary course of
business, provided that the underlying obligations
relating to such Liens are paid in the ordinary course
of business or are not overdue for a period of more than
90 days, or are being contested diligently and in good
faith by appropriate proceedings and as to which
Borrower has set aside reserves on its books in
accordance with GAAP, or the payment of which
obligations are otherwise secured in a manner
satisfactory to Agent;
(vii) zoning ordinances, easements, rights-of-way, licenses,
reservations, provisions, covenants, conditions, waivers
or restrictions on the use of Property and other similar
encumbrances or title exceptions, in each case, that are
acceptable to Agent;
(viii) Liens in respect of judgments or awards with respect to
which no Event of Default would exist pursuant to
subsection 8.1.6;
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(ix) pledges, deposits or other Liens to secure payment of
insurance premiums (A) to be paid in accordance with
applicable laws in the ordinary course of business
relating to payment of worker's compensation, or (B)
that are required for the participation in any fund in
connection with worker's compensation, unemployment
insurance, old-age pensions or other social security
programs;
(x) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of
like nature in each case incurred in the ordinary course
of business; and
(xi) Liens described on Exhibit 1.1(F) hereto.
Permitted Prior Liens: any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (v) and (vi) of
the definition of Permitted Liens that are accorded
priority to the Security Interests by law; and
(iii) the Permitted Liens described in clauses (ii), (vii),
(ix), (x) and (xi) of the definition of Permitted Liens,
subject to the limitations or requirements set forth
therein.
Permitted Senior Indebtedness: Indebtedness, other than the Loan,
incurred to purchase tangible personal property or Indebtedness incurred
to lease tangible personal property pursuant to Capitalized Leases,
provided that (i) such Indebtedness (other than the Loan) existing as of
the Closing Date shall not exceed $100,000, (ii) during any Loan Year
after the Closing Date the amount of such Indebtedness (other than the
Loan) at any one time outstanding during such Loan Year shall not exceed
$200,000, unless the Motorola Indebtedness has been paid in full and the
Motorola Liens have been released, in which case the amount of such
Indebtedness shall not exceed $1,500,000, and (iii) no Event of Default
exists at the time or will be caused as a result of the incurrence of any
Indebtedness described in clause (ii).
Permitted Senior Indebtedness Liens: Liens that secure Permitted
Senior Indebtedness, provided that (i) each such Lien attaches only to the
Property purchased or leased with the proceeds of the Permitted Senior
Indebtedness incurred with respect to such Property and (ii) Agent is
granted a Lien upon such Property, subordinate only to the Lien granted to
the holder of the applicable Permitted Senior Indebtedness.
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Person: any individual, firm, corporation, business enterprise,
trust, association, joint venture, partnership, Governmental Body or other
entity, whether acting in an individual, fiduciary or other capacity.
Prepayment Premium: defined in subsection 2.8.1(a).
Principal Balance: the unpaid principal balance of the Loan or any
specified portion thereof outstanding from time to time.
Pro Forma Operating Cash Flow: for any period, Operating Cash Flow
for such period plus, for any portion of such period prior to the (i)
Closing, the Operating Cash Flow of the Bell Atlantic Sellers derived from
the operation of the Bell Atlantic System, (ii) Funding Date of the Merger
Portion, the Operating Cash Flow of Paging Partners derived from the
operation of the Paging Partners System, or (iii) Funding Date of any
Advance, the Operating Cash Flow derived from the Paging Business which is
the subject of the applicable Subsequent Acquisition, in each case as
adjusted in Agent's sole discretion for expenses intended to be eliminated
following the consummation of the Bell Atlantic Acquisition, the Paging
Partners Merger or such Subsequent Acquisition, as applicable.
Property: all types of real, personal or mixed property and all
types of tangible or intangible property.
Pro Rata Share: the proportion that a Lender's Commitment bears to
the total Commitments of all Lenders.
Qualified Depository: a member bank of the Federal Reserve System
having a combined capital and surplus of at least $500,000,000.
Real Estate: each parcel of real estate owned by Borrower.
Register: has the meaning assigned to that term in subsection 9.1.3.
Related Parties means (i) any spouse or immediate family member of a
Management Holder, (ii) any trust set up for the benefit of a Management
Holder or any of the Persons specified in clause (i) or (iii) any
corporation or limited liability company wholly owned by a Management
Holder and/or the Persons specified in clause (i) and (ii).
Required Amount: an amount equal to the lesser of (i) the aggregate
undrawn face amount of the Letters of Credit as of May 31, 1999 and (ii)
the amount which, if applied to reduce the Principal Balance as of the
last day of the most recent month prior to May, 1999 with respect to which
Agent has been in receipt for at least 10 days of the financial statements
required under Section 6.3.1 for such month, would have caused the Target
Leverage Ratio as of such last day to be equal to 4.0.
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Required Bell Atlantic Principal Payment: the scheduled principal
payment due on March 31, 2000 pursuant to the Bell Atlantic Seller Note in
an amount equal to the sum of (i) the Base Principal Payment plus (ii) the
Additional Principal Payment.
Required Excess Cash Flow Prepayment: for any year in which a
mandatory prepayment is required to be made pursuant to subsection
2.8.2(a), an amount equal to the lesser of (i) (A) 50% of the Excess Cash
Flow for the preceding year (with respect to the mandatory prepayment due
in 2001) or (B) 25% of the Excess Cash Flow for the preceding year (with
respect to the mandatory prepayment due in 2002 and each year thereafter)
or (ii) the amount by which the Cash Equivalents as of the end of the
preceding year exceeds $1,000,000.
Securities Act: the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, as in effect from time to
time.
Securities Exchange Act: the Securities Exchange Act of 1934, as
amended, any successor statute thereto, and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder, as in
effect from time to time.
Security Agreement: a security agreement executed by Borrower in
favor of Agent.
Security Instruments: collectively, the Security Agreement, the BAP
Investors Pledge Agreement, the Assignment of Leases, the Assignment of
Bell Atlantic Acquisition Instruments, the Paging Partners Pledge
Agreement, the Assignment of Paging Partners Merger Instruments and each
Mortgage now or hereafter granted by Borrower to Agent, all as amended
from time to time.
Security Interests: the Liens in the Collateral granted to Agent
pursuant to the Security Instruments and any other document now or
hereafter executed by Borrower or any other Person which purports to
create a Lien on the Property of such Person in favor of Agent.
Select Capital: Select Capital Corp., a Delaware corporation, or any
substitute holder of the Select Capital Note as described in the
definition thereof.
Select Capital Note: collectivley, one or more promissory notes
dated January 4, 1999 in the original principal amount of $295,400 made by
Borrower in favor of Select Capital, or any substitution therefor in a
principal amount not in excess of $295,400, provided that the holder of
any such substituted note executes and delivers to Agent a subordination
agreement in form and substance substantially similar to the Deferred
Payment Parties Subordination Agreement.
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Select Capital Warrants: warrants to purchase up to 1562 shares of
the Borrower Capital Stock issuable to Select Capital pursuant to the
terms and conditions of the Select Capital Note.
Senior Debt Service: during any period, all payments of principal,
interest, premium and other charges with respect to the Principal Balance
(other than the Loan Fees), which payments are required to be made
pursuant to this Loan Agreement during such period.
Senior Debt Service Coverage Ratio: the ratio of (i) Pro Forma
Operating Cash Flow for the twelve month period ending on the last day of
any quarter to (ii) (A) for the quarter ended March 31, 1999, Senior Debt
Service for such quarter multiplied by 4, (B) for the quarter ended June
30, 1999, Senior Debt Service for the six month period then ended
multiplied by 2, (C) for the quarter ended September 30, 1999, Senior Debt
Service for the nine months then ended multiplied by 1.33 and (D) for any
quarter ending on or after December 31, 1999, Senior Debt Service for the
twelve months then ended.
Senior Leverage Ratio: the ratio of the Net Principal Balance as of
the last day of any month to the Pro Forma Operating Cash Flow for the
twelve month period ending on such last day.
Solvency Certificate: a solvency certificate executed by Borrower to
Agent.
Small Subsequent Acquisition: a Subsequent Acquisition with respect
to which (i) the gross purchase price payable is less than $250,000 and
(ii) Agent has reviewed and approved any liabilities, whether liquidated
or contingent, to be assumed by Borrower in connection with such
Subsequent Acquisition.
Stated Rate: as defined in subsection 2.2.3.
Subsequent Acquisition: an Asset Acquisition or Equity Acquisition
by Borrower subsequent to the Closing Date.
Subsequent Acquisition Additional Loan Instruments: collectively,
the following documents to be executed and delivered by Borrower in
connection with a Subsequent Acquisition:
(i) the Assignment of Subsequent Acquisition Instruments, a
Notice of Borrowing with respect to the applicable Advance, any
amendments to the Loan Instruments and such UCC Financing Statements
and other mortgages, security agreements and agreements required by
Agent to (A) reflect the effect of such Subsequent Acquisition and
(B) grant to Agent a perfected Lien, subject in priority only to
Permitted Prior Liens, upon all existing and after-acquired Property
acquired by Borrower as a result of the consummation of such
Subsequent Acquisition, and to
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the extent permitted by applicable law, the FCC Licences (and the
proceeds thereof) transferred to Borrower in connection with such
Subsequent Acquisition;
(ii) an Environmental Certificate covering any real estate
acquired or leased by Borrower in connection with such Subsequent
Acquisition;
(iii) a Landlord's Consent executed by each Landlord under
such Leases assumed or executed by Borrower in connection with such
Subsequent Acquisition as Agent may require;
(iv) such assignments and third party consents with respect to
any agreements with respect to the Paging Business which is the
subject of such Subsequent Acquisition as Agent reasonably shall
request; and
(v) such other instruments, documents, certificates, consents,
waivers and opinions as Agent reasonably may require in connection
with such Subsequent Acquisition.
Subsequent Acquisition Instruments: the purchase agreement and all
other documents and instruments executed in connection with a Subsequent
Acquisition.
Subsequent Acquisition Merger: as defined in subsection 4.5.7.
Subsequent Acquisition Seller: the seller or sellers under the
applicable Subsequent Acquisition Instruments.
Subsequent Portion: a portion of the Loan in the amount of
$1,500,000. An amount equal to the portion of the Subsequent Portion in
excess of the amount thereof actually used during the Subsequent Portion
Availability Period to make the Bell Atlantic Seller Note Payment and to
pay the Subsequent Portion Loan Fee shall be added to the Acquisition
Portion as of the Bell Atlantic Seller Note Payment Date.
Subsequent Portion Availability Period: the period (i) commencing on
the date which is 10 days after Agent receives the Basic Financial
Statements for 1999 and (ii) ending on June 30, 2000.
Subsequent Portion Loan Fee: the fee payable by Borrower to Lenders
pursuant to subsection 2.7.2.
System: the paging system facilities of Borrower, operated at the
locations described on Exhibit 5.5.4, as updated or amended from time to
time in accordance with Section 7.11.
Target Leverage Ratio: the ratio of the Principal Balance as of the
last day of any month to the lesser of (i) the product of (A) Operating
Cash Flow for the period from the
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Closing Date through such last day multiplied by (B) a fraction, the (x)
numerator of which is 365 and (y) denominator of which is the number of
days elapsed from the Closing Date through such last day and (ii) Pro
Forma Operating Cash Flow for the twelve month period ending on such last
day.
Termination Event: (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder; or (ii) the
withdrawal of Borrower or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a
notice of intent to terminate a Pension Plan or the treatment of a Pension
Plan amendment as a termination under Section 4041 of ERISA; or (iv) the
institution of proceedings to terminate, or the appointment of a trustee
with respect to, any Pension Plan by the PBGC; or (v) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; or (vi) the partial or complete withdrawal of Borrower or
any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of
a lien pursuant to Section 412 of the Code or Section 302 of ERISA; or
(viii) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA;
or (ix) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by the
PBGC of proceedings to terminate a Multiemployer Plan under Section 4042
of ERISA.
Total Debt Service: during any period, all payments of principal,
interest, premium and other charges with respect to Indebtedness for
Borrowed Money of Borrower (other than the Loan Fees) made or required to
be made during such period.
Total Leverage Ratio: the ratio of (i) the sum of (A) the Net
Principal Balance as of the last day of any month plus (B) the principal
balance of all Indebtedness for Borrowed Money of Borrower other than
Borrower's Obligations as of the last day of such month to (ii) the Pro
Forma Operating Cash Flow for the twelve month period ending on such last
day.
Trade Out Transaction: an exchange of advertising time for non-cash
consideration, such as goods, services or program material.
1.2 Time Periods. In this Loan Agreement and the other Loan Instruments,
in the computation of periods of time from a specified date to a later specified
date, (i) the word "from" means "from and including," (ii) the words "to" and
"until" each mean "to, but excluding" and (iii) the words "through," "end of"
and "expiration" each mean "through and including." Unless otherwise specified,
all references in this Loan Agreement and the other Loan Instruments to (i) a
"month" shall be deemed to refer to a calendar month, (ii) a "quarter" shall be
deemed to refer to a calendar quarter and (iii) a "year" shall be deemed to
refer to a calendar year.
1.3 Accounting Terms and Determinations. All accounting terms not
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made and all
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financial statements required to be delivered pursuant hereto shall be prepared
in accordance with GAAP as in effect at the time of such interpretation,
determination or preparation, as applicable. In the event that any Accounting
Changes (as hereinafter defined) occur and such changes result in a change in
the method of calculation of financial covenants, standards or terms contained
in this Loan Agreement, then Borrower and Lenders agree to enter into
negotiations to amend such provisions of this Loan Agreement so as to reflect
such Accounting Changes with the desired result that the criteria for evaluating
the financial condition of Borrower shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. For purposes hereof,
"Accounting Changes" shall mean changes in generally accepted accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants (or any successor thereto) or other appropriate
authoritative body.
1.4 References. All references in this Loan Agreement to "Article,"
"Section," "subsection," "subparagraph," "clause" or "Exhibit," unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
1.5 Lender's or Agent's Discretion. Whenever the terms "satisfactory to
Lenders or Agent," "determined by Lenders or Agent," "acceptable to Lenders or
Agent," "Lenders or Agent shall elect," "Lenders or Agent shall request," "at
the option or election of Lenders or Agent," or similar terms are used in the
Loan Instruments, except as otherwise specifically provided therein, such terms
shall mean satisfactory to, at the election or option of, determined by,
acceptable to or requested by Lenders or Agent, as applicable, in their or its
sole and unlimited discretion.
1.6 Borrower's Knowledge. Any statements, representations or warranties
that are based upon the best knowledge of Borrower or an officer thereof shall
be deemed to have been made after due inquiry by Borrower or an officer, as
applicable, with respect to the matter in question.
ARTICLE II
LOAN AND TERMS OF PAYMENT
2.1 Loan.
2.1.1 Aggregate Loan Amount. The Loan shall consist of a term loan
from Lenders to Borrower in the maximum aggregate amount of $30,000,000,
comprised of the Initial Portion, the Merger Portion, the Subsequent
Portion and the Acquisition Portion.
2.1.2 Initial Portion. Each Lender severally agrees to disburse its
Pro Rata Share of the Initial Portion to or as directed by Borrower when
all of the terms and conditions set forth in Section 4.1 and 4.2 have been
satisfied.
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2.1.3 Merger Portion. Each Lender severally agrees to disburse its
Pro Rata Share of the Merger Portion at any time prior to July 1, 1999 to
or as directed by Borrower provided all of the terms and conditions set
forth in Section 4.1 and 4.3 have been satisfied.
2.1.4 Subsequent Portion. Each Lender severally agrees to disburse
its Pro Rata Share of the Subsequent Portion at any time during the
Subsequent Portion Availability Period to or as directed by Borrower
provided all of the terms and conditions set forth in Sections 4.1 and 4.4
have been satisfied.
2.1.5 Acquisition Portion. Each Lender severally agrees to disburse
its Pro Rata Share of Advances of the Acquisition Portion to or as
directed by Borrower from time to time during the Acquisition Portion
Availability Period provided all of the terms and conditions set forth in
Sections 4.1 and 4.5 have been satisfied.
2.1.6 Use of Proceeds. The proceeds of the (i) Initial Portion shall
be used to provide funds to consummate the Bell Atlantic Acquisition, to
pay the Closing Loan Fee, to make the Paging Partners Escrow Deposit, to
pay transaction costs and for working capital, (ii) Merger Portion shall
be used to provide funds to consummate the Paging Partners Merger, to pay
transaction costs and for working capital, (iii) Subsequent Portion shall
be used to make the Bell Atlantic Seller Note Payment and to pay the
Subsequent Portion Loan Fee and (iv) Acquisition Portion shall be used to
provide funds to enable Borrower to repay the Motorola Indebtedness, to
make the Bell Atlantic Seller Note Payment and to make other payments on
the Bell Atlantic Seller Indebtedness after the Bell Atlantic Seller Note
Payment has been paid in full, to pay the Letters of Credit Indebtedness
(other than the Letters of Credit Account Parties Payment), to pay the
Deferred Payment Indebtedness, to make Subsequent Acquisitions permitted
hereunder, to pay the Acquisition Portion Loan Fee payable in connection
with the disbursement of Advances of the Acquistion Portion and to pay
transaction costs in connection therewith.
2.1.7 Note. The Loan shall be evidenced by the Note.
2.1.8 Reborrowing. Borrower shall not be entitled to reborrow any
portion of the Loan which is repaid or prepaid.
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2.2 Interest.
2.2.1 Interest Rate. Except as provided in Section 2.5 and as
otherwise provided in the last sentence of this subsection 2.2.1, the Base
Rate Portion shall bear interest at the Base Rate in effect from time to
time plus the Applicable Margin in effect for the current quarter and each
LIBOR Loan shall bear interest at the applicable LIBOR Rate plus the
Applicable Margin in effect for the current quarter. As used in this Loan
Agreement, the term "Applicable Margin" for any quarter shall be
determined by Agent on the first day of such quarter (the "Determination
Date") and shall mean with respect to the Base Rate Portion and each LIBOR
Loan the per annum percentage rate set forth opposite the applicable
Senior Leverage Ratio as calculated as of the last day of the month most
recently ended with respect to which Agent has been in receipt for at
least 10 days of the financial statements required under Section 6.3.1 for
such month:
Senior Base Rate LIBOR Loan
Leverage Applicable Applicable
Ratio Margin Margin
----- ------ ------
3.5 or greater 1.75% 4.50%
3.0 or greater but
less than 3.5 1.50% 4.25%
less than 3.0 1.25% 4.00%
Notwithstanding the foregoing, until the last day of the sixth quarter
following the quarter in which the Closing Date occurs, the Applicable
Margin shall mean (i) with respect to the Base Rate Portion, 1.75% per
annum and (ii) with respect to each LIBOR Loan, 4.50% per annum.
2.2.2 Interest Computation. Interest shall be payable monthly in
arrears, computed on the basis of a year consisting of 360 days and
charged for the actual number of days during the period for which interest
is being charged. In computing interest, the Funding Date shall be
included and the date of payment shall be excluded.
2.2.3 Maximum Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Instrument, Lenders shall
not collect a rate of interest, including the Loan Fees, on any obligation
or liability due and owing by Borrower to Lenders in excess of the maximum
contract rate of interest permitted by applicable law ("Excess Interest").
All fees, charges, goods, things in action or any other sums or things of
value (other than items (a), (b), (c) and (d) below) paid or payable by
Borrower (collectively, the "Additional Sums"), whether pursuant to the
Note, this Loan Agreement, the other Loan Instruments or any other
document or instrument in any way pertaining to the Loan, that, under the
laws of the State of Arizona, may be deemed to be interest with respect to
the Loan, for the purpose of any laws of the State of Arizona that may
limit the maximum amount of interest to be charged with respect to the
Loan shall be payable by Borrower and shall be deemed to be additional
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interest, and for such purposes only, the agreed upon and "contracted for
rate of interest" with respect to the Loan shall be deemed to be increased
by the rate of interest resulting from the Additional Sums. Lenders and
Borrower agree that the interest laws of the State of Arizona shall govern
the relationship among them and understand and believe that the
transactions contemplated by the Loan Instruments comply with the usury
laws of the State of Arizona, but in the event of a final adjudication to
the contrary, Borrower shall be obligated to pay, nunc pro tunc, to
Lenders only such interest as then shall be permitted by the laws of the
state found to govern the contract relationship among Lenders and
Borrower. For the purpose of any laws of the State of Arizona that may
limit the maximum amount of interest to be charged with respect to a loan,
the "contracted for rate of interest" for the Loan shall consist of the
following: (a) interest calculated in accordance with the provisions of
subsection 2.2.1; (b) interest calculated in accordance with the
provisions of Section 2.5; (c) the late charges, described and payable in
accordance with provisions of Section 2.6; (d) the Loan Fees; and (e) all
Additional Sums, if any. Borrower agrees to pay an effective "contracted
for rate of interest" which is the sum of items (a), (b), (c), (d) and
(e), as applicable, above. If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for
in this Loan Agreement or any other Loan Instrument, then in such event
(i) Borrower shall not be obligated to pay such Excess Interest, (ii) any
Excess Interest collected by Lenders shall be, at Lenders' option, (A)
applied to the Principal Balance or to accrued and unpaid interest not in
excess of the maximum rate permitted by applicable law or (B) refunded to
the payor thereof, (iii) the interest rates provided for herein
(collectively, including, without limitation, the Loan Fees, the "Stated
Rate") shall be automatically reduced to the maximum rate allowed from
time to time under applicable law (the "Maximum Rate") and this Loan
Agreement and the other Loan Instruments, as applicable, shall be deemed
to have been, and shall be, modified to reflect such reduction, and (iv)
Borrower shall not have any action against Agent or Lenders for any
damages arising out of the payment or collection of such Excess Interest;
provided, however, that if at any time thereafter the Stated Rate is less
than the Maximum Rate, Borrower shall, to the extent permitted by law,
continue to pay interest at the Maximum Rate until such time as the total
interest received by Lenders is equal to the total interest which Lenders
would have received had the Stated Rate been (but for the operation of
this provision) the interest rate payable. Thereafter, the interest rate
payable shall be the Stated Rate unless and until the Stated Rate again
exceeds the Maximum Rate, in which event the provisions contained in this
subsection 2.2.3 again shall apply.
2.3 LIBOR Loans.
2.3.1 Election by Borrower. Subject to the provisions of subsection
2.3.2 and provided no Event of Default then exists, Borrower from time to
time may elect to have all or a portion of the Principal Balance bear or
continue to bear interest at a LIBOR Rate, such election to be exercised
by delivery of a LIBOR Election Notice to Agent c/o Andrew Pluta, FINOVA
Capital Corporation, 311 S. Wacker Drive, Chicago, Illinois 60606,
Telecopy No. (312) 322-3530, by facsimile transmission not less than three
Business Days prior to the commencement of the applicable Interest Period.
Agent shall determine (which determination shall, absent manifest error,
be presumptively correct) the LIBOR Rate applicable to the
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relevant LIBOR Loan on the applicable Interest Rate Determination Date and
promptly shall give notice thereof to Borrower. Agent and Lenders shall
have the right without further confirmation to assume that any LIBOR
Election Notice received by Agent and in good faith believed by Agent to
be executed by John Adiletta or any other individual designated by him in
a notice to Agent has been given by a person duly authorized to act on
behalf of Borrower. Any LIBOR Election Notice received by Agent shall be
irrevocable. Upon the expiration of an Interest Period the applicable
LIBOR Loan shall be converted to and become part of the Base Rate Portion
unless such LIBOR Loan has been continued as a LIBOR Loan in accordance
with this subsection 2.3.1.
2.3.2 LIBOR Limitations. Each LIBOR Loan shall be in an amount not
less than $1,000,000 or integral multiples of $100,000 in excess thereof.
At no time shall more than three LIBOR Loans be in effect.
2.3.3 Eurodollar Deposits Unavailable or Interest Rate
Unascertainable. If prior to the commencement of any Interest Period Agent
determines that Dollar deposits of the relevant amount for the relevant
Interest Period are not available in the London Interbank Market or the
rate at which such Dollar deposits are being offered will not adequately
and fairly reflect the cost to the Lenders of maintaining a LIBOR Rate for
such Interest Period, or that by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the
LIBOR Rate applicable to such Interest Period, Agent promptly shall give
notice of such determination to Borrower and any LIBOR Election Notice
previously given by Borrower which has not yet become effective shall be
deemed to be canceled.
2.3.4 Tax and Other Laws. In the event that by reason of any law,
regulation or requirement or interpretation thereof by any Governmental
Body, or the imposition of any requirement of any such Governmental Body,
whether or not having the force of law, including the imposition of any
reserve and/or special deposit requirement (other than reserves included
in the Eurocurrency Reserve Requirements), any Lender shall be subjected
to any tax, levy, impost, charge, fee, duty, deduction or withholding of
any kind whatsoever (other than any tax imposed upon the total net income
of such Lender or franchise tax imposed on such Lender) and if any such
measures or any other similar measure shall result in an increase in the
cost to any Lender of maintaining its share of any LIBOR Loan or in a
reduction in the amount of principal or interest receivable by any Lender
in respect thereof, then Borrower shall pay to the affected Lender within
10 days after receipt of a notice from such Lender (which notice shall be
accompanied by a statement in reasonable detail setting forth the basis
for the calculation thereof, which calculation, in the absence of
demonstrable error, shall be conclusive and binding), an amount equal to
such increased cost or reduced amount. At any time after receipt of such
notice Borrower may convert all LIBOR Loans to the Base Rate Portion, and
such conversion shall be effective three Business Days after the Lenders
have received notice from Borrower of such conversion. Notwithstanding the
foregoing, no Lender shall (i) be entitled to compensation under this
subsection 2.3.4 for any amounts incurred or accruing more than 180 days
prior to the giving of notice to Borrower
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of additional costs of the type described in this subsection 2.3.4 or (ii)
exercise any of its rights under this subsection 2.3.4 if it shall not at
the time be the general policy or practice of such Lender to exercise
similar rights against its other borrowers similarly situated. Upon the
occurrence of any event giving rise to the operation of subsections 2.3.4
or 2.3.6 or Section 12.4 with respect to any Lender, such Lender will, if
requested by Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
portion of the Loan affected by such event, provided that such designation
is made on such terms that such Lender and its lending office suffer no
material economic, legal or regulatory disadvantage, with the object of
aoviding the consequence of the event giving rise to the operation of such
subsection or Section. The foregoing shall not affect or postpone any of
the obligations of Borrower or the rights of any Lender proviced in
subsection 2.3.4 or 2.3.6 or Section 12.4.
2.3.5 Changes in Law Rendering LIBOR Loans Unlawful. If at any time
any law, treaty or regulation, or any interpretation thereof by any
Governmental Body shall make it unlawful for any Lender to fund or
maintain its share of any LIBOR Loan with monies obtained in the London
Interbank Market, such Lender, upon the occurrence of such event, shall
notify Borrower thereof and thereupon the (i) right of Borrower to make
any LIBOR Election shall be suspended for the duration of such illegality
and (ii) if required by such law, regulation or interpretation, on such
date as shall be specified in such notice all Interest Periods then in
effect shall be terminated, and thereafter all LIBOR Loans shall be deemed
converted to the Base Rate Portion.
2.3.6 Indemnity. In addition to any other payments payable by
Borrower to Lenders pursuant to the Loan Instruments, Borrower shall
indemnify and reimburse each Lender on demand for any loss or expense
which such Lender may sustain as a consequence of any prepayment of any
LIBOR Loan prior to the expiration of the Interest Period applicable
thereto except as required under subsection 2.3.5 and/or any failure by
Borrower to (i) make any payment when due of any amount payable with
respect to any LIBOR Loan or (ii) borrow the amount set forth in any LIBOR
Election Notice on the date specified therefor.
2.4 Principal and Interest Payments.
2.4.1 Interest. Except as otherwise provided in subsection 2.8.1(c)
and 2.8.2(d), interest on the Principal Balance shall be payable monthly
in arrears on the first Business Day of each month beginning with the
month following the month in which the Closing occurs.
2.4.2 Principal. The Principal Balance shall be payable in
consecutive quarterly installments on the first Business Day of each
quarter commencing with the quarter beginning July 1, 2000. Each such
installment shall be in an amount equal to the percentage of the Principal
Balance as of June 30, 2000 set forth below opposite the quarter in which
such payment is due:
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Percentage of Principal
Quarter Beginning Balance as of June 30, 2000
----------------- ---------------------------
July 1, 2000 0.50%
October 1, 2000 0.50%
January 1, 2001 1.94%
April 1, 2001 1.94%
July 1, 2001 1.94%
October 1, 2001 1.94%
January 1, 2002 3.13%
April 1, 2002 3.13%
July 1, 2002 3.13%
October 1, 2002 3.13%
January 1, 2003 3.50%
April 1, 2003 3.50%
July 1, 2003 3.50%
October 1, 2003 3.50%
The remaining Principal Balance, together with all accrued and unpaid
interest thereon and all other sums which then are due and payable
pursuant to the terms of the Loan Instruments, shall be due and payable in
full on the Maturity Date.
2.5 Default Rate. During a Default Rate Period, Borrower's Obligations
shall bear interest at the Default Rate.
2.6 Late Charges. If a payment of principal or interest to be made
pursuant to this Loan Agreement becomes past due for a period in excess of five
Business Days, Borrower shall pay on demand to Lenders a late charge of 2% of
the amount of such overdue payment.
2.7 Loan Fees.
2.7.1 Closing Loan Fee. Borrower shall pay to Lenders a closing fee
in the amount of $430,000 upon the Closing. The Closing Loan Fee shall be
deemed to be fully earned as of the Closing. FINOVA shall credit the
$50,000 deposit (net of expenses) previously paid by Borrower to FINOVA
against the Closing Loan Fee.
2.7.2 Subsequent Portion Loan Fee. Upon the disbursement of the
Subsequent Portion Borrower shall pay to Lenders a loan fee in the amount
of 1.00% of the amount of the Subsequent Portion actually disbursed. The
Subsequent Portion Loan Fee shall be deemed to be fully earned upon the
disbursement of the Subsequent Portion.
2.7.3 Acquisition Portion Loan Fees. Concurrently with the
disbursement of each Advance of the Acquisition Portion, Borrower shall
pay to Lenders a loan fee in the amount
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of 1.00% of the amount of such Advance. Each Acquisition Portion Loan Fee
shall be deemed to be fully earned upon the disbursement of the applicable
Advance.
2.8 Prepayments.
2.8.1 Voluntary Prepayments. Borrower may not prepay any LIBOR Loan
prior to the expiration of the Interest Period applicable thereto. Except
as provided in the preceding sentence, Borrower may at any time
voluntarily prepay the Principal Balance in whole or in part, subject to
the following conditions:
(a) Prepayment Premium. Concurrently with any voluntary
prepayment of all or any part of the Principal Balance and subject
to the last sentence of this subsection 2.8.1(a), Borrower shall pay
to Lenders a prepayment premium (the "Prepayment Premium") equal to
a percentage of the amount of the Principal Balance prepaid,
determined in accordance with the following schedule:
Percentage of Principal
Period of Prepayment Balance Prepaid
-------------------- ---------------
First Loan Year 4.0%
Second Loan Year 3.0%
Third Loan Year 2.0%
Thereafter 0.0%
Notwithstanding the foregoing, the applicable Prepayment Premium
shall be reduced by 100 basis points in the event that (i) Borrower
requests Lenders to provide financing to enable Borrower to
consummate a Subsequent Acquisition, (ii) Lenders decline to provide
the requested financing on terms (including without limitation,
leverage, interest rates and fees) no less favorable to Borrower
than those herein contained and (iii) the Subsequent Acquisition is
consummated with proceeds of other senior financing and Borrower's
Obligations are prepaid in full concurrently with the disbursement
of such proceeds.
(b) Notice of Prepayment; Number and Amount of Prepayments.
Not less than 10 days prior to the date upon which Borrower desires
to make any voluntary prepayment of the Principal Balance, Borrower
shall deliver to Lenders notice of its intention to prepay, which
notice shall be irrevocable and shall state the prepayment date and
the amount of the Principal Balance to be prepaid. The amount of any
voluntary partial prepayment of the Principal Balance shall be not
less than $100,000 or integral multiples thereof. A voluntary
prepayment of the Principal Balance shall not be made more
frequently than once a month.
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(c) Additional Payments. Concurrently with any voluntary
prepayment of the Principal Balance pursuant to this subsection
2.8.1, Borrower shall (i) prepay the Motorola Indebtedness in an
amount equal to the Motorola Ratable Share of the voluntary
prepayment of the Principal Balance, determined as of the date of
such voluntary prepayment and (ii) pay to Lenders accrued and unpaid
interest on the portion of the Principal Balance which is being
prepaid to the date on which Lenders are in receipt of Good Funds,
and any other sums which then are due and payable pursuant to the
terms of any of the Loan Instruments.
(d) Application of Partial Prepayments. Any voluntary partial
prepayment of the Principal Balance pursuant to this subsection
2.8.1 shall be applied to the installments of the Principal Balance
in the inverse order of maturity.
2.8.2 Mandatory Prepayments.
(a) Required Excess Cash Flow Prepayments. Until Borrower's
Obligations are paid in full, within 120 days after the end of 1999
and the end of each year thereafter, Borrower shall pay to (i)
Lenders the Lenders' Ratable Share, determined as of the date of the
last day of such year, of the Required Excess Cash Flow Prepayment
for such year and (ii) Motorola the Motorola Ratable Share,
determined as of the last day of such year, of the Required Excess
Cash Flow Prepayment for such year.
(b) Prepayments from Insurance Proceeds, Asset Sale Proceeds
or Equity Sale Proceeds. Until Borrower's Obligations are paid in
full, Borrower shall pay to (i) Lenders the Lenders' Ratable Share
of any insurance proceeds, Asset Sale Proceeds or Equity Sale
Proceeds, determined as of the date of any required prepayment
pursuant to Section 6.6.2 with respect to insurance proceeds or as
of the date of receipt by Borrower with respect to Asset Sale
Proceeds or Equity Sale Proceeds and (ii) Motorola the Motorola
Ratable Share of any insurance proceeds, Asset Sale Proceeds or
Equity Sale Proceeds, determined as of the date of any required
prepayment pursuant to Section 6.6.2 with respect to insurance
proceeds or as of the date of receipt by Borrower with respect to
Asset Sale Proceeds or Equity Sale Proceeds. The Lenders' Ratable
Share and the Motorola Ratable Share of any such insurance proceeds,
Asset Sale Proceeds or Equity Sale Proceeds shall be calculated
after deducting from such insurance proceeds, Asset Sale Proceeds or
Equity Sale Proceeds, as applicable, the amount of any accrued and
unpaid interest on the Loan and any applicable Prepayment Premium
payable to Lenders.
(c) Prepayments from Indemnification Proceeds. Until
Borrower's Obligations are paid in full, whether or not an Event of
Default exists, upon notice from Agent to Borrower given within 30
days after receipt by Agent of notice from Borrower of Borrower's
collection of any Indemnification Proceeds, Borrower shall
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pay to Lenders such portion of such Indemnification Proceeds
designated by Agent in its notice to Borrower except to the extent
(i) such Indemnification Proceeds are utilized to satisfy
Indebtedness of Borrower the existence of which gave rise to, or to
reimburse Borrower for any obligation, claim, judgment, liability or
settlement made by Borrower which gave rise to, the payment of such
Indemnification Proceeds to Borrower and (ii) no Event of Default
then exists and is continuing. In the event Agent fails to give such
notice within such 30 day period, Borrower may use such
Indemnification Proceeds in such manner as Borrower shall determine,
subject to the terms and conditions of this Loan Agreement. Borrower
shall give to Agent prompt notice of the collection of any
Indemnification Proceeds.
(d) Application of Mandatory Prepayments. Prepayments received
by Lenders pursuant to this subsection 2.8.2 shall be applied in the
following order of priority to the payment of: (i) any and all sums
which are due and payable pursuant to the terms of the Loan
Instruments, except the Principal Balance and accrued and unpaid
interest thereon, (ii) accrued and unpaid interest on the portion of
the Principal Balance being prepaid, and (iii) the installments of
the Principal Balance in the inverse order of maturity.
2.8.3 Prepayment Premium. No Prepayment Premium shall be payable
with respect to prepayments (i) pursuant to subsection 2.8.2(a), 2.8.2(c)
or 2.3.5, (ii) from any refinancing of the Loan made by Lenders, which
refinancing shall be at Lenders' discretion, or (iii) from proceeds of
insurance. Any prepayment from Asset Sale Proceeds or Equity Sale Proceeds
shall be accompanied by payment of the applicable Prepayment Premium.
2.8.4 Involuntary Prepayment. Concurrently with any payment of the
Principal Balance received by Lenders resulting from the exercise by Agent
and/or Lenders of any remedy available to Agent and/or Lenders subsequent
to the occurrence of an Event of Default and the acceleration of
Borrower's Obligations, Borrower shall pay to Lenders a Prepayment Premium
in an amount equal to the Prepayment Premium which would be payable if
such payment was made pursuant to subsection 2.8.1.
2.9 Payments after Event of Default. All payments received by Lenders
during the existence of an Event of Default shall be applied in accordance with
Section 8.4.
2.10 Method of Payment; Good Funds. All payments to be made pursuant to
the Loan Instruments by Borrower to Lenders shall be made by wire transfer of
Good Funds to the account of Agent at Citibank, N.A., 399 Park Avenue, New York,
New York, ABA 021000089, Credit: FINOVA Capital Corporation, Credit Account No.
40680477, or to such other account as Agent shall notify Borrower.
ARTICLE III
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SECURITY; LETTERS OF CREDIT
3.1 Security. Borrower's Obligations shall be secured by (i) a Lien upon
all of the Collateral, which Lien at all times shall be superior and prior to
all other Liens, except Permitted Prior Liens, and (ii) the Letters of Credit.
3.2 Letters of Credit.
3.2.1 Draws on Letters of Credit. Lenders may direct Agent to draw
on the Letters of Credit (i) in an aggregate amount equal to the amount of
the applicable unmade payment if an Event of Default under subsection
8.1.1 occurs, (ii) in full or in part at any time if any Event of Default
described in clauses (ii), (iii), (iv) or (v) of subsection 8.1.5(a),
subsection 8.1.5(b) or subsection 8.1.7 occurs and (iii) in an aggregate
amount equal to the Required Amount at any time after May 31, 1999 if (A)
the Paging Partners Merger Closing Date has not occurred on or before May
31, 1999 and (B) the Target Leverage Ratio as of the last day of the most
recent month prior to May, 1999 with respect to which Agent has been in
receipt for at least 10 days of the financial statements required under
Section 6.3.1 for such month exceeds 4.0. The amount drawn on each Letter
of Credit in connection with the aggregate amount of any permitted drawing
on all Letters of Credit shall be equal the aggregate amount of such
permitted drawing multiplied by a fraction, the numerator of which is the
undrawn face amount of such Letter of Credit and the denominator of which
is the undrawn face amount of all Letters of Credit. Any partial draw upon
the Letters of Credit shall not prevent Agent from making additional full
or partial draws thereon to the extent permitted hereunder, and Agent and
Lenders shall not be precluded from exercising any other rights and
remedies under the Loan Instruments in the event the Letters of Credit are
drawn upon. Agent shall be entitled to draw upon the Letters of Credit to
the extent permitted hereunder regardless of whether (i) Borrower or any
of its Affiliates has any claim, set-off or defense against Agent or any
Lender or (ii) the Paging Partners Merger is consummated after May 31,
1999. Neither Borrower nor any of its Affiliates shall file any motion,
suit or claim (other than any compulsory counterclaim excluding any
compulsory counterclaim the assertion of which could result in Agent being
enjoined from drawing upon the Letters of Credit), or commence any other
judicial proceeding at law or in equity or institute any non-judicial
action to challenge the right or authority of Agent to make any permitted
drawing upon the Letters of Credit or otherwise attempt to enjoin, impede
or impair any such permitted drawing.
3.2.2 Application of Draw Proceeds. The proceeds of any draw upon
the Letters of Credit shall be applied to reduce the Principal Balance in
the inverse order of maturity of the installments thereof.
3.2.3 Release of Letters of Credit. Agent shall release and deliver
to Borrower the Letters of Credit, subject to any notation thereon or
reduction in the face amount thereof as a result of any permitted draw
upon the Letters of Credit, promptly after the Paging Partners
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Merger Closing Date if the Paging Partners Merger Closing Date occurs on
or before May 31, 1999.
ARTICLE IV
CONDITIONS OF CLOSING
4.1 Closing Conditions for Each Disbursement. The obligation of Lenders to
disburse any portion of the Loan, and the right of Borrower under Section 7.3 to
consummate the Paging Partners Merger, shall be subject to the satisfaction or
waiver of all of the following conditions on or before the applicable Funding
Date in a manner, form and substance satisfactory to Agent:
4.1.1 Representations and Warranties. On such Funding Date, the
representations and warranties of each Obligor set forth in the Loan
Instruments to which such Person is a party shall be true and correct in
all material respects.
4.1.2 Performance; No Default. Each Person shall have performed and
complied with all agreements and conditions contained in the Instruments
to which such Person is a party to be performed by or complied with by
such Person prior to or at such Funding Date, and no Event of Default or
Incipient Default then shall exist or result from the disbursement of such
portion of the Loan.
4.1.3 Licenses. Agent shall have received (i) copies of all Licenses
issued by the FCC and any other Governmental Body for the operation of the
Paging Business to be acquired by Borrower on the applicable Funding Date
and (ii) evidence that (A) such Licenses constitute all Licenses which are
necessary to enable Borrower to conduct such Paging Business, except for
any Licenses (other than any FCC Licenses), the absence of which could not
reasonably be expected to have a Material Adverse Effect, (B) such
Licenses are in full force and effect as of the applicable Funding Date,
except where the failure of any Licenses (other than any FCC Licenses) to
be in full force and effect could not reasonably be expected to have a
Material Adverse Effect, (C) no event has occurred which could result in
the termination, revocation or non-renewal of any such License, except
where the termination, revocation or non-renewal of any such License
(other than any FCC License) could not reasonably be expected to have a
Material Adverse Effect, (D) upon the applicable Funding Date Borrower
will be the holder of all such Licenses, except where the failure of
Borrower to be the holder of any such License (other than any FCC License)
could not reasonably be expected to have a Material Adverse Effect and (E)
the consent by the FCC or other applicable Governmental Body of the
transfer of such Licenses to Borrower has become final and is no longer
subject to administrative or judicial reconsideration, review or appeal,
except with respect to any such License (other than any FCC License) where
the failure of such consent to have become final could not reasonably be
expected to have a Material Adverse Effect.
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4.1.4 Financial Statements and Projections. Agent shall have such
received pro-forma balance sheets, financial statements and operating
projections with respect to Borrower and the Paging Business to be
acquired on the applicable Funding Date as Agent reasonably may require,
provided that no pro-forma balance sheets or operating projections shall
be required (i) in connection with the Paging Partners Merger if the
Paging Partners Merger is consummated prior to September 30, 1999 or (ii)
in connection with any Subsequent Acquisition with respect to which
Agent's consent is not required under subsection 4.5.6.
4.1.5 Insurance. At least three Business Days prior to the
applicable Funding Date Borrower shall have delivered to Agent evidence
satisfactory to Agent that all Business Insurance coverage required
pursuant to Section 6.6 is in full force and effect and all premiums then
due thereon have been paid in full.
4.1.6 Environmental Audit. Agent shall have received an
Environmental Audit with respect to each parcel of Real Estate to be
acquired by Borrower on the applicable Funding Date designated by Agent,
and such other alternative assurances of compliance with Environmental
Laws (such as regulatory records checks) with respect to each parcel of
Leasehold Property to be acquired by Borrower on the applicable Funding
Date designated by Agent. All costs incurred in performing such
Environmental Audits and providing such other alternative assurances of
compliance shall be borne by Borrower.
4.1.7 Indebtedness to be Refinanced. Agent shall have received
evidence that the Indebtedness to be Refinanced in connection with the
consummation of the acquisition of the Paging Business to be acquired by
Borrower on the applicable Funding Date has been paid in full or will be
paid in full on the applicable Funding Date.
4.1.8 Approval of Instruments and Security Interests; Consents.
Agent shall have received evidence that all material approvals or consents
shall have been obtained from the FCC and all other Governmental Bodies
and, except to the extent the failure to obtain such approvals or consents
could reasonably be expected to have a Material Adverse Effect, all other
Persons, whose approval or consent is required to enable (i) Borrower and
the other Persons party to the Instruments to enter into and perform their
respective obligations under the Instruments to which each such Person is
a party and (ii) such Person to grant to Agent the Security Interests
contemplated in the Security Instruments to which such Person is a party.
4.1.9 Security Interests. All filings of Uniform Commercial Code
financing statements and all other filings and actions necessary to
perfect and maintain the Security Interests as first, valid and perfected
Liens in the Property covered thereby, subject in priority only to
Permitted Prior Liens, shall have been filed or taken and Agent shall have
received such UCC, state and federal tax Lien, pending suit, judgment and
other Lien searches as it deems necessary to confirm the foregoing.
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4.1.10 Use of Assets. Agent shall be satisfied that Borrower at all
times shall be entitled to the use and quiet enjoyment of all Property
necessary for the continued ownership and operation of Borrower's Paging
Business, including, without limitation, the use of equipment, fixtures,
Licenses, offices and means of ingress and egress thereto, and any
easements or rights-of-way necessary to reach any equipment or other items
necessary for the operation of such Paging Business, except where the
failure to be entitled to such use and quiet enjoyment could not
reasonably be expected to have a Material Adverse Effect.
4.1.11 Proceedings and Documents. All corporate and other
proceedings in connection with the Instruments and all documents and
instruments incident thereto shall be reasonably satisfactory to Agent,
and Agent shall have received all such counterpart originals or certified
or other copies as Agent may request.
4.1.12 Material Adverse Change. No event shall have occurred since
December 31, 1997, in the case of the Initial Portion, or since the most
recent Funding Date, in the case of the Merger Portion, the Subsequent
Portion or any Advance, and no litigation or governmental proceeding or
investigation shall be pending, which has had or could reasonably be
expected to have a Material Adverse Effect. No judgment, order, injunction
or other restraint prohibiting or imposing materially adverse conditions
on the transactions to be consummated on the applicable Funding Date shall
be in effect.
4.1.13 Broker Fees. If the services of a broker or other agent have
been used in connection with the acquisition of the Paging Business to be
acquired by Borrower on the applicable Funding Date, all fees owed to such
broker or agent shall have been paid and Agent shall have received
evidence of such payment.
4.1.14 Fees and Expenses. Agent shall have received payment of the
Loan Fees payable on the applicable Funding Date and all fees and expenses
described in subsection 11.1.1.
4.2 Closing Conditions for Initial Portion. The obligation of Lenders to
disburse the Initial Portion shall be subject to the satisfaction or waiver of
all of the following conditions on or before the Closing Date in a manner, form
and substance satisfactory to Agent:
4.2.1 Equity Capitalization. Borrower shall demonstrate to the
satisfaction of Agent that Borrower has received not less than $6,000,000
in capital contributions in exchange for the issuance of the Borrower
Capital Stock.
4.2.2 Maximum Leverage. Borrower shall demonstrate to the
satisfaction of Agent that, assuming the Initial Portion had been
disbursed and the Bell Atlantic Acquisition had been consummated on the
last day of the second month prior to the month in which the Closing Date
is to occur, (i) the Senior Leverage Ratio as of such last day would not
exceed 3.7 and (ii) the Total Leverage Ratio as of such last day would not
exceed 4.8.
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4.2.3 Consummation of Bell Atlantic Acquisition. Agent shall have
received evidence that (i) Borrower has acquired good title to all
Property necessary for the operation of the Bell Atlantic System, free and
clear of all Liens other than Permitted Liens and (ii) the Bell Atlantic
Acquisition has been consummated in accordance with the terms of the Bell
Atlantic Acquisition Instruments and as contemplated by this Loan
Agreement.
4.2.4 Delivery of Documents. The following shall have been delivered
to Agent, each duly authorized and executed, where applicable, and in form
and substance satisfactory to Agent:
(a) the Initial Loan Instruments;
(b) the Letters of Credit;
(c) a good standing certificate for Borrower from the
Secretaries of State of Delaware, New Jersey, Pennsylvania,
Maryland, Virginia, West Virginia, New York and Washington, DC, each
dated a recent date prior to the Closing Date;
(d) certified copies of (i) the articles of incorporation of
Borrower, together with all amendments thereto, certified by the
Secretary of State of Delaware as of a recent date prior to the
Closing Date; (ii) the by-laws of Borrower, certified as of the
Closing Date by the secretary of Borrower and (iii) resolutions
adopted by the board of directors of Borrower authorizing the
execution and delivery of the Loan Instruments, the Bell Atlantic
Acquisition Instruments and the Paging Partners Merger Agreement by
Borrower and the consummation of the transactions contemplated
thereby, certified as of the Closing Date by the secretary of
Borrower;
(e) signature and incumbency certificates of officers of
Borrower;
(f) certified copies or executed originals of each of the
following:
(1) the Bell Atlantic Acquisition Instruments;
(2) the Bell Atlantic Seller Indebtedness Instruments;
(3) the Bell Atlantic Reseller Agreement;
(4) the Letters of Credit Indebtedness Instruments;
(5) the Deferred Payment Indebtedness Instruments;
(6) the Paging Partners Merger Agreement and the Paging
Partners Escrow Agreement;
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(7) the Operating Agreements;
(8) the Leases; and
(9) all instruments and documents evidencing Permitted
Senior Indebtedness existing as of the Closing Date;
(g) a Landlord Consent and Waiver from each Bell Atlantic
Seller with respect to each Lease under which such Bell Atlantic
Seller is the lessor;
(h) Pay-Off Letters from the each holder of Indebtedness to be
Refinanced in connection with the consummation of the Bell Atlantic
Acquisition; and
(i) such other instruments, documents, certificates, consents,
waivers and opinions as Agent reasonably may request.
4.2.5 Opinions of Counsel; Direction for Delivery. Agent shall have
received (i) opinions dated the Closing Date from (A) Phillips Nizer
Benjamin Krim & Ballon LLP, counsel to Borrower, and (B) Wiley, Rein &
Fielding, special regulatory counsel for Borrower, in each case addressed
to Agent, as a Lender and as Agent, in such form and covering such matters
as Agent reasonably may require and (ii) copies of letters in form
satisfactory to Agent from Borrower addressed to the counsel described in
clause (i), directing such counsel to deliver to Agent the foregoing
opinions. In addition, Agent shall have received or be entitled to rely
upon opinions dated the Closing Date from counsel to the Bell Atlantic
Sellers, covering such matters as Agent reasonably may require.
4.2.6 Appraisal. Agent shall have received an appraisal of the Bell
Atlantic System prepared by a firm acceptable to Agent indicating a
current fair market value of the Bell Atlantic System of not less than
$28,000,000.
4.3 Conditions to Disbursement of the Merger Portion. The obligation of
Lenders to disburse the Merger Portion, and the right of Borrower under Section
7.3 to consummate the Paging Partners Merger, shall be subject to the
satisfaction of all of the following conditions on or before the applicable
Funding Date:
4.3.1 Disbursement of Initial Portion. The Initial Portion shall
have been disbursed.
4.3.2 Maximum Leverage. Borrower shall demonstrate to the
satisfaction of Agent that, assuming the Merger Portion had been disbursed
and the Paging Partners Merger had been consummated on the last day of the
second month prior to the month in which the Funding Date of the Merger
Portion is to occur, (i) the Senior Leverage Ratio as of such last
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day would not exceed 4.0 and (ii) the Total Leverage Ratio as of such last
day would not exceed 5.0.
4.3.3 Consummation of Paging Partners Merger. Agent shall have
received evidence that (i) Borrower has acquired good title to all other
Property necessary for the operation of the Paging Partners System, free
and clear of all Liens other than Permitted Liens and (ii) the Paging
Partners Merger shall have been consummated in accordance with the terms
of the Paging Partners Merger Instruments and as contemplated by this Loan
Agreement.
4.3.4 Delivery of Documents. The following shall have been delivered
to Agent, each duly authorized and executed, where applicable, and in form
and substance satisfactory to Agent:
(a) the Paging Partners Merger Additional Loan Instruments;
(b) a good standing certificate for Paging Partners, Paging
Partners Merger Sub and Borrower from the Secretary of State of
Delaware, each dated a recent date prior to the Funding Date of the
Merger Portion;
(c) a certificate of merger from the Delaware Secretary of
State reflecting the consummation of the Paging Partners Merger and
copies of such of the Paging Partners Merger Instruments as are
required to be filed with the Delaware Secretary of State, certified
by the Delaware Secretary of State;
(d) certified copies of (i) the articles of incorporation of
Paging Partners and Paging Partners Merger Sub, together with all
amendments thereto, certified by the Secretary of State of Delaware;
(ii) the by-laws of Paging Partners and Paging Partners Merger Sub,
certified as of the Funding Date of the Merger Portion by the
secretary of Paging Partners and (iii) resolutions adopted by the
board of directors of Paging Partners and Paging Partners Merger Sub
authorizing the execution and delivery of the Paging Partners Merger
Instruments and the consummation of the Paging Partners Merger,
certified as of the Funding Date of the Merger Portion by the
secretary of Paging Partners;
(e) certified copies of (i) the articles of incorporation of
Borrower, together with all amendments thereto as in effect upon the
consummation of the Paging Partners Merger, certified by the
Secretary of State of Delaware; (ii) the by-laws of Borrower,
certified as of the Funding Date of the Merger Portion by the
secretary of Borrower and (iii) resolutions adopted by the board of
directors of Borrower authorizing the execution and delivery of the
Paging Partners Additional Loan Instruments, the Paging Partners
Merger Instruments and the consummation of the Paging Partners
Merger, certified as of the Funding Date of the Merger Portion by
the secretary of Borrower;
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(f) signature and incumbency certificates of officers of
Paging Partners, Paging Partners Merger Sub and Borrower;
(g) certified copies or executed originals of each of the
following:
(1) the Paging Partners Merger Instruments;
(2) the Motorola Indebtedness Instruments;
(3) the Operating Agreements not previously delivered to
Agent;
(4) the Leases not previously delivered to Agent; and
(5) all instruments and documents evidencing Permitted
Senior Indebtedness existing as of the Funding Date of the
Merger Portion;
(h) Pay-Off Letters from the each holder of Indebtedness to be
Refinanced in connection with the consummation of the Paging
Partners Merger; and
(i) such other instruments, documents, certificates, consents,
waivers and opinions as Agent reasonably may request.
4.3.5 Opinions of Counsel; Direction for Delivery. Agent shall have
received (i) opinions dated the Funding Date of the Merger Portion from
(A) Phillips Nizer Benjamin Krim & Ballon LLP, counsel to Borrower, and
(B) Wiley, Rein & Fielding, special regulatory counsel for Borrower, in
each case addressed to Agent, as a Lender and as Agent, in such form and
covering such matters as Agent reasonably may require and (ii) copies of
letters in form satisfactory to Agent from Borrower addressed to the
counsel described in clause (i), directing such counsel to deliver to
Agent the foregoing opinions. In addition, Agent shall have received or be
entitled to rely upon opinions dated the Funding Date of the Merger
Portion from counsel to Paging Partners, covering such matters as Agent
reasonably may require.
4.4 Conditions to Disbursement of the Subsequent Portion. The obligation
of Lenders to disburse the Subsequent Portion shall be subject to the
satisfaction of all of the following conditions on or before the Funding Date of
the Subsequent Portion:
4.4.1 Disbursement of Initial Portion. The Initial Portion shall
have been disbursed.
4.4.2 Maximum Leverage. Borrower shall demonstrate to the
satisfaction of Agent that, assuming the Subsequent Portion had been
disbursed and the Bell Atlantic Seller Note Payment had been made on the
last day of the second month prior to the month in which
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the Funding Date of the Subsequent Portion is to occur, (i) the Senior
Leverage Ratio as of such last day would not exceed 4.0 and (ii) the Total
Leverage Ratio as of such last day would not exceed 5.0.
4.4.3 Bell Atlantic Seller Note Payment. Agent shall have received
evidence satisfactory to Agent that the Bell Atlantic Seller Note Payment
will be paid with the proceeds of the disbursement of the Subsequent
Portion.
4.4.4 Delivery of Documents. A Notice of Borrowing with respect to
the Subsequent Portion shall have been delivered to Agent, duly authorized
and executed and in form and substance satisfactory to Agent.
4.5 Conditions to Disbursement of Acquisition Portion. The obligation of
Lenders to disburse Advances shall be subject to the satisfaction of all of the
following conditions on or before the Funding Date of each such Advance:
4.5.1 Disbursement of Initial Portion. The Initial Portion shall
have been disbursed.
4.5.2 Maximum Leverage. Borrower shall demonstrate to the
satisfaction of Agent that, assuming the requested Advance had been
disbursed and the applicable Subsequent Acquisition, if any, had been
consummated on the last day of the second month prior to the month in
which the Funding Date of the requested Advance is to occur, (i) the
Senior Leverage Ratio as of such last day would not exceed 4.0 and (ii)
the Total Leverage Ratio as of such last day would not exceed 5.0.
4.5.3 Amount and Frequency of Advances. The requested Advance shall
be in a minimum amount of $250,000 and no more than one Advance not
related to a Subsequent Acquisition shall be made in any quarter. The
amount of the requested Advance, when added to the aggregate amount of all
prior Advances, shall not exceed the amount of the Acquisition Portion
then in effect.
4.5.4 Purpose of Advance. If the requested Advance is to be used:
(a) to consummate a Subsequent Acquisition or to pay all or
any portion of the Bell Atlantic Seller Indebtedness, Agent shall
have received evidence that the Motorola Indebtedness has been paid
in full and the Motorola Liens have been released;
(b) to consummate a Subsequent Acquisition, to pay all or any
portion of the Letters of Credit Indebtedness or to pay all or any
portion of the Deferred Payment Indebtedness, Agent shall have
received evidence that (i) the Motorola Indebtedness has been paid
in full and the Motorola Liens have been released, (ii) the
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Bell Atlantic Seller Note Payment has been paid in full and (iii)
either (A) the Bell Atlantic Seller Indebtedness has been paid in
full and the Bell Atlantic Seller Indebtedness Liens have been
released or (B) after giving effect to such requested Advance, Agent
shall be satisfied that the Principal Balance would not exceed any
applicable limits on "Senior Indebtedness" under the Bell Atlantic
Seller Subordination Agreement.
4.5.5 Information Regarding Subsequent Acquisitions. If the proceeds
of the requested Advance are to be used to consummate a Subsequent
Acquisition, within a reasonable period of time prior to the proposed
Funding Date of the requested Advance Agent shall have received from
Borrower a description of the proposed Subsequent Acquisition accompanied
by a description of the operations history and relevant market information
with respect to the Paging Business proposed to be acquired, a discussion
of competition and information regarding key personnel with respect to
such Paging Business, and such other financial statements, reports,
projections and information with respect to the operation of such Paging
Business as Agent reasonably may require, together with the most recent
drafts of the applicable Subsequent Acquisition Instruments.
4.5.6 Consent to Subsequent Acquisition. If the proceeds of the
requested Advance are to be used to consummate a Subsequent Acquisition
other than a Small Subsequent Acquisition, or if the aggregate gross
purchase prices payable in connection with all prior Small Subsequent
Acquisitions is $750,000 or greater, Agent shall have consented to such
Subsequent Acquisition, which consent may be given or withheld in Agent's
sole discretion.
4.5.7 Consummation of Subsequent Acquisition. If the proceeds of the
requested Advance are to be used to consummate a Subsequent Acquisition,
Agent shall have received evidence that (i) the Subsequent Acquisition has
been consummated in accordance with the terms of the applicable Subsequent
Acquisition Instruments and as contemplated by this Loan Agreement, (ii)
if such Subsequent Acquisition is an Asset Acquisition, Borrower will
acquire concurrently with the applicable Funding Date of the requested
Advance good title to all of the Property being purchased pursuant to such
Subsequent Acquisition Instruments, free and clear of all Liens and
Indebtedness, except such Liens and Indebtedness permitted hereunder as
Borrower has agreed to assume or take subject to pursuant to the
Subsequent Acquisition Instruments, (iii) if such Subsequent Acquisition
is an Equity Acquisition (A) the equity securities which are the subject
of such Subsequent Acquisition and the Property of the Person being
acquired in such Subsequent Acquisition shall be free and clear of all
Liens and Indebtedness, except such Liens and Indebtedness permitted
hereunder as Borrower has agreed to assume or take subject to pursuant to
such Subsequent Acquisition Instruments, (B) Agent shall be satisfied that
adequate provision has been made to protect Borrower against the
assumption of material undisclosed liabilities and (C) on the Funding Date
of the requested Advance, the Person being acquired in such Subsequent
Acquisition will be merged with and into Borrower with the Borrower being
the surviving entity (a "Subsequent Acquisition Merger").
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4.5.8 Delivery of Documents. The following shall have been delivered
to Agent, each duly authorized and executed, where applicable, and in form
and substance satisfactory to Agent:
(a) the applicable Subsequent Acquisition Additional Loan
Instruments;
(b) a good standing certificate for Borrower from the
Secretary of State of each new State in which Borrower will be
conducting its Paging Business as a result of the consummation of
such Subsequent Acquisition, each dated a recent date prior to the
Funding Date of the requested Advance;
(c) certified copies of (i) any amendments to the articles of
incorporation of Borrower since the most recent Funding Date,
certified by the Secretary of State of Delaware as of a recent date
prior to the Funding Date of the applicable Advance; (ii) any
amendments to the by-laws of Borrower since the most recent Funding
Date, certified as of the Funding Date of the requested Advance by
the secretary of Borrower and (iii) resolutions adopted by the board
of directors of Borrower authorizing the execution and delivery of
the applicable Subsequent Acquisition Additional Loan Instruments
and the applicable Subsequent Acquisition Instruments and the
consummation of the transactions contemplated thereby, certified as
of the Funding Date of the requested Advance by the secretary of
Borrower;
(d) signature and incumbency certificates of officers of
Borrower;
(e) if the requested Advance is being used in connection with
an Equity Acquisition:
(1) a good standing certificate for the Person being
acquired, dated a recent date prior to the Funding Date of the
requested Advance;
(2) a certificate of merger from the Delaware Secretary
of State and the State in which the Person being acquired is
organized reflecting the consummation of the Subsequent
Acquisition Merger and copies of such of the instruments as
are required to be filed with the respective Secretaries of
State, certified by the respective Secretaries of State;
(f) certified copies of (i) the articles of incorporation or
organization or certificate of limited partnership, as applicable,
of the applicable Subsequent Acquisition Seller, together with all
amendments thereto, certified by the Secretary of State where the
Subsequent Acquisition Seller is organized; (ii) the by-laws,
partnership agreement or limited liability company operating
agreement of the Subsequent Acquisition Seller, as applicable,
certified as of the Funding Date of the requested Advance by the
Subsequent Acquisition Seller and (iii) resolutions adopted by the
board of directors, general partner or manager of the Subsequent
Acquisition
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Seller authorizing execution and delivery of the applicable
Subsequent Acquisition Instruments and the consummation of the
Subsequent Acquisition, certified as of the Funding Date of the
requested Advance by the Subsequent Acquisition Seller;
(g) certified copies or executed originals of each of the
following:
(1) the applicable Subsequent Acquisition Instruments;
(2) the Operating Agreements not previously delivered to
Agent;
(3) the Leases not previously delivered to Agent; and
(4) all instruments and documents evidencing Permitted
Senior Indebtedness existing as of the Funding Date of the
requested Advance;
(h) Pay-Off Letters from the each holder of Indebtedness to be
Refinanced in connection with the consummation of the applicable
Subsequent Acquisition; and
(i) such other instruments, documents, certificates, consents,
waivers and opinions as Agent reasonably may request.
4.5.9 Opinions of Counsel; Direction for Delivery. Agent shall have
received (i) opinions dated the Funding Date of the requested Advance from
(A) Phillips Nizer Benjamin Krim & Ballon LLP, counsel to Borrower, and
(B) Wiley, Rein & Fielding, special regulatory counsel for Borrower, in
each case addressed to Agent, as a Lender and as Agent, in such form and
covering such matters as Agent reasonably may require and (ii) copies of
letters in form satisfactory to Agent from Borrower addressed to the
counsel described in clause (i), directing such counsel to deliver to
Agent the foregoing opinions. In addition, Agent shall have received or be
entitled to rely upon opinions dated the Funding Date of the requested
Advance from counsel to any applicable Subsequent Acquisition Seller,
covering such matters as Agent reasonably may require.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and Lenders as follows:
5.1 Existence and Power. Borrower is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware. Borrower
is in good standing under the laws of each other jurisdiction in which the
failure to be in good standing could have a Material Adverse Effect. Borrower
has all requisite power and authority to own its Property and to carry on its
business as now conducted and as proposed to be conducted following the Closing
Date.
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5.2 Authority. Borrower has full power and authority to enter into,
execute, deliver and carry out the terms of the Instruments to which it is a
party and to incur the obligations provided for therein, all of which have been
duly authorized by all proper and necessary action and are not prohibited by its
articles of incorporation or by-laws.
5.3 Borrower Capital Stock and Related Matters.
5.3.1 Borrower Capital Stock. There is set forth in Exhibit 5.3.1 a
complete description of the Borrower Capital Stock. The Borrower Capital
Stock is validly issued, fully paid and non-assessable, and has been
issued and sold in compliance with all applicable federal and state laws,
rules and regulations, including, without limitation, all so-called
"Blue-Sky" laws. The Borrower Capital Stock is owned beneficially and of
record by the Persons in the respective percentages set forth on Exhibit
5.3.1, free and clear of all Liens except the Security Interests.
5.3.2 Restrictions. Except as set forth in Exhibit 5.3.2, Borrower
(i) is not a party to and has no knowledge of any agreements restricting
the transfer of the Borrower Capital Stock, except the Loan Instruments
and the Paging Partners Merger Agreement, (ii) except as provided in the
Paging Partners Merger Agreement, has not issued any rights which can be
convertible into or exchangeable or exercisable for any Borrower Capital
Stock, or any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character
relating to, any of the Borrower Capital Stock or any securities
convertible into or exchangeable or exercisable for any Borrower Capital
Stock and (iii) is not subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any Borrower Capital Stock.
Borrower is not required to file, and Borrower has not filed, pursuant to
the Securities Act or Section 12 of the Securities Exchange Act, a
registration statement relating to any class of debt or equity securities.
5.4 Binding Agreements. This Loan Agreement and the other Loan
Instruments, when executed and delivered, will constitute the valid and legally
binding obligations of Borrower to the extent Borrower is a party thereto,
enforceable against Borrower in accordance with their respective terms, except
as such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and (ii) equitable principles
(whether or not any action to enforce such document is brought at law or in
equity).
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5.5 Business and Property of Borrower.
5.5.1 Business and Property. Borrower (i) holds all FCC Licenses
necessary to the operation of the System and all other Licenses necessary
to the operation of the System, except where the failure to hold such
other Licenses could not reasonably be expected to have a Material Adverse
Effect and (ii) has not engaged in and does not propose to engage in any
business activity other than the operation of the System and the Paging
Business relating thereto.
5.5.2 Licenses. There is set forth in Exhibit 5.5.2 a description of
all material Licenses which have been issued or assigned to Borrower,
including all such Licenses issued by the FCC. All of such Licenses are in
full force and effect and have been duly issued in the name of, or validly
assigned to, Borrower, no default or breach exists thereunder and Borrower
has full power and authority thereunder to operate the System and the
Paging Business relating thereto.
5.5.3 Operating Agreements. There is set forth in Exhibit 5.5.3 a
description of all material Operating Agreements relating to the operation
of the System. Each such Operating Agreement is in full force and effect
and no event has occurred which could result in the cancellation or
termination of any such Operating Agreement or the imposition thereunder
of any liability upon Borrower which could have a Material Adverse Effect.
5.5.4 Facility Sites. There is set forth in Exhibit 5.5.4 the
locations of the chief executive office of Borrower, the locations of all
of Borrower's Property, the places where Borrower's books and records are
kept and the locations of all switches, transmitters, control points,
antennae, equipment and offices presently used in the operation of the
System.
5.5.5 Leases. There is set forth in Exhibit 5.5.5 a list of all
Leases, together with a complete and accurate address of each parcel of
Leasehold Property subject to such Leases and the address of each Landlord
under such Lease. Each Lease is in full force and effect, there has been
no default in the performance of any of its terms or conditions by
Borrower or, to the best knowledge of Borrower, any other party thereto,
and, to the best knowledge of Borrower, no claims of default have been
asserted with respect thereto. The present and contemplated use of the
Leasehold Property is in compliance with all applicable zoning ordinances
and regulations and other laws and regulations, the violation of which
could have a Material Adverse Effect.
5.5.6 Real Estate. There is set forth in Exhibit 5.5.6 a complete
and accurate address and legal description of the Real Estate, together
with the tax identification numbers applicable thereto. The present and
contemplated use of the Real Estate is in compliance with all applicable
zoning ordinances and regulations and other laws and regulations the
failure to comply with which would have a Material Adverse Effect.
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5.5.7 Operation and Maintenance of Equipment. To the best knowledge
of Borrower, no Person owning or operating any equipment necessary for the
operation of the System has used, operated or maintained the same in a
manner which now or hereafter could result in the cancellation or
termination of the right of Borrower to use or make use of the same or
which could result in any material liability of Borrower for damages in
connection therewith. To the best knowledge of Borrower, all of the
equipment and other tangible personal property owned by Borrower is, in
all material respects, in good operating condition and repair (subject to
normal wear and tear) and, to the best knowledge of Borrower, has been
used, operated and maintained in substantial compliance with all
applicable laws, rules and regulations.
5.6 Title to Property; Liens. Borrower has (i) good title to all Property
necessary to conduct its Paging Business, except (A) any License which cannot be
transferred without the consent of a Governmental Body and (B) the portion
thereof consisting of a leasehold estate and (ii) a valid leasehold estate in
each portion of its Property which consists of a leasehold estate. All of such
Property is free and clear of all Liens, except Permitted Liens. Upon the proper
filing with the appropriate Governmental Bodies of appropriate Uniform
Commercial Code financing statements, the applicable Loan Instruments will
create valid and perfected first Liens in the Property described therein,
subject in priority only to Permitted Prior Liens.
5.7 Projections and Financial Statements.
5.7.1 Financial Statements. Borrower has delivered to Agent the
financial statements described in Exhibit 5.7.1 pertaining to the
operations of the System. To the best knowledge of Borrower (i) such
financial statements present fairly in all material respects the results
of operations of the System for the periods covered thereby and the
financial condition of the System as of the dates indicated therein, (ii)
all of such financial statements have been prepared in conformity with
GAAP consistently applied, except for the absence of footnotes and subject
to year-end adjustments and (iii) since December 31, 1997, there has been
no change which has had a Material Adverse Effect. Borrower also has
delivered to Agent a pro-forma balance sheet as of the Closing Date. Such
pro-forma balance sheet, which assumes the consummation of the
transactions contemplated by the Instruments, presents fairly in all
material respects the anticipated financial condition of Borrower as of
the Closing Date.
5.7.2 Projections. Borrower has delivered to Agent the projections
described in Exhibit 5.7.2 of the future operations of Borrower. Such
projections represent the best estimates of future performance of Borrower
believed by Borrower to be reasonable as of the Closing Date.
5.8 Litigation. There is set forth in Exhibit 5.8 a description of all
actions, suits, arbitration proceedings and claims pending or, to the best
knowledge of Borrower, threatened against Borrower, relating to the System or
the business or operations thereof or maintained by Borrower
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at law or in equity or before any Governmental Body which if adversely
determined could reasonably be expected to have a Material Adverse Effect. None
of the matters set forth in such Exhibit 5.8 could reasonably be expected to be
adversely determined.
5.9 Defaults in Other Agreements; Consents; Conflicting Agreements.
Borrower is not in default under any agreement to which it is a party or by
which it or any of its Property is bound, the effect of which default could have
a Material Adverse Effect. No material authorization, consent, approval or other
action by, and no notice to or filing with, any Governmental Body or any other
Person which has not already been obtained, taken or filed, as applicable, is
required (i) for the due execution, delivery or performance by Borrower of any
of the Instruments to which Borrower is a party or (ii) as a condition to the
validity or enforceability of any of the Instruments to which Borrower is a
party or any of the transactions contemplated thereby or the priority of the
Security Interests, except for (A) certain filings to establish and perfect the
Security Interests and (B) filing of certain of the Loan Instruments with the
FCC. No provision of any mortgage, indenture, material contract, material
agreement, statute, rule, regulation, judgment, decree or order binding on
Borrower or affecting its Property conflicts with, or requires any consent which
has not already been obtained under, or would in any way prevent the execution,
delivery or performance of the terms of any of the Instruments or affect the
validity or priority of the Security Interests. The execution, delivery and
performance of the terms of the Instruments will not constitute a default under,
or result in the creation or imposition of, or obligation to create, any Lien
other than Permitted Liens upon the Property of Borrower pursuant to the terms
of any such mortgage, indenture, contract or agreement.
5.10 Taxes. Borrower has filed all tax returns required to be filed, and
has paid, or made adequate provision for the payment of, all taxes shown to be
due and payable on such returns or in any assessments made against it, except
such taxes or assessments as are being contested in good faith and by
appropriate proceedings diligently conducted and for which adequate reserves
have been set aside in accordance with GAAP, and no tax liens have been filed
and, to the best knowledge of Borrower, no claims are being asserted in respect
of such taxes which are required by GAAP to be reflected in the financial
statements of Borrower and are not so reflected therein. The charges, accruals
and reserves on the books of Borrower with respect to all federal, state, local
and other taxes are considered by the management of Borrower to be adequate, and
Borrower does not know of any unpaid assessment which is or might be due and
payable by Borrower or create a Lien against any of Borrower's Property, except
such assessments as are being contested in good faith and by appropriate
proceedings diligently conducted, and for which adequate reserves have been set
aside in accordance with GAAP. None of the tax returns of Borrower are under
audit and Borrower is not the subject or target of any investigation by the
Internal Revenue Service.
5.11 Compliance with Applicable Laws. Borrower is not in default in
respect of any judgment, order, writ, injunction, decree or decision of any
Governmental Body, which default could have a Material Adverse Effect. Borrower
is in compliance in all material respects with all applicable statutes and
regulations, including, without limitation, the Communications Act, all
Environmental Laws, ERISA, ADA and all laws and regulations relating to unfair
labor practices, equal employment opportunity and employee safety, of all
Governmental Bodies, the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. No material condemnation, eminent
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domain or expropriation has been commenced or, to the best knowledge of
Borrower, threatened against Borrower's Property.
5.12 Patents, Trademarks, Franchises, Agreements. Borrower owns, possesses
or has the right to use all patents, trademarks, service marks, trade names,
copyrights, franchises and rights with respect thereto (i) which are necessary
for the conduct of the Paging Business proposed to be conducted by Borrower
after the Closing Date and (ii) for which the failure to own, possess or have
the right to use could have a Material Adverse Effect, in each case, without any
known conflict with the rights of others and free of any Liens other than the
Security Interests.
5.13 FCC Matters. Borrower (i) has duly and timely filed all reports and
other filings which are required to be filed by Borrower under the
Communications Act and any other applicable law, rule or regulation of any
Governmental Body, the non-filing of which could have a Material Adverse Effect,
and (ii) is in compliance with the Communications Act and all such laws, rules
and regulations, the noncompliance with which could have a Material Adverse
Effect. All information provided by or on behalf of Borrower in any material
filing with the FCC was at the time of filing true, complete and correct in all
material respects, and the FCC has been notified of any substantial or
significant changes in such information as required in accordance with the
Communications Act and all other applicable laws, rules and regulations.
5.14 Environmental Matters. Borrower is in compliance in all material
respects with all applicable Environmental Laws and no portion of any of Real
Estate or the Leasehold Property has been used as a land fill. To the best
knowledge of Borrower, there currently are not any known Hazardous Materials
generated, manufactured, released, stored, buried or deposited over, beneath, in
or on (or used in the construction and/or renovation of) the Real Estate or
Leasehold Property in violation of applicable Environmental Laws.
5.15 Application of Certain Laws and Regulations. Borrower is not and no
Affiliate of Borrower is:
5.15.1 Investment Company Act. An "investment company," or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.15.2 Holding Company Act. A "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
5.15.3 Foreign or Enemy Status. (i) An "enemy" or an "ally of an
enemy" within the meaning of Section 2 of the Trading with the Enemy Act,
(ii) a "national" of a foreign country designated in Executive Order No.
8389, as amended, or of any "designated enemy country" as defined in
Executive Order No. 9095, as amended, of the President of the United
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States of America, in each case within the meaning of such Executive
Orders, as amended, or of any regulation issued thereunder, (iii) a
"national of any designated foreign country" within the meaning of the
Foreign Assets Control Regulations or the Cuban Assets Control Regulations
of the United States of America (Code of Federal Regulations, Title 31,
Chapter V, Part 515, Subpart B, as amended) or (iv) an alien or a
representative of any alien or foreign government within the meaning of
Section 310 of Title 47 of the United States Code.
5.15.4 Regulations as to Borrowing. Subject to any statute or
regulation which regulates the incurrence of any Indebtedness for Borrowed
Money, including, without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services.
5.16 Margin Regulations. None of the transactions contemplated by this
Loan Agreement or any of the other Loan Instruments, including the use of the
proceeds of the Loan, will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U and X, and Borrower
does not own or intend to carry or purchase any "margin security" within the
meaning of such Regulation U or G.
5.17 Other Indebtedness. Upon the Closing, there will be no Indebtedness
for Borrowed Money owed by Borrower to any Person, except (i) Borrower's
Obligations, (ii) the Bell Atlantic Seller Indebtedness, (iii) the Letters of
Credit Indebtedness, (iv) the Deferred Payment Indebtedness and (v) Permitted
Senior Indebtedness permitted to exist as of the Closing Date pursuant to this
Loan Agreement.
5.18 No Misrepresentation. Neither this Loan Agreement nor any other Loan
Instrument, certificate, information or report furnished or to be furnished by
or on behalf of Borrower to Agent or any Lender in connection with any of the
transactions contemplated hereby or thereby, contains or will contain a
misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements contained herein or
therein, taken as a whole, not misleading in the light of the circumstances
under which such statements were made. There is no fact, other than information
known to the public generally, known to Borrower after diligent inquiry, that
could have a Material Adverse Effect that has not expressly been disclosed to
Agent in writing.
5.19 Employee Benefit Plans.
5.19.1 No Other Plans. Neither Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under, any Employee
Benefit Plan other than those identified on Exhibit 5.19.1. Borrower has
provided Agent accurate and complete copies of all contracts, agreements
and documents described on Exhibit 5.19.1.
5.19.2 ERISA and Code Compliance and Liability. Borrower and each
ERISA Affiliate are in compliance with all applicable provisions of ERISA
and the regulations and
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published interpretations thereunder with respect to all Employee Benefit
Plans except where failure to comply would not result in a material
liability to Borrower and except for any required amendments for which the
remedial amendment period as defined in Section 401(b) of the Code has not
yet expired. Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been or will be determined by the
Internal Revenue Service to be so qualified, and each trust related to
such plan has been or will be determined to be exempt under Section 401(a)
of the Code. No material liability has been incurred by Borrower or any
ERISA Affiliate which remains unsatisfied for any taxes or penalties with
respect to any Employee Benefit Plan or any Multiemployer Plan.
5.19.3 Funding. No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code)
been insured (without regard to any waiver granted under Section 412 of
the Code), nor has any funding waiver from the Internal Revenue Service
been received or requested with respect to any Pension Plan, nor has
Borrower or any ERISA Affiliate failed to make any contributions or to pay
any amounts due and owing as required by Section 412 of the Code, Section
302 of ERISA or the terms of any Pension Plan prior to the due dates of
such contributions under Section 412 of the Code or Section 302 of ERISA,
nor has there been any event requiring any disclosure under Section
4041(c)(3)(C), 4063(a) or 4068 of ERISA with respect to any Pension Plan.
5.19.4 Prohibited Transactions and Payments. Neither Borrower nor
any ERISA Affiliate has: (i) engaged in a nonexempt "prohibited
transaction" as such term is defined in Section 406 of ERISA or Section
4975 of the Code; (ii) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid; (iii) failed to make a required
contribution or payment to a Multiemployer Plan; or (iv) failed to make a
required installment or other required payment under Section 412 of the
Code.
5.19.5 No Termination Event. No Termination Event has occurred or is
reasonably expected to occur.
5.19.6 ERISA Litigation. No material proceeding, claim, lawsuit
and/or investigation is existing or, to the best knowledge of Borrower,
threatened concerning or involving any (i) employee welfare benefit plan
(as defined in Section 3(1) of ERISA) currently maintained or contributed
to by Borrower or any ERISA Affiliate, (ii) Pension Plan or (iii)
Multiemployer Plan.
5.20 Employee Matters.
5.20.1 Collective Bargaining Agreements; Grievances. Except as set
forth in Exhibit 5.20.1, (i) none of the employees of Borrower is subject
to any collective bargaining agreement with Borrower, (ii) no petition for
certification or union election is pending with respect to the employees
of Borrower and no union or collective bargaining unit has sought
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such certification or recognition with respect to the employees of
Borrower and (iii) there are no strikes, slowdowns, work stoppages, unfair
labor practice complaints, grievances, arbitration proceedings or
controversies pending or, to the best knowledge of Borrower, threatened
against Borrower by any of Borrower's employees, other than employee
grievances or controversies arising in the ordinary course of business
that could not in the aggregate be expected to have a Material Adverse
Effect.
5.20.2 Claims Relating to Employment. Neither Borrower nor, to
Borrower's best knowledge, any employee of Borrower, is subject to any
employment agreement or non-competition agreement with any former employer
or any other Person which agreement would have a Material Adverse Effect
due to (i) any information which Borrower would be prohibited from using
under the terms of such agreement or (ii) any legal considerations
relating to unfair competition, trade secrets or proprietary information.
5.21 Burdensome Obligations. After giving effect to the transactions
contemplated by the Instruments (i) Borrower (A) will not be a party to or be
bound by any franchise, agreement, deed, lease or other instrument, or be
subject to any restriction, which is so unusual or burdensome so as to cause, in
the foreseeable future, a Material Adverse Effect and (B) does not intend to
incur, or believe that it will incur, debts beyond its ability to pay such debts
as they become due, and (ii) Borrower (A) owns and will own Property, the fair
saleable value of which is (I) greater than the total amount of its liabilities
(including contingent liabilities) and (II) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured, and (B) has and will have capital that is not
unreasonably small in relation to its business as presently conducted and as
proposed to be conducted. Borrower does not presently anticipate that future
expenditures needed to meet the provisions of federal or state statutes, orders,
rules or regulations will be so burdensome so as to have a Material Adverse
Effect.
5.22 Broker Fees. The services of a broker or other similar agent have not
been used in connection with the Loan, other than Deerfield Partners and PCS
Management, whose fees, not to exceed $300,000 in the case of Deerfield Partners
or $225,000 in the case of PCS Management, will be paid in full by Borrower upon
the Closing in the manner permitted under Section 7.16.
5.23 Pagers in Service. As of the Closing Date, there are no less than
190,000 Pagers in Service. Upon the consummation of the Paging Partners Merger,
there will be no less than 410,000 Pagers in Service.
5.24 Insurance. No notice of cancellation has been received with respect
to any insurance policies required pursuant to Section 6.6.1 and Borrower is in
material compliance with all conditions contained in such policies.
5.25 Representations and Warranties in Certain Documents. To the best
knowledge of Borrower, the representations and warranties made by the Bell
Atlantic Sellers in the Bell Atlantic Acquisition Instruments and by Paging
Partners Corporation in the Paging Partners Merger
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Agreement are true and correct in all material respects as of the Closing Date
and no material default exists thereunder.
5.26 Year 2000 Problem. Borrower has taken all action necessary to assure
that there will be no Material Adverse Effect by reason of the advent of the
year 2000, including without limitation, that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process dates after April 1, 1999.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full
Borrower agrees that it will:
6.1 Legal Existence; Good Standing. Maintain its existence and its good
standing in Delaware and maintain its qualification in each other jurisdiction
in which the failure so to qualify could have a Material Adverse Effect.
6.2 Inspection. Permit representatives of Agent and Lenders, upon
reasonable prior notice and during normal business hours if no Event of Default
or Incipient Default exists and is continuing, or without notice at any time if
an Event of Default or Incipient Default exists and is continuing, to (i) visit
its offices, (ii) examine its books and records and Accountants' reports
relating thereto, (iii) make copies or extracts therefrom, (iv) discuss its
affairs with its employees, (v) examine and inspect its Property and (vi) meet
and discuss its affairs with the Accountants, and such Accountants, as a
condition to their retention by Borrower, are hereby irrevocably authorized by
Borrower to fully discuss and disclose all such affairs with Agent and Lenders.
6.3 Financial Statements and Other Information. Maintain a standard system
of accounting in accordance with GAAP and furnish to each Lender:
6.3.1 Monthly Statements. As soon as available and in any event
within 30 days after the close of each month:
(a) a copy of the balance sheet of Borrower as of the end of
such month, which shall include a line item showing the amount on
deposit in the Bell Atlantic Interest Account as restricted cash,
(b) statements of operations and Operating Cash Flow for such
month and for the period from the beginning of the then current year
to the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period in the
preceding year, and
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(c) a Pager Certificate for each Borrower as of the last day
of such month,
all in reasonable detail, containing such information as Lenders
reasonably may require, and certified as complete and correct, subject to
normal year-end adjustments, by the Chief Financial Officer of Borrower.
6.3.2 Quarterly Statements and Agings. As soon as available and in
any event within 45 days after the close of each quarter:
(a) a copy of the balance sheet of Borrower as of the end of
such quarter,
(b) statements of operations and Operating Cash Flow for such
quarter and for the period from the beginning of the then current
year to the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding
period in the preceding year, and
(c) an aging of Borrower's outstanding accounts payable and
accounts receivable as of the end of such quarter,
all in reasonable detail, containing such information as Lenders
reasonably may require, and certified by the Chief Financial Officer as
complete and correct, subject to normal year-end adjustments.
6.3.3 Annual Statements. As soon as available and in any event
within 90 days after the close of each year:
(a) the balance sheet of Borrower as of the end of such year
and the statements of operations, cash flows, shareholders' equity
(collectively, the "Basic Financial Statements"), Operating Cash
Flow and Excess Cash Flow for such year setting forth in each case
in comparative form the corresponding figures for the preceding
year,
(b) an opinion of the Accountants which shall accompany the
Basic Financial Statements of Borrower, which opinion shall be
unqualified as to going concern and scope of audit, stating that (i)
the examination by the Accountants in connection with such Basic
Financial Statements has been made in accordance with generally
accepted auditing standards, (ii) such Basic Financial Statements
have been prepared in conformity with GAAP and in a manner
consistent with prior periods, and (iii) such Basic Financial
Statements fairly present in all material respects the financial
position and results of operations of Borrower, and
(c) a letter from the Accountants stating that the statements
of Operating Cash Flow and Excess Cash Flow were computed in
accordance with the requirements of this Loan Agreement.
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6.3.4 Officer's Certificates. The financial statements described in
subsection 6.3.2 and 6.3.3 shall be accompanied by a Compliance
Certificate.
6.3.5 Accountants' Certificate. Simultaneously with the delivery of
the certified Basic Financial Statements required by subsection 6.3.3,
copies of a certificate of the Accountants stating that (i) they have
checked the computations delivered by Borrower in compliance with
subsection 6.3.3, and (ii) in making the examination necessary for their
audit or review of the Basic Financial Statements for such year, nothing
came to their attention of a financial or accounting nature that caused
them to believe that (A) Borrower was not in compliance with the terms,
covenants, provisions or conditions of any of the Loan Instruments, or (B)
there shall have occurred any condition or event which would constitute an
Event of Default, or, if so, specifying in such certificate all such
instances of non-compliance and the nature and status thereof.
6.3.6 Audit Reports. Promptly upon receipt thereof, a copy of each
report, other than the reports referred to in subsection 6.3.3, including
any so-called "Management Letter" or similar report, submitted to Borrower
by the Accountants in connection with any annual, interim or special audit
made by the Accountants of the books of Borrower.
6.3.7 Business Plans. Not less than 30 days prior to the end of each
year, a business plan for the Paging Business of Borrower for the
following year setting forth in reasonable detail the projected Operating
Cash Flow, Capital Expenditures and operations budget of such Paging
Business and of Borrower, and such other information as Lenders reasonably
may request, for such following year.
6.3.8 Notice of Defaults; Loss. Prompt written notice if: (i) any
Indebtedness of Borrower is declared or shall become due and payable prior
to its declared or stated maturity, or called and not paid when due, (ii)
there shall occur and be continuing an Event of Default, accompanied by a
statement of the president of Borrower setting forth what action Borrower
proposes to take in respect thereof, or (iii) any event shall occur which
has a Material Adverse Effect, including the amount or the estimated
amount of any loss or adverse effect.
6.3.9 Notice of Suits; Adverse Events. Prompt written notice of: (i)
any citation, summons, subpoena, order to show cause or other order naming
Borrower a party to any proceeding before any Governmental Body which
might reasonably be expected to have a Material Adverse Effect, including
with such notice a copy of such citation, summons, subpoena, order to show
cause or other order, (ii) any lapse or other termination of any license,
permit, franchise, agreement or other authorization issued to Borrower by
any Governmental Body or any other Person that is material to the
operation of the Paging Business of Borrower, (iii) any refusal by any
Governmental Body or any other Person to renew or extend any such license,
permit, franchise, agreement or other authorization and (iv) any dispute
between Borrower and any Governmental Body or any other Person, which
lapse,
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termination, refusal or dispute referred to in clauses (ii) and (iii)
above or in this clause (iv) could have a Material Adverse Effect.
6.3.10 Reports to Shareholders, Creditors and Governmental Bodies.
(a) Promptly upon becoming available, copies of all financial
statements, reports, notices and other statements sent or made
available generally by Borrower to its shareholders, of all regular
and periodic reports and all registration statements and
prospectuses filed by Borrower with any securities exchange or with
the Securities and Exchange Commission or any Governmental Body
succeeding to any of its functions, and of all statements generally
made available by Borrower or others concerning material
developments in the business of Borrower.
(b) Promptly upon becoming available, copies of any periodic
or special reports filed by Borrower with any Governmental Body or
Person, if such reports indicate any material change in the
business, operations, affairs or condition of Borrower, or if copies
thereof are requested by any Lender, and copies of any material
notices and other communications from any Governmental Body or
Person which specifically relate to Borrower.
6.3.11 ERISA Notices and Requests.
(a) With reasonable promptness, and in any event within 30
days after occurrence of any of the following, notice and/or copies
of: (i) the establishment of any new Employee Benefit Plan, Pension
Plan or Multiemployer Plan; (ii) the commencement of contributions
to any Employee Benefit Plan, Pension Plan or Multiemployer Plan to
which Borrower or any of its ERISA Affiliates was not previously
contributing or any increase in the benefits of any existing
Employee Benefit Plan, Pension Plan or Multiemployer Plan; (iii)
each funding waiver request filed with respect to any Employee
Benefit Plan and all communications received or sent by Borrower or
any ERISA Affiliate with respect to such request; and (iv) the
failure of Borrower or any of its ERISA Affiliates to make a
required installment or payment under Section 302 of ERISA or
Section 412 of the Code by the due date.
(b) Promptly and in any event within 10 days of becoming aware
of the occurrence of or forthcoming occurrence of any (i)
Termination Event or (ii) "prohibited transaction," as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Pension Plan or any trust created thereunder, a
notice specifying the nature thereof, what action Borrower has
taken, is taking or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto.
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(c) With reasonable promptness but in any event within 10 days
after the occurrence of any of the following, copies of: (i) any
favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit
Plan under Section 401(a) of the Code; (ii) all notices received by
Borrower or any ERISA Affiliate of the PBGC's intent to terminate
any Pension Plan or to have a trustee appointed to administer any
Pension Plan; (iii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by Borrower or any ERISA
Affiliate with the Internal Revenue Service with respect to each
Pension Plan; and (iv) all notices received by Borrower or any ERISA
Affiliate from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section
4202 of ERISA; and written notice within two Business Days of
Borrower's or any ERISA Affiliate's filing of or intention to file a
notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA.
6.3.12 Other Information.
(a) Immediate notice of any material change in, or termination
of, the employment of John X. Adiletta, any change in the location
of any Property of Borrower which is material to or necessary for
the continued operation of Borrower's business, any change in the
name of Borrower, any sale or purchase of Property outside the
regular course of business of Borrower, and any change in the
business or financial affairs of Borrower, which change could have a
Material Adverse Effect.
(b) Promptly upon request therefor, such other information and
reports relating to the past, present or future financial condition,
operations, plans and projections of Borrower as Lenders reasonably
may request from time to time.
6.4 Reports to Governmental Bodies and Other Persons. Timely file all
material reports, applications, documents, instruments and information required
to be filed pursuant to all rules, regulations or requests of any Governmental
Body or other Person having jurisdiction over the operation of the business of
Borrower, including, but not limited to, such of the Loan Instruments as are
required to be filed with any such Governmental Body or other Person pursuant to
applicable rules and regulations promulgated by such Governmental Body or other
Person, except where the failure to file could not reasonably be expected to
have a Material Adverse Effect.
6.5 Maintenance of Licenses and Other Agreements. Maintain in full force
and effect at all times (subject to any modification in the ordinary of business
which could not reasonably be expected to have a Material Adverse Effect), and
apply in a timely manner for renewal of, all Licenses, trademarks, trade names
and agreements necessary for the operation of its Paging Business, the loss of
any of which could have a Material Adverse Effect, and deliver to Agent (i)
prompt notice of the proposed amendment or modification of any of such Licenses,
trademarks, tradenames or agreements which could reasonably be expected to have
a Material Adverse Effect and (ii) (A) evidence of the filing of any application
for renewal of any such Licenses not later than the last day
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such application may be filed in accordance with applicable law and (B) copies
of any petition filed to deny any such renewal application promptly after
receipt thereof by Borrower.
6.6 Insurance.
6.6.1 Maintenance of Insurance. Maintain in full force and effect
Business Insurance as required by the insurance letter agreement between
Borrower and Agent attached hereto as Exhibit 6.6.1, all of which shall be
written by insurers and in amounts and forms satisfactory to Agent and
otherwise comply with the terms of such insurance letter agreement, and
deliver to Agent such evidence of compliance with this subsection 6.6.1 as
Agent may require.
6.6.2 Claims and Proceeds. Borrower hereby directs all insurers
under all policies of Business Insurance to pay all proceeds payable
thereunder directly to Agent and Borrower hereby authorizes Agent to
collect all such proceeds. Borrower irrevocably appoints Agent (and all
officers, employees or agents designated by Agent) as Borrower's true and
lawful attorney and agent in fact for the purpose of and with power to
make, settle and adjust claims under such policies of insurance, endorse
the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and to make all
determinations and decisions with respect to such policies of insurance.
Borrower acknowledges that such appointment as attorney and agent in fact
is a power coupled with an interest, and therefore is irrevocable. The
insurance proceeds received on account of any loss, damage, destruction or
other casualty (i) if any Event of Default exists and is continuing or if
the aggregate amount thereof exceeds $200,000, at the option of Agent may
be applied to the payment of Borrower's Obligations in the following order
of priority: (A) first, to the payment of any and all sums which then are
due and payable pursuant to the terms of the Loan Instruments, other than
the Principal Balance and interest accrued thereon, (B) next, to accrued
and unpaid interest on the Principal Balance and (C) then, to the
Principal Balance of the Loan in the inverse order of the maturity of the
installments thereof, or (ii) at the option of Agent may be (or if no
Event of Default exists and is continuing and the aggregate amount thereof
is $200,000 or less, shall be), held by Agent and applied to pay for the
cost of repair or replacement of the Property which was the subject of
such loss, damage, destruction or other casualty, in which event such
proceeds shall be made available in the manner and under such conditions
as Agent may require. In the event such proceeds are to be applied to the
repair or replacement of Property, the Property shall be repaired or
replaced so as to be of at least equal value and substantially the same
character as prior to such loss, damage, destruction or other casualty
within 90 days after receipt of such proceeds.
6.7 Future Leases. Deliver to Agent, concurrently with the execution by
Borrower, as lessee, of any lease pertaining to real property, (i) an executed
copy thereof, (ii) at the option of Agent, either a leasehold mortgage upon or a
collateral assignment of such lease in favor of Agent, in either case in form
and substance satisfactory to Agent, and (iii) a Landlord Consent and Waiver
from the lessor under such lease.
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6.8 Future Acquisitions of Real Property. Deliver to Agent concurrently
with the (i) execution by Borrower of any contract relating to the purchase by
Borrower of real property, an executed copy of such contract and (ii) closing of
the purchase of such real property, (A) a first mortgage or deed of trust in
favor of Agent on such real property, in form and substance satisfactory to
Agent, (B) a lender's policy of title insurance, in such form and amount and
containing such endorsements as shall be satisfactory to Agent, (C) an ALTA/ACSM
survey of such real property and (D) such other documents and assurances with
respect to such real property as Agent may require.
6.9 Environmental Matters.
6.9.1 Compliance. At all times comply with, and be responsible for,
its material obligations under all Environmental Laws applicable to the
Real Estate, Leasehold Property and any other Property owned by Borrower
or used by Borrower in the operation of Borrower's Paging Business. At its
sole cost and expense, Borrower shall (i) comply in all respects with (A)
any notice of any violation or administrative or judicial complaint or
order having been filed against Borrower, any portion of any Real Estate
or Leasehold Property or any other Property owned by Borrower or used by
Borrower in the operation of its business alleging violations of any law,
ordinance and/or regulation requiring Borrower to take any action in
connection with the release, transportation and/or clean-up of any
Hazardous Materials, and (B) any notice from any Governmental Body or any
other Person alleging that Borrower is or may be liable for costs
associated with a response or clean-up of any Hazardous Materials or any
damages resulting from such release or transportation, or (ii) diligently
contest in good faith by appropriate proceedings any demands set forth in
such notices, provided (A) reserves in an amount reasonably satisfactory
to Agent to pay the costs associated with complying with any such notice
are established by Borrower and (B) no Lien would or will attach to the
Property which is the subject of any such notice as a result of any
compliance by Borrower which is delayed during any such contest. Promptly
upon receipt of any notice described in the foregoing clause (i), Borrower
shall deliver to Agent a copy thereof.
6.9.2 Certification. Deliver to Agent, not later than the first
Business Day of each year, an Environmental Compliance Certificate.
6.10 Compliance with Laws. Comply with the Communications Act and all
other federal, state and local laws, ordinances, requirements and regulations
and all judgments, orders, injunctions and decrees applicable to Borrower and
its operations, the failure to comply with which could have a Material Adverse
Effect.
6.11 Taxes and Claims. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any Property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien (other than
a Permitted Lien) upon the Property of Borrower, provided that Borrower
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shall not be required by this Section 6.11 to pay any such amount if the same is
being contested diligently and in good faith by appropriate proceedings and as
to which Borrower has set aside reserves on its books reasonably satisfactory to
Agent.
6.12 Maintenance of Properties. Maintain all of its Properties necessary
in the operation of its Paging Business in good working order and condition.
6.13 Governmental Approvals. Upon the exercise by Agent and/or Lenders of
any power, right or privilege pursuant to the provisions of any of the Loan
Instruments after the occurrence and during the continuance of any Event of
Default requiring any consent, approval or authorization of any Governmental
Body (including, without limitation, transfers of Licenses), promptly execute
and cause the execution of all applications, certificates, instruments and other
documents that Agent and/or Lenders may be required to obtain for such consent,
approval or authorization.
6.14 Payment of Indebtedness. Except as to matters being contested in good
faith and by appropriate proceedings and except to the extent prohibited by the
terms of this Loan Agreement, the Bell Atlantic Seller Subordination Agreement
or the Motorola Intercreditor Agreement, promptly pay when due, or in
conformance with customary trade terms, all of its Indebtedness.
6.15 Year 2000 Problem. Take all action reasonably necessary to assure
that there will be no Material Adverse Effect by reason of the advent of the
year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities of Borrower effectively
recognize and process dates after April 1, 1999; and, at Agent's request,
provide to Agent assurance reasonably acceptable to Agent that Borrower's
computer-based systems, embedded microchips and other processing capabilities
are year 2000 compatible.
6.16 Bell Atlantic Interest Account. On the first Business Day of each
quarter commencing with April 1, 1999 through and including the first quarter of
2000, deposit in the Bell Atlantic Interest Account such amount as is necessary
to cause the collected balance of funds on deposit therein to be equal to all
accrued and unpaid interest on the Bell Atlantic Seller Indebtedness.
ARTICLE VII
NEGATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full,
Borrower shall not:
7.1 Borrowing. Create, incur, assume or suffer to exist any liability for
Indebtedness for Borrowed Money except (i) Borrower's Obligations, (ii)
Permitted Senior Indebtedness, (iii) the Bell Atlantic Seller Indebtedness, (iv)
the Letters of Credit Indebtedness, (v) the Deferred Payment
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Indebtedness and (v) provided Borrower and Motorola have executed and delivered
to Agent the Motorola Intercreditor Agreement, the Motorola Indebtedness.
7.2 Liens. Create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, except Permitted Liens.
7.3 Merger and Acquisition. Consolidate with or merge with or into any
Person, acquire directly or indirectly all or substantially all of the capital
stock, equity interests or Property of any Person, or acquire any Paging
Business except for (i) the Paging Partners Merger on the terms and conditions
set forth in the Paging Partners Merger Agreement, provided the conditions set
forth in Sections 4.1 and 4.3 have been satisfied and (ii) Subsequent
Acquisitions, provided the conditions set forth in Sections 4.1 and 4.5 have
been satisfied.
7.4 Contingent Liabilities. Assume, guarantee, endorse, contingently agree
to purchase, become liable in respect of any letter of credit, or otherwise
become liable upon the obligation of any Person, except for liabilities arising
from the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business and for the Letters of
Credit Indebtedness.
7.5 Distributions. Make any dividends, distributions or other shareholder
expenditures with respect to the Borrower Capital Stock or apply any of its
Property to the purchase, redemption or other retirement of, or set apart any
sum for the payment of, or make any other distribution by reduction of capital
or otherwise in respect of, any of the Borrower Capital Stock, except that,
provided that no Event of Default or Incipient Default exists and is continuing,
any Required Excess Cash Flow Prepayment has been made, and any payment required
under the Bell Atlantic Seller Indebtedness Instruments has been made, Borrower
may, within 120 days after the end of 2000 and the end of each year thereafter,
pay dividends to its shareholders in an aggregate amount not to exceed the
remainder of (i) the Net Excess Cash Flow for such year minus (ii) the sum of
(A) the amount of any prepayment of the Bell Atlantic Seller Indebtedness during
such 120 day period permitted under subsection 7.7.3, (B) the amount of any
payments on account of the Letters of Credit Indebtedness during such 120 day
period permitted under subsection 7.7.4 and (C) the amount of any payments on
account of the Deferred Payment Indebtedness permitted under subsection 7.7.5.
7.6 Capital Expenditures. Make or incur any Capital Expenditures in any
year set forth below in excess of the amount set forth below opposite such year,
except to the extent such Capital Expenditures are made from the proceeds of
additional cash capital contributions to Borrower and no Event of Default exists
and is continuing at the time such cash capital contributions are made:
Year Amount
---- ------
1999 $3,600,000
2000 $3,500,000
2001 $3,300,000
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2002 $3,000,000
2003 $3,000,000
7.7 Payments of Indebtedness for Borrowed Money. Make any payment or
prepayment on account of any Indebtedness for Borrowed Money other than
Borrower's Obligations, except that Borrower may:
7.7.1 Permitted Senior Indebtedness. Make regularly scheduled
payments on account of Permitted Senior Indebtedness.
7.7.2 Motorola Indebtedness. Make (i) regularly scheduled payments
on account of the Motorola Indebtedness (A) if no Event of Default under
subsection 8.1.1, clauses (ii), (iii), (iv) or (v) of subsection 8.1.5(a),
subsection 8.1.5(b), subsection 8.1.7 or 8.1.2(a) with respect to Sections
7.18, 7.19 or 7.20 exists and is continuing or (B) while any such Event of
Default exists and is continuing provided that concurrently with the
making of any such payment, Borrower pays to Lenders on account of
Borrower's Obligations (such payment to be applied in such order as
Lenders may determine) an amount equal to the quotient of (x) the amount
of such payment to Motorola divided by (y) the Motorola Ratable Share
determined immediately prior to the making of such payment to Motorola,
(ii) prepayments on account of the Motorola Indebtedness to the extent
provided for in Sections 2.8 and 2.9 and (iii) prepayments on account of
the Motorola Indebtedness from proceeds of the Acquisition Portion subject
to the satisfaction of the conditions set forth in Section 4.5 provided
that no Event of Default exists and is continuing or would be created by
the making of any such prepayments.
7.7.3 Bell Atlantic Seller Indebtedness. Make (i) the Bell Atlantic
Seller Note Payment provided that (A) no Event of Default exists and is
continuing or would be created by the making of such payment, (B) the
Senior Leverage Ratio as of the last day of the month most recently ended
with respect to which Agent has been in receipt for at least 10 days of
the financial statements required under Section 6.3.1 for such month and
assuming such payment had been made on such last day is less than or equal
to 4.0 and (C) the Total Leverage Ratio as of such last day and assuming
such payment had been made on such last day is less than or equal to 5.0,
(ii) regularly scheduled payments of accrued and unpaid interest on the
Bell Atlantic Seller Indebtedness after the date the Bell Atlantic Seller
Note Payment is due and at a rate per annum not in excess of the Base Rate
in effect from time to time plus 1.0% per annum, subject to the terms and
conditions of the Bell Atlantic Seller Subordination Agreement, (iii)
prepayments of the Bell Atlantic Seller Indebtedness within 120 days after
the end of 1999 and the end of each year thereafter in an amount not to
exceed the Net Excess Cash Flow for such year, subject to the terms and
conditions of the Bell Atlantic Seller Subordination Agreement, (iv)
voluntary prepayments of the Bell Atlantic Seller Indebtedness to the
extent permitted by the Bell Atlantic Seller Subordination Agreement and
(v) prepayments on account of the Bell Atlantic Seller Indebtedness from
proceeds of the Acquisition Portion subject to the satisfaction of the
conditions set forth in Section 4.5 provided that no Event of Default
exists and is continuing or would be created by the making of any such
prepayment.
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7.7.4 Letters of Credit Indebtedness. Make (i) the Letters of Credit
Account Parties Payment on or after the Letters of Credit Account Parties
Payment Date provided that (A) no Event of Default exists and is
continuing or would be created by the making of such payment and (B) after
giving effect to the Letters of Credit Account Parties Payment, the Cash
Equivalents would exceed $750,000, (ii) an annual payment within 120 days
after the end of 1999 and each year thereafter on account of accrued and
unpaid interest on and the outstanding principal balance of the Letters of
Credit Indebtedness provided that (A) no Event of Default or Incipient
Default exists and is continuing or would be created by the making of any
such annual payment, (B) any Required Excess Cash Flow Prepayment has been
made, (C) any payment required under the Bell Atlantic Seller Indebtedness
Instruments has been made and (D) the amount of any such annual payment
does not exceed the remainder of (x) the Net Excess Cash Flow for such
year minus (y) the amount of any prepayment of the Bell Atlantic Seller
Indebtedness during such year permitted under subsection 7.7.3 minus (z)
the aggregate amount of all dividends paid to its shareholders during such
120 day period permitted under Section 7.5 and (iii) prepayments on
account of the Letters of Credit Indebtedness from proceeds of the
Acquisition Portion subject to the satisfaction of the conditions set
forth in Section 4.5, provided no Event of Default or Incipient Default
exists and is continuing or would be created by the making of any such
prepayment.
7.7.5 Deferred Payment Indebtedness. Provided that no Event of
Default or Incipient Default exists and is continuing or would be created
by the making of any such payment, Borrower may make payments on account
of the Deferred Payment Indebtedness (i) on March 31, 1999 provided that
after giving effect to any such payment the Cash Equivalents would exceed
$500,000, (ii) on the Paging Partners Merger Closing Date provided that
after giving effect to any such payment the Cash Equivalents would exceed
$750,000 and (iii) from proceeds of the Acquisition Portion subject to the
satisfaction of the conditions set forth in Section 4.5.
7.8 Obligations as Lessee Under Operating Leases. Enter into or suffer to
exist any arrangement as lessee of Property under any Operating Lease if the
aggregate rentals for all such Operating Leases during any year would exceed
$4,000,000.
7.9 Investments, Loans. At any time purchase or otherwise acquire, hold or
invest in the capital stock of, or any other interest in, any Person, or make
any loan or advance to, or enter into any arrangement for the purpose of
providing funds or credit to, or make any other investment, whether by way of
capital contribution or otherwise, in or with any Person, including, without
limitation, any Affiliate, except (i) investments in direct obligations of, or
instruments unconditionally guaranteed by, the United States of America or in
certificates of deposit issued by a Qualified Depository, (ii) investments in
commercial or finance paper which, at the time of investment, is rated "A" or
better by Moody's Investors Service, Inc., or Standard & Poor's Corporation,
respectively, or at the equivalent rate by any of their respective successors,
(iii) any interests in any money market account maintained, at the time of
investment, with a Qualified Depository, the investments of which,
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at the time of investment, are restricted to the types specified in clause (i)
above and (iv) the Adiletta Loan. All investments permitted pursuant to this
Section 7.9 shall have a maturity not exceeding one year.
7.10 Fundamental Business Changes. Materially change the nature of its
business or engage in any business other than the Paging Business.
7.11 Facility Sites. Not change the locations of any tower installations,
transmitters, switches or offices used in the operation of the System unless (i)
Agent shall have received notice of such change not later than 10 Business Days
after such change, (ii) Borrower shall have complied with all applicable laws,
rules and regulations and shall have received all required consents and
approvals from any Governmental Body, including, without limitation, the FCC,
(iii) such change could not reasonably be expected to have a Material Adverse
Effect and (iv) Borrower shall have executed and delivered to Agent any
documents Agent reasonably may require in order to maintain the validity and
priority of the Security Interests.
7.12 Sale or Transfer of Assets. Sell, lease, assign, transfer or
otherwise dispose of any Property except for (i) the sale or disposition of (A)
inventory in the ordinary course of business, (B) Property which is not material
to or necessary for the continued operation of its business and (C) obsolete or
unusable items of equipment which promptly are replaced with new items of
equipment of like function and comparable value to the unusable items of
equipment when the same were new or not obsolete or unusable, provided such
replacement items of equipment shall become subject to the Security Interests,
(ii) Trade Out Transactions consummated in connection with promotional or other
activities, all of which shall be conducted by Borrower in the ordinary course
of business consistent with past practices and (iii) Asset Sales with respect to
which Borrower has obtained Lenders' prior written consent, which consent may be
given or withheld in the sole and absolute discretion of Lenders.
7.13 Amendment of Certain Agreements. Amend, modify or waive any term or
provision of (i) its articles of incorporation or by-laws, except as
contemplated by the Paging Partners Merger Agreement in connection with the
Paging Partners Merger, (ii) the Bell Atlantic Acquisition Instruments, (iii)
the Bell Atlantic Seller Indebtedness Instruments, (iv) the Bell Atlantic
Reseller Agreement, (v) the Letters of Credit Indebtedness Instruments, (vi) the
Deferred Payment Indebtedness Instruments or (vi) the Motorola Indebtedness
Instruments.
7.14 Acquisition of Additional Properties. Acquire any additional Property
except such Property as is necessary to or useful in the operation of its
business and Subsequent Acquisitions, provided that all such acquisitions shall
be subject to the conditions and limitations set forth in this Loan Agreement.
7.15 Equity Sales. Consummate any Equity Sales, including, without
limitation, the issuance or sale of any additional capital stock or any options
or other interests convertible into or exercisable for any such additional
capital stock, without the prior written consent of Lenders, which
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consent may be given or withheld in the sole and absolute discretion of Lenders,
except (i) as contemplated by the Paging Partners Merger Agreement provided that
the Paging Partners Merger has been consummated as permitted pursuant to Section
7.3 and (ii) for the Select Capital Warrants, provided that upon issuance, the
Select Capital Warrants are pledged to Agent pursuant to a pledge agreement in
form and substance substantially similar to the BAP Investors Pledge Agreement.
7.16 Transactions with Affiliates. Sell, lease, assign, transfer or
otherwise dispose of any Property to any Affiliate, lease Property, render or
receive services or purchase assets from any Affiliate, or otherwise enter into
any contractual relationship with any Affiliate on terms which are less
favorable to Borrower than those otherwise reasonably attainable on an arm's
length basis from a Person which is not one of its Affiliates, except that on
the Closing Date Borrower may (i) pay to PCS Management on the Closing Date a
fee of $225,000 by (A) issuing to PCS Management the PCS Management Note and (B)
issuing capital stock of Borrower valued at $150,000 and (ii) pay to Deerfield
Partners a $300,000 fee by (A) making a $36,061 cash payment, (B) issuing to
Deerfield Partners the Deerfield Partners Note and (C) issuing capital stock of
Borrower valued at $113,939.
7.17 Compliance with ERISA.
(i) Permit the occurrence of any Termination Event which would
result in a liability to Borrower or any ERISA Affiliate in excess of
$50,000;
(ii) Permit the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities by more than $50,000;
(iii) Permit any accumulated funding deficiency in excess of $50,000
(as defined in Section 302 of ERISA and Section 412 of the Code) with
respect to any Pension Plan, whether or not waived;
(iv) Fail to make any contribution or payment to any Multiemployer
Plan which Borrower or any ERISA Affiliate may be required to make under
any agreement relating to such Multiemployer Plan, or any law pertaining
thereto which results in or is likely to result in a liability in excess
of $50,000;
(v) Engage, or permit Borrower or any ERISA Affiliate to engage, in
any "prohibited transaction" as such term is defined in Section 406 of
ERISA or Section 4975 of the Code for which a civil penalty pursuant to
Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in
excess of $50,000 is imposed;
(vi) Permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability to
Borrower or any ERISA Affiliate or increase the obligation of Borrower or
any ERISA Affiliate to a Multiemployer Plan which
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liability or increase, individually or together with all similar
liabilities and increases, is material to Borrower or any ERISA Affiliate;
or
(vii) Fail, or permit Borrower or any ERISA Affiliate to fail, to
establish, maintain and operate each Employee Benefit Plan in compliance
in all material respects with ERISA, the Code and all other applicable
laws and regulations and interpretations thereof.
7.18 Senior Leverage Ratio. Permit the Senior Leverage Ratio as of any
date set forth below to be greater than the amount set forth opposite such date:
Date Amount
---- ------
March 31, 1999 4.00
June 30, 1999 4.00
September 30, 1999 4.00
December 31, 1999 4.00
March 31, 2000 4.00
June 30, 2000 4.00
September 30, 2000 3.75
December 31, 2000 3.50
March 31, 2001 3.25
June 30, 2001 3.25
September 30, 2001 3.25
December 31, 2001 3.00
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.50
March 31, 2003 2.50
June 30, 2003 2.50
September 30, 2003 2.50
December 31, 2003 2.50
7.19 Total Leverage Ratio. Permit the Total Leverage Ratio as of any date
set forth below to be greater than the amount set forth opposite such date:
Date Amount
---- ------
March 31, 1999 5.00
June 30, 1999 5.00
September 30, 1999 5.00
December 31, 1999 5.00
March 31, 2000 5.00
June 30, 2000 5.00
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September 30, 2000 4.75
December 31, 2000 4.50
March 31, 2001 4.25
June 30, 2001 4.00
September 30, 2001 3.75
December 31, 2001 3.75
March 31, 2002 3.75
June 30, 2002 3.50
September 30, 2002 3.50
December 31, 2002 3.50
March 31, 2003 3.50
June 30, 2003 3.50
September 30, 2003 3.50
December 31, 2003 3.50
7.20 Senior Debt Service Coverage Ratio. Permit the Senior Debt Service
Coverage Ratio as of any date set forth below to be less than the amount set
forth below opposite such date:
Date Amount
---- ------
March 31, 1999 2.50
June 30, 1999 2.50
September 30, 1999 2.50
December 31, 1999 2.50
March 31, 2000 2.50
June 30, 2000 2.50
September 30, 2000 2.50
December 31, 2000 2.50
March 31, 2001 2.25
June 30, 2001 2.25
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.00
June 30, 2002 2.00
September 30, 2002 2.00
December 31, 2002 2.00
March 31, 2003 1.90
June 30, 2003 1.90
September 30, 2003 1.90
December 31, 2003 1.90
7.21 Certain Agreements. Enter into any joint operating or similar
agreements with respect to the operation of the System or any other paging
system without the prior written consent of Lenders.
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ARTICLE VIII
DEFAULT AND REMEDIES
8.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Loan Instruments:
8.1.1 Default in Payment. If Borrower shall fail to pay all or any
portion of Borrower's Obligations when the same become due and payable.
8.1.2 Breach of Covenants.
(a) If Borrower shall fail to observe or perform any covenant
or agreement made by Borrower contained in subsection 2.8.1(c) or
2.8.2 with respect to payments required to be made to Motorola,
subsection 3.2.1, Section 6.1, 6.2, 6.5, 6.6, 6.9, 6.10, 6.11, 6.13,
6.14 or 6.16 or in Article VII; or
(b) If any Obligor shall fail to observe or perform any
covenant or agreement (other than those referred to in subparagraph
(a) above or specifically addressed elsewhere in this Section 8.1)
made by such Person in any of the Loan Instruments to which such
Person is a party, and such failure shall continue for a period of
30 days after written notice of such failure is given by Lenders.
8.1.3 Breach of Warranty. If any representation or warranty made by
or on behalf of any Obligor in or pursuant to any of the Loan Instruments
or in any instrument or document furnished in compliance with the Loan
Instruments shall prove to be false or misleading in any material respect.
8.1.4 Default Under Other Indebtedness for Borrowed Money. If (i)
Borrower at any time shall be in default (as principal or guarantor or
other surety) in the payment of any principal of or premium or interest on
any Indebtedness for Borrowed Money (other than Borrower's Obligations,
the Letters of Credit Indebtedness or the Deferred Payment Indebtedness)
beyond the grace period, if any, applicable thereto and the aggregate
amount of such payments then in default beyond such grace period shall
exceed $100,000 or (ii) any default shall occur in respect of any issue of
Indebtedness for Borrowed Money of Borrower (other than Borrower's
Obligations, the Letters of Credit Indebtedness or the Deferred Payment
Indebtedness) outstanding in a principal amount of at least $200,000, or
in respect of any agreement or instrument relating to any such issue of
Indebtedness for Borrow ed Money, and such default shall continue beyond
the grace period, if any, applicable thereto.
8.1.5 Bankruptcy.
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(a) If Borrower shall (i) generally not be paying its debts as
they become due, (ii) file, or consent, by answer or otherwise, to
the filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy or insolvency under
the laws of any jurisdiction, (iii) make an assignment for the
benefit of creditors, (iv) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers
for it or for any substantial part of its Property, or (v) be
adjudicated insolvent.
(b) If any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of Borrower, a custodian,
receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its Property, or if
an order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of Borrower of any petition
for any such relief shall be filed against it and such petition
shall not be dismissed or stayed within 60 days.
8.1.6 Judgments. If there shall be entered against Borrower one or
more judgments, awards or decrees, or orders of attachment, garnishment or
any other writ, which exceed $250,000 in the aggregate at any one time
outstanding, excluding judgments, awards, decrees, orders or writs (i) for
which there is full insurance and with respect to which the insurer has
assumed responsibility in writing, (ii) for which there is full
indemnification (upon terms and by creditworthy indemnitors which are
satisfactory to Lenders) or (iii) which have been in force for less than
the applicable period for filing an appeal so long as execution has not
been levied thereunder (or in respect of which Borrower shall at the time
in good faith be prosecuting an appeal or proceeding for review and in
respect of which a stay of execution or appropriate appeal bond shall have
been obtained pending such appeal or review.
8.1.7 Impairment of Licenses; Other Agreements. If (i) any
Governmental Body shall revoke, terminate, suspend or adversely modify any
License of Borrower, the adverse modification or non-continuation of which
could reasonably be expected to have a Material Adverse Effect, or (ii)
there shall exist any violation or default in the performance of, or a
material failure to comply with any agreement, or condition or term of any
License, which violation, default or failure could reasonably be expected
to have a Material Adverse Effect, or (iii) any agreement which is
necessary to the operation of the Paging Business of Borrower shall be
revoked or terminated and not replaced by a substitute acceptable to
Lenders within 30 days after the date of such revocation or termination,
and such revocation or termination and non-replacement could reasonably be
expected to have a Material Adverse Effect.
8.1.8 Collateral. If any material portion of the Collateral shall be
seized or taken by a Governmental Body or Person, or Borrower shall fail
to maintain or cause to be maintained the Security Interests and priority
of the Loan Instruments as against any Person,
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or the title and rights of any Person party to any Loan Instrument to any
material portion of the Collateral shall have become the subject matter of
litigation which could reasonably be expected to result in impairment or
loss of the security provided by the Loan Instruments.
8.1.9 Interruption of Operations. If the operations of the System
shall cease completely at any time for more than 72 hours during any
period of 10 consecutive days, unless (i) the operations of all or
substantially all of the paging systems in the relevant market also are
interrupted for a like period of time and (ii) Borrower shall be receiving
during such period proceeds of business interruption insurance sufficient
to assure that its per diem Operating Cash Flow during such period is at
least equal to its average per diem Operating Cash Flow for the
consecutive three month period preceding the initial date of interruption;
provided, however, that, notwithstanding the provisions of clauses (i) and
(ii) to the contrary, an Event of Default shall be deemed to occur
hereunder if the operations of the System shall cease completely at any
time for more than 120 hours during any period of 20 consecutive days.
8.1.10 Plans. If an event or condition specified in subsection
6.3.11 hereof shall occur or exist with respect to any Pension Plan or
Multiemployer Plan and, as a result of such event or condition, together
with all other such events or conditions, Borrower or any ERISA Affiliate
shall incur, or in the opinion of Lenders be reasonably likely to incur, a
liability to a Pension Plan or Multiemployer Plan or the PBGC (or any of
them) which, in the reasonable judgment of Lender, would have a Material
Adverse Effect.
8.1.11 Change in Control. If (i) John X. Adiletta shall cease to
devote his full business time and effort to the day to day management of
the business and operations of Borrower, (ii) BAP Investors collectively
shall cease to own and control at least 85% of the Borrower Capital Stock
from the Closing Date to the Paging Partners Merger Closing Date, (iii)
prior to the Paging Partners Merger Closing Date, the Management Holders
and their Related Parties shall cease to own and control at least 50% of
the Borrower Capital Stock or (iv) from and after the Paging Partners
Merger Closing Date, any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Securities Exchange Act,
whether or not applicable) is or becomes the "beneficial owner" (as such
term is used in Rules 13d-3 and 13d-5 under the Securities Exchange Act,
whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly (including as a result of a
merger or consolidation), of more than 30% of the total voting power in
the aggregate of all classes of capital stock of Paging Partners then
outstanding normally entitled to vote in elections of directors (but
excluding from the percentage of voting power held by any group the voting
power of shares owned by the Management Holders and their Related Parties
who are deemed to be members of the group, provided that such Management
Holders and Related Parties beneficially own a majority of the total
voting power of capital stock held by such group), if at such time the
Management Holders and their Related
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Parties together shall fail to beneficially own, directly or indirectly,
securities representing at least the same percentage of the combined
voting power of such capital stock as the percentage "beneficially owned"
by such person or group.
8.2 Acceleration of Borrower's Obligations. Upon the occurrence of:
(a) any Event of Default described in clauses (ii), (iii), (iv) and
(v) of subsection 8.1.5(a) or in 8.1.5(b), all of Borrower's Obligations
at that time outstanding automatically shall mature and become due, and
(b) any other Event of Default, Lenders, at any time, at their
option, without further notice or demand, may declare all of Borrower's
Obligations due and payable, whereupon Borrower's Obligations immediately
shall mature and become due and payable,
all without presentment, demand, protest or notice (other than notice of the
declaration referred to in clause (b) above), all of which hereby are waived.
8.3 Remedies on Default. If Borrower's Obligations have been accelerated
pursuant to Section 8.2, Lenders, at their option, may:
8.3.1 Enforcement of Security Interests. Enforce their rights and
remedies under the Loan Instruments in accordance with their respective
terms.
8.3.2 Other Remedies. Enforce any of the rights or remedies accorded
to Lenders and/or Agent at equity or law, by virtue of statute or
otherwise.
8.4 Application of Funds. Any funds received by Lenders or Agent pursuant
to the exercise of any rights accorded to Lenders and/or Agent pursuant to, or
by the operation of any of the terms of, any of the Loan Instruments, including,
without limitation, insurance proceeds, condemnation proceeds or proceeds from
the sale of Collateral shall be applied to Borrower's Obligations in the
following order of priority:
8.4.1 Expenses. First, to the payment of (i) all fees and expenses
actually incurred, including, without limitation, court costs, fees of
appraisers, title charges, costs of maintaining and preserving the
Collateral, costs of sale, and all other costs incurred by Agent and
Lenders, in exercising any rights accorded to such Persons pursuant to the
Loan Instruments or by applicable law, including, without limitation,
reasonable attorney's fees, and (ii) all Liens superior to the Liens of
Agent and the Motorola Liens except such superior Liens subject to which
any sale of the Collateral may have been made.
8.4.2 Borrower's Obligations. Next, to the payment of Borrower's
Obligations in such order as Lenders may determine and, to the extent
required by the Motorola Intercreditor Agreement, to the payment of the
Motorola Indebtedness.
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8.4.3 Surplus. Any surplus, to the Person or Persons entitled
thereto.
8.5 Performance of Borrower's Obligations. If Borrower fails to (i)
maintain in force and pay for any insurance policy or bond which Borrower is
required to provide pursuant to any of the Loan Instruments, (ii) keep the
Collateral free from all Liens except for Permitted Liens, (iii) pay when due
all taxes, levies and assessments on or in respect of the Collateral, except as
otherwise permitted pursuant to the terms hereof, (iv) make all payments and
perform all acts on the part of Borrower to be paid or performed in the manner
required by the terms hereof and by the terms of the other Loan Instruments with
respect to any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, (v) keep fully and perform promptly any other of the obligations of
Borrower hereunder or under any of the other Loan Instruments, and (vi) keep
fully and perform promptly the obligations of Borrower with respect to any issue
of Indebtedness for Borrowed Money secured by a Permitted Prior Lien, then Agent
or Lenders may (but shall not be required to) procure and pay for such insurance
policy or bond, place such Collateral in good repair and operating condition,
pay, contest or settle such Liens or taxes or any judgments based thereon or
otherwise make good any other aforesaid failure of Borrower. Borrower shall
reimburse Agent and Lenders immediately upon demand for all sums paid or
advanced on behalf of Borrower for any such purpose, together with costs and
expenses (including reasonable attorney's fees) paid or incurred by Agent and
Lenders in connection therewith and interest on all sums advanced from the date
of advancement until repaid to Agent and Lenders at the Default Rate. All such
sums advanced by Agent and Lenders, with interest thereon, immediately upon
advancement thereof, shall be deemed to be part of Borrower's Obligations.
ARTICLE IX
ADDITIONAL LENDERS AND PARTICIPANTS; THE AGENT
9.1 Assignment to Other Lenders.
9.1.1 Assignment. FINOVA may make one or more Loan Assignments to an
Assignee and each Assignee, with the prior written consent of Agent (which
may be given or denied in the sole discretion of Agent), may make a Loan
Assignment of the rights and obligations which were assigned to such
Assignee, provided, however, that (i) each Loan Assignment shall be of a
constant, and not a varying, percentage of all rights and obligations of
such Lender under this Loan Agreement, (ii) each Loan Assignment shall not
be less than $5,000,000 and shall be in integral multiples of $1,000,000
in excess thereof, (iii) the parties to each such Loan Assignment shall
execute and deliver to the Agent an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and (iv) FINOVA at all
times shall maintain not less than a 51% interest in Borrower's
Obligations.
9.1.2 Effect of Loan Assignment. Upon the execution, delivery,
acceptance and recording of an Assignment and Acceptance (i) the Assignee
thereunder shall be a party to this Loan Agreement and, to the extent that
rights and obligations hereunder have been
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assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and (ii) the Lender thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Loan Agreement.
9.1.3 Register. Agent shall maintain a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names, addresses, and interests of the Lenders in
Borrower's Obligations (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and
Borrower, Agent and Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by Borrower or any Lender
at any reasonable time and from time to time upon reasonable prior notice.
9.1.4 Substitution of Notes. Simultaneously with the delivery by
Agent to Borrower of any Note which is the subject of a Loan Assignment
which is marked "canceled," Borrower shall execute and deliver to Agent
for delivery to (i) the applicable Assignee, a Note payable to the order
of such Assignee in an amount equal to the amount assigned to such
Assignee, and (ii) the assigning Lender, a Note payable to the order of
such Lender in an amount equal to the amount retained by such Lender, each
such Note to be substantially in the form of the canceled Note.
9.1.5 Inspections. Any action which any Assignee shall desire to
undertake pursuant to Section 6.2 shall be coordinated by such Assignee
through Agent, and Agent shall accompany each such Assignee which desires
to undertake any such action pursuant to Section 6.2.
9.2 Participations. Subject to the restrictions set forth in subsection
9.1.1, each Lender shall have the right to sell Participations. In the event of
the sale of a Participation, the obligations of the Lender selling such a
Participation shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any Note which previously has been delivered to Lender pursuant to the terms of
this Loan Agreement, and Borrower shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Loan Agreement. Notwithstanding the sale of any Participation, all amounts
payable by Borrower pursuant to the terms of the Loan Instruments shall be
determined as if no such Participation had been sold. No Participant shall be
entitled to require a Lender to take or omit to take any action pursuant to the
Loan Instruments except as provided in the Participation Agreement executed by
and between the Participant and such Lender.
9.3 Set Off and Sharing of Payments. Upon the occurrence of any Event of
Default and the acceleration of Borrower's Obligations, each Lender is
authorized by Borrower, at any time or from time to time thereafter, without
notice to Borrower or to any other Person, to set off and to appropriate and
apply any and all balances held by such Lender for the account of Borrower, and
any
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other Property at any time held or owing by such Lender to or for the credit or
for the account of Borrower, against and on account of any of Borrower's
Obligations which are not paid when due. Borrower agrees that (i) each Lender
may exercise its right to set off with respect to amounts in excess of such
Lender's share of Borrower's Obligations and may sell Participations in such
excess to other Lenders and (ii) any Lender so purchasing a Participation in the
Loan made or other of Borrower's Obligations held by other Lenders may exercise
all rights of set-off, bankers' lien, counterclaim or similar rights with
respect to such Participation as fully as if such Lender were a direct holder of
the Loan and other of Borrower's Obligations in the amount of such
Participation.
9.4 Lenders' Decisions. Until a Loan Assignment is made, all Lenders'
Decisions shall be made solely by FINOVA. After a Loan Assignment is made, any
Lenders' Decisions which may be made pursuant to the Loan Instruments by Lenders
or as to which the Lenders shall have the right to consent shall be made as set
forth in the applicable Lender Addition Agreements; provided, however, that (i)
except as set forth in clause (ii) below, such Lender Addition Agreements shall
provide that any holder or holders of 67% or more of the Principal Balance shall
have the right to make all Lenders' Decisions and to consent to any matter
arising under the Loan Instruments without obtaining the consent of any other
holder or holders of the Principal Balance and (ii) the Lender Addition
Agreements may provide that the consent of all Lenders shall be required for
Lenders' Decisions relating to (A) increasing the amount of the Loan, (B)
extending the Maturity Date, (C) altering the interest rates applicable to or
the repayment terms of the Loan or (D) amending Article VII or Article IX.
9.5 Appointment of Agent. Each Lender hereby irrevocably appoints and
authorizes FINOVA to act as Agent for such Lender under this Loan Agreement and
to execute and deliver or accept the other Loan Instruments on behalf of such
Lender. Each Lender hereby irrevocably authorizes, and each holder of any Note
by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent
to take such action on its behalf under the provisions of this Loan Agreement
and the other Loan Instruments and any other instruments and agreements referred
to herein and therein, and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Agent by the terms
of this Loan Agreement, together with such powers as are reasonably incidental
thereto. FINOVA agrees to act as the Agent on behalf of the Lenders to the
extent provided in this Loan Agreement.
9.6 Delegation of Duties. The Agent may perform any of its respective
duties hereunder by or through agents or employees and shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
9.7 Nature of Duties; Independent Credit Investigation. Agent shall have
no duties or responsibilities except those expressly set forth in this Loan
Agreement and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Loan Agreement or otherwise
exist. The duties of Agent shall be mechanical and administrative in nature.
Agent shall not have by reason of this Loan Agreement a fiduciary or trust
relationship in respect of any Lender, and nothing in this Loan Agreement
express or implied, is intended to or shall be so construed as to
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impose upon Agent any obligations in respect of this Loan Agreement except as
expressly set forth herein. Each Lender expressly acknowledges that (i) Agent
has not made any representations or warranties to it and that no act by Agent
hereafter taken, including any review of the affairs of any of the Persons party
to any Loan Instrument shall be deemed to constitute any representation or
warranty by Agent to any Lender and (ii) it has made and will continue to make,
without reliance upon Agent, its own independent investigation of the financial
condition and affairs and its own appraisal of the creditworthiness of each of
the Persons party to any Loan Instrument and the condition and value of the
Collateral in connection with this Loan Agreement and the making of the Loan.
9.8 Instructions from Lenders. Agent shall have the right to request
instructions from the Lenders by notice to each of the Lenders. If Agent shall
request instructions from the Lenders with respect to any act or action
(including the failure to act) in connection with this Loan Agreement, Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from the Lenders, and Agent shall
not incur liability to any Person by reason of so refraining. No Lender shall
have any right of action against Agent as a result of Agent acting or refraining
from acting in accordance with the instructions of the Lenders.
9.9 Exculpatory Provisions. None of Agent or any of its respective
directors, officers, employees, agents, attorneys or Affiliates shall (i) be
liable to any Lender for any action taken or omitted to be taken by it or them
pursuant to any Loan Instruments unless caused by it or its respective
directors, officers, employees, agents, attorneys or Affiliates own gross
negligence or willful misconduct, (ii) be responsible in any manner to any of
Lenders for the effectiveness, enforceability, genuineness, validity or due
execution of this Loan Agreement or any other Loan Instruments or for any
recital, representation, warranty, document, certificate, report or statement
herein or made or furnished under or in connection with this Loan Agreement or
any other Loan Instruments, or (iii) be under any obligation to any of Lenders
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Persons
party to any Loan Instrument, the financial condition of such Persons, or the
existence or possible existence of any Event of Default or Incipient Default.
9.10 Reimbursement and Indemnification by Lenders of Agent. Each Lender
agrees to reimburse and indemnify Agent (to the extent not reimbursed by
Borrower and without limiting the obligation of Borrower to do so) in proportion
to its Ratable Share from and against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent in its capacity as such, in any way relating to or
arising out of this Loan Agreement or any other Loan Instruments or any action
taken or omitted by Agent hereunder or thereunder, provided that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent's gross negligence or willful misconduct.
9.11 Reliance by Agent. Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, resolution, notice, consent, certificate,
letter, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been
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signed, sent or made by the proper Person or Persons, and upon the advice and
opinions of counsel and other professional advisers selected by Agent. Agent
shall be fully justified in failing or refusing to take any action hereunder
unless it shall first be indemnified to its satisfaction by Lenders against any
and all liability and expense (other than a liability or expense relating to
gross negligence or willful misconduct) which may be incurred by it by reason of
taking or continuing to take any such action.
9.12 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Incipient Default or Event of Default unless
Agent has received written notice from a Lender or Borrower referring to this
Loan Agreement, describing such Incipient Default or Event of Default and
stating that such notice is a "notice of default."
9.13 Release of Collateral. Lenders hereby authorize Agent to release any
Lien granted to Agent upon any Collateral upon (i) the payment and satisfaction
of all of Borrower's Obligations or (ii) the request of Borrower if such release
is required pursuant to the terms of any of the Loan Instruments.
9.14 Lenders in Their Individual Capacities. With respect to the portions
of the Loan made by it, Agent shall have the same rights and powers as any other
Lender and may exercise the same as thought it were not Agent, and the term
"Lenders" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Agent and its Affiliates and each of the Lenders and their
respective Affiliates may, without liability to account, except as prohibited
herein, make loans to, accept deposits from, discount drafts for, act as trustee
under indentures of, and generally engage in any kind of banking or trust
business with, Borrower and its Affiliates as though such Lender were not a
Lender hereunder.
9.15 Holders of Notes. Agent may deem and treat any payee of any Note as
the owner hereof for all purposes unless and until Agent receives an Assignment
and Acceptance with respect thereto. Any request, authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
9.16 Successor Agent. Agent may resign at any time by giving not less than
30 days' prior written notice to Borrower and the other Lenders. The Lenders
shall have the right to appoint a successor Agent. If a successor Agent is not
appointed within 30 days following Agent's notice of its resignation or its
removal, Agent shall appoint a successor agent who shall serve as Agent until
such time as the Lenders appoint a successor Agent. Upon its appointment, such
successor Agent shall succeed to the rights, powers and duties of Agent and the
term "Agent" shall mean such successor effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the resignation of any Agent, the provisions of
this Article IX shall inure to the benefit of such former Agent and such former
Agent shall not by reason of such
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resignation be deemed to be released from liability for any actions taken or not
taken by it while it was Agent.
9.17 Delivery of Information. Agent shall not be required to deliver to
any Lender originals or copies of any documents, instruments, reports, notices,
communications or other information received by Agent from Borrower or any other
Person under or in connection with any Loan Instruments except (i) as
specifically provided in the Loan Instruments or (ii) as specifically requested
from time to time in writing by any Lender with respect to a specific document,
instrument, notice or other written communication received by and in the
possession of Agent at the time of receipt of such request and then only in
accordance with such specific request.
9.18 Beneficiaries. Except as expressly provided in this Loan Agreement,
the provisions of this Article IX are solely for the benefit of Agent and
Lenders, and Borrower shall not have any rights to rely on or enforce any of the
provisions hereof. In performing its functions and duties under this Loan
Agreement, Agent shall act solely as agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower.
ARTICLE X
CLOSING
The Closing Date shall be such date as the parties shall determine, and
the Closing shall take place on such date, provided all conditions for the
Closing as set forth in this Loan Agreement have been satisfied or otherwise
waived by Agent. The Closing shall take place at the offices of Altheimer &
Gray, 10 S. Wacker Drive, Suite 4000, Chicago, Illinois 60606 or such other
place as the parties hereto shall agree. Unless the Closing occurs on or before
January 31, 1999, this Loan Agreement shall terminate and be of no further force
or effect and, except for any obligation of Borrower to Agent pursuant to
Article XI, none of the parties hereto shall have any further obligation to any
other party.
ARTICLE XI
EXPENSES AND INDEMNITY
11.1 Attorney's Fees and Other Fees and Expenses. Whether or not any of
the transactions contemplated by this Loan Agreement shall be consummated,
Borrower agrees to pay to Agent on demand all expenses incurred by Agent and
Lenders, in connection with the transactions contemplated hereby (including,
without limitation, any appraisal fees, environmental audit fees and title and
recording charges) and in connection with any amendments, modifications or
waivers (whether or not the same become effective) under or in respect of any of
the Loan Instruments, including, without limitation:
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11.1.1 Fees and Expenses for Preparation of Loan Instruments. All
expenses, disbursements and reasonable attorney's fees (including, without
limitation, charges for required mortgagee's title insurance, lien
searches, reproduction of documents, long distance telephone calls and
overnight express carriers) of counsel retained by Agent and Lenders in
connection with the preparation and negotiation of the Loan Instruments or
any amendments, modifications or waivers hereto or thereto.
11.1.2 Fees and Expenses in Enforcement of Rights or Defense of Loan
Instruments. Any expenses or other costs, including reasonable attorney's
fees and expert witness fees actually incurred by Agent and Lenders in
connection with the enforcement or collection against Borrower or any
other Person party to any Loan Instrument of any provision of any of the
Loan Instruments, and in connection with or arising out of any litigation,
investigation or proceeding instituted by any Governmental Body or any
other Person with respect to any of the Loan Instruments, whether or not
suit is instituted, including, but not limited to, such costs or expenses
arising from the enforcement or collection against Borrower or any other
Person party to the Loan Instruments of any provision of any of the Loan
Instruments in any state or federal bankruptcy or reorganization
proceeding.
11.2 Indemnity. Borrower agrees to indemnify and save Agent and Lenders
harmless of and from the following:
11.2.1 Brokerage Fees. The fees, if any, of brokers and finders
engaged by Borrower.
11.2.2 General. Any loss, cost, liability, damage or expense
(including reasonable attorney's fees and expenses) incurred by Agent and
Lenders, in investigating, preparing for, defending against, providing
evidence, producing documents or taking other action in respect of any
commenced or threatened litigation, administrative proceeding, suit
instituted by any Person or investigation under any law, including any
federal securities law, the Bankruptcy Code, any relevant state corporate
statute or any other securities law, bankruptcy law or law affecting
creditors generally of any jurisdiction, or any regulation pertaining to
any of the foregoing, or at common law or otherwise, relating, directly or
indirectly, to the transactions contemplated by or referred to in, or any
other matter related to, the Loan Instruments, whether or not Agent or any
Lender is a party to such litigation, proceeding or suit, or is subject to
such investigation, except to the extent of any gross negligence or
willful misconduct of Agent or any Lender.
11.2.3 Operation of Collateral; Joint Venturers. Any loss, cost,
liability, damage or expense (including reasonable attorney's fees and
expenses) incurred in connection with the ownership, operation or
maintenance of the Collateral, the construction of Agent or any
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Lender and Borrower as having the relationship of joint venturers or
partners or the determination that Agent or any Lender has acted as agent
for Borrower.
11.2.4 Environmental Indemnity. Any and all claims, losses, damages,
response costs, clean-up costs and expenses suffered and/or incurred at
any time by Agent and Lenders arising out of or in any way relating to the
existence at any time of any Hazardous Materials in, on, under, at,
transported to or from, or used in the construction and/or renovation of,
any of the Real Estate or Leasehold Property, or otherwise with respect to
any Environmental Law, and/or the failure of Borrower to perform its
obligations and covenants hereunder with respect to environmental matters,
including, but not limited to: (i) claims of any Persons for damages,
penalties, response costs, clean-up costs, injunctive or other relief,
(ii) costs of removal and restoration, including fees of attorneys and
experts, and costs of reporting the existence of Hazardous Materials to
any Governmental Body, and (iii) any expenses or obligations, including
attorney's fees and expert witness fees, incurred at, before and after any
trial or other proceeding before any Governmental Body or appeal therefrom
whether or not taxable as costs, including, without limitation, witness
fees, deposition costs, copying and telephone charges and other expenses,
all of which shall be paid by Borrower to Agent or such Lender when
incurred by Agent or such Lender, except to the extent of any gross
negligence or willful misconduct of Agent or any Lender.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices and communications under this Loan Agreement
shall be in writing and shall be (i) delivered in person, (ii) sent by telecopy,
or (iii) mailed, postage prepaid, either by registered or certified mail, return
receipt requested, or by overnight express carrier, addressed in each case as
follows:
To Borrower: Aquis Communications, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
Attention: John X. Adiletta
Telecopy No.: (973) 560-8004
Copy to: Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Adley Van Gartenstein, Esq.
Telecopy No.: (212) 262-5152
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To Lender: FINOVA Capital Corporation
311 South Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attention: Portfolio Manager
Communications Finance
Telecopy No.: (312) 322-3530
Copy to: FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, Arizona 85002-2209
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
Copy to: Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Michael L. Owen, Esq.
Telecopy No.: (312) 715-4800
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a written notice to the other parties hereto. All
notices sent pursuant to the terms of this Section 12.1 shall be deemed received
(i) if personally delivered, then on the Business Day of delivery, (ii) if sent
by telecopy before 2:00 p.m. Phoenix time, on the day sent if a Business Day or
if such day is not a Business Day or if sent after 2:00 p.m. Phoenix time, then
on the next Business Day, (iii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iv) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received. Any notice by telecopy shall be followed
by delivery on the next Business Day by overnight, express carrier or by hand.
12.2 Survival of Loan Agreement; Indemnities. All covenants, agreements,
representations and warranties made in this Loan Agreement and in the
certificates delivered pursuant hereto shall survive the making by Lender of the
Loan and the execution and delivery to Lenders of the Note and of all other Loan
Instruments, and shall continue in full force and effect so long as any of
Borrower's Obligations remain outstanding, unperformed or unpaid.
Notwithstanding the repayment of all amounts due under the Loan Instruments, the
cancellation of the Note and the release and/or cancellation of any and all of
the Loan Instruments or the foreclosure of any Liens on the Collateral, the
obligations of Borrower to indemnify Agent and Lenders with respect to the
expenses, damages, losses, costs and liabilities described in Section 11.2 shall
survive until all applicable statute of limitations periods with respect to
actions which may be brought against Agent or any Lender have run.
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12.3 Further Assurance. From time to time, Borrower shall execute and
deliver to Agent and Lenders such additional documents as Lenders reasonably may
require to carry out the purposes of the Loan Instruments and to protect
Lenders' rights thereunder, including, without limitation, using its best
efforts in the event any Collateral is to be sold to secure the approval by any
Governmental Body of any application required by such Governmental Body in
connection with such sale, and not take any action inconsistent with such sale
or the purposes of the Loan Instruments.
12.4 Taxes and Fees. Should any tax (other than taxes based upon the net
income of any Lender), recording or filing fees become payable in respect of any
of the Loan Instruments, or any amendment, modification or supplement thereof,
Borrower agrees to pay the same on demand, together with any interest or
penalties thereon attributable to any delay by Borrower in meeting any Lender's
demand, and agrees to hold Lenders harmless with respect thereto.
12.5 Severability. In the event that any provision of this Loan Agreement
is deemed to be invalid by reason of the operation of any law, including, but
not limited to, any of the rules and regulations and policies of the FCC, or by
reason of the interpretation placed thereon by any court or the FCC or any other
Governmental Body, as applicable, the validity, legality and enforceability of
the remaining terms and provisions of this Loan Agreement shall not in any way
be affected or impaired thereby, all of which shall remain in full force and
effect, and the affected term or provision shall be modified to the minimum
extent permitted by law so as to achieve most fully the intention of this Loan
Agreement.
12.6 Waiver. No delay on the part of Agent or any Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, and no
single or partial exercise of any right, power or privilege hereunder shall
preclude other or further exercise thereof, or be deemed to establish a custom
or course of dealing or performance between the parties hereto, or preclude the
exercise of any other right, power or privilege.
12.7 Modification of Loan Instruments. No modification or waiver of any
provision of any of the Loan Instruments shall be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
12.8 Captions. The headings in this Loan Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
12.9 Successors and Assigns. This Loan Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, subject to the limitations set forth in Article
IX; provided, however, that Borrower shall not be entitled to assign any of its
rights or delegate any of its duties hereunder.
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12.10 Remedies Cumulative. All rights and remedies of Agent and Lenders
pursuant to this Loan Agreement, any other Loan Instruments or otherwise, shall
be cumulative and non-exclusive, and may be exercised singularly or
concurrently. Neither Agent nor any Lender shall be required to prosecute
collection, enforcement or other remedies against Borrower or any other Person
party to the Loan Instruments before proceeding against any such Person or to
enforce or resort to any security, liens, collateral or other rights of Agent or
Lenders. One or more successive actions may be brought against Borrower and/or
any other Person party to the Loan Instruments, either in the same action or in
separate actions, as often as Lenders deem advisable, until all of Borrower's
Obligations are paid and performed in full.
12.11 Entire Agreement; Conflict. This Loan Agreement and the other Loan
Instruments executed prior or pursuant hereto constitute the entire agreement
among the parties hereto with respect to the transactions contemplated hereby or
thereby and supersede any prior agreements, whether written or oral, relating to
the subject matter hereof. In the event of a conflict between the terms and
conditions set forth herein and the terms and conditions set forth in any other
Loan Instrument, the terms and conditions set forth herein shall govern.
12.12 APPLICABLE LAW. THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF ARIZONA.
FOR PURPOSES OF THIS SECTION 12.12, THE LOAN INSTRUMENTS SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF ARIZONA.
12.13 JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF AGENT OR ANY
LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN
WHICH AGENT OR SUCH LENDER SHALL INITIATE OR TO WHICH AGENT OR SUCH LENDER SHALL
REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER HEREBY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED BY AGENT OR ANY LENDER IN OR REMOVED BY AGENT OR ANY LENDER
TO ANY OF SUCH COURTS, AND HEREBY AGREES THAT PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE
MANNER PROVIDED FOR NOTICES HEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO
SECTION 12.1. BORROWER WAIVES ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE
DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD BORROWER, AFTER
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BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR
PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING
THEREOF, BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY THE COURT AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET
FORTH IN THIS SECTION 12.13 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT BY
AGENT OR ANY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING BY
AGENT OR ANY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.
12.14 WAIVER OF RIGHT TO JURY TRIAL. AGENT, LENDERS AND BORROWER
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN
INSTRUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
12.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
BORROWER OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER LOAN
INSTRUMENTS.
12.16 Estoppel Certificate. Within 15 days after Agent or any Lender
requests Borrower to do so, Borrower will execute and deliver to Agent or such
Lender a statement certifying (i) that this Loan Agreement is in full force and
effect and has not been modified except as described in such statement, (ii) the
date to which interest on the Note has been paid, (iii) the Principal Balance,
(iv) whether or not to its knowledge an Event of Default has occurred and is
continuing, and, if so, specifying in reasonable detail each such Event of
Default of which it has knowledge, (v) whether to its knowledge it has any
defense, setoff or counterclaim to the payment of the Note in accordance with
its terms, and, if so, specifying each defense, setoff or counterclaim of which
it has knowledge in reasonable detail (including where applicable the amount
thereof), and (vi) as to any other matter reasonably requested by Agent or such
Lender.
12.17 Consequential Damages. Neither Agent nor any Lender nor any agent or
attorney of Agent or such Lender shall be liable to Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Borrower's Obligations.
12.18 Counterparts. This Loan Agreement may be executed by the parties
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
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12.19 No Fiduciary Relationship. No provision in this Loan Agreement or in
any other Loan Instrument, and no course of dealing among the parties hereto,
shall be deemed to create any fiduciary duty by Agent or any Lender to Borrower.
12.20 Confidentiality. Except as provided for in the Loan Instruments and
except as necessary to enable Agent or Lenders to realize upon Borrower's
Obligations and except in connection with the administration or enforcement of
Agent's and Lenders' rights under the Loan Instruments, Agent and Lenders each
shall use their commercially reasonable efforts not to disclose any information
relative to the Paging Business of Borrower designated by Borrower as
confidential to any Person without the prior written consent of Borrower, except
that Agent and Lenders may disclose any such information (i) in connection with
any proposed Loan Assignment or Participation, (ii) which otherwise is in the
public domain, (iii) to the extent required by applicable law or any rule,
regulation, decree, order or injunction of any Governmental Body, subject to any
protective order obtained by Borrower or (iv) which is obtained by Agent or any
Lender from a third party not known to Agent or any Lender to be under an
obligation of confidentiality to Borrower.
12.21 Governmental Approval. Notwithstanding anything to the contrary
contained herein or in any other Loan Instrument, no party hereto shall take any
action that would constitute or result in the transfer or assignment of any FCC
license, or other license, permit or authority issued by any Governmental Body,
or a transfer of control over any such license, permit or authorization, if such
assignment or transfer would require the prior approval of and/or notice to any
Governmental Body, without such party first having notified such Governmental
Body of any such assignment or transfer and, if required, obtaining the approval
of such Governmental Body therefor.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
AQUIS COMMUNICATIONS, INC., a Delaware
corporation
By:
-----------------------------------------
John X. Adiletta
President
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:
-----------------------------------------
David A. Meier
Vice President
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SCHEDULE I
Commitments
Lender Commitment Pro Rata Share
- ------ ---------- --------------
FINOVA Capital Corporation $30,000,000.00 100%
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EXHIBIT 1.1(A)
COMPLIANCE CERTIFICATE
AQUIS COMMUNICATIONS, INC.
Reference is made to that certain Loan Agreement dated as of January 4,
1999 (such Loan Agreement, as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement"), between Aquis Communications,
Inc., a Delaware corporation, and FINOVA Capital Corporation, a Delaware
corporation. All capitalized terms used but not elsewhere defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
Pursuant to the Loan Agreement the undersigned hereby certifies to Agent
and Lenders that:
(1) as of _________________, 199_, ____________________ is the Chief
Financial Officer of Borrower; and
(2) except as set forth below, Borrower is in full compliance with all
terms and conditions of the Loan Agreement; and
(3) with respect to the Sections of the Loan Agreement set forth below and
the covenants contained therein, Borrower is in full compliance unless otherwise
indicated.
<TABLE>
<CAPTION>
Section and Covenant In Full Compliance Not in Compliance
- -------------------- ------------------ -----------------
<S> <C> <C>
6.1 Legal Existence; Good Standing |_| |_|
6.2 Inspection |_| |_|
6.3 Financial Statements and Other Information
6.3.1 Monthly Statements |_| |_|
6.3.2 Quarterly Statements and Agings |_| |_|
6.3.3 Annual Statements |_| |_|
6.3.4 Officer's Certificates |_| |_|
6.3.5 Accountants' Certificate |_| |_|
6.3.6 Audit Reports |_| |_|
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
6.3.7 Business Plans |_| |_|
6.3.8 Notice of Defaults; Loss |_| |_|
6.3.9 Notice of Suits; Adverse Events |_| |_|
6.3.10 Reports to Shareholders, Creditors |_| |_|
and Governmental Bodies
6.3.11 ERISA Notices and Requests |_| |_|
6.3.12 Other Information |_| |_|
6.4 Reports to Governmental Bodies and Other Persons |_| |_|
6.5 Maintenance of Licenses and Other Agreements |_| |_|
6.6 Insurance
6.6.1 Maintenance of Insurance |_| |_|
6.6.2 Claims and Proceeds |_| |_|
6.7 Future Leases |_| |_|
6.8 Future Acquisitions of Real Property |_| |_|
6.9 Environmental Matters
6.9.1 Compliance |_| |_|
6.9.2 Certification |_| |_|
6.10 Compliance with Laws |_| |_|
6.11 Taxes and Claims |_| |_|
6.12 Maintenance of Properties |_| |_|
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
6.13 Governmental Approvals |_| |_|
6.14 Payment of Indebtedness |_| |_|
6.15 Year 2000 Problem |_| |_|
6.16 Bell Atlantic Interest Account |_| |_|
7.1 Borrowing |_| |_|
7.2 Liens |_| |_|
7.3 Merger and Acquisition |_| |_|
7.4 Contingent Liabilities |_| |_|
7.5 Distributions |_| |_|
7.6 Capital Expenditures |_| |_|
7.7 Payments of Indebtedness for |_| |_|
Borrowed Money
7.7.1 Permitted Senior Indebtedness |_| |_|
7.7.2 Motorola Indebtedness |_| |_|
7.7.3 Bell Atlantic Seller Indebtedness |_| |_|
7.7.4 Letters of Credit Indebtedness |_| |_|
7.7.3 Deferred Payment Indebtedness |_| |_|
7.8 Obligations as Lessee Under Operating |_| |_|
Expenses
7.9 Investments, Loans |_| |_|
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
7.10 Fundamental Business Changes |_| |_|
7.11 Facility Sites |_| |_|
7.12 Sale or Transfer of Assets |_| |_|
7.13 Amendment of Certain Agreements |_| |_|
7.14 Acquisition of Additional Properties |_| |_|
7.15 Equity Sales |_| |_|
7.16 Transactions with Affiliates |_| |_|
7.17 Compliance with ERISA |_| |_|
7.18 Senior Leverage Ratio (see |_| |_|
Schedule 1 attached hereto for
supporting calculations)
7.19 Total Leverage Ratio (see |_| |_|
Schedule 2 attached hereto for
supporting calculations)
7.20 Senior Debt Service Coverage Ratio |_| |_|
(see Schedule 3 attached hereto for
supporting calculations)
7.21 Certain Agreements |_| |_|
</TABLE>
With respect to any item identified above as not being in compliance, the
undersigned has attached and certifies as to the accuracy of statements
specifying the violation, condition, or events which result in such
non-compliance, the nature and status thereof, and the actions which Borrower
proposes to take with respect thereto to bring Borrower into full compliance
with the Loan Agreement.
The foregoing certifications are made by ____________________, in his
capacity as the acting Chief Financial Officer of Borrower, from his personal
knowledge, after due inquiry and with full knowledge that Agent and Lenders will
rely thereon. This Certificate is given pursuant to and in compliance with
subsection 6.3.3 of the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate on this ____ day of ___________, 199_.
4
<PAGE>
AQUIS COMMUNICATIONS, INC.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
5
<PAGE>
Schedule 1
Senior Leverage Ratio
For ________________________ ended on _______________________________________
(Indicate fiscal period) (Indicate date of financial statements)
6
<PAGE>
Schedule 2
Total Leverage Ratio
For ________________________ ended on _______________________________________
(Indicate fiscal period) (Indicate date of financial statements)
7
<PAGE>
Schedule 3
Senior Debt Service Coverage Ratio
For ________________________ ended on _______________________________________
(Indicate fiscal period) (Indicate date of financial statements)
8
<PAGE>
EXHIBIT 1.1(B)
ENVIRONMENTAL COMPLIANCE CERTIFICATE
AQUIS COMMUNICATIONS, INC.
Reference is made to that certain Loan Agreement dated as of December___,
1998 (such Loan Agreement, as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement"), between Aquis Communications,
Inc., a Delaware corporation, and FINOVA Capital Corporation, a Delaware
corporation. All capitalized terms used but not elsewhere defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
Pursuant to the Loan Agreement the undersigned hereby certify to Agent and
Lenders that:
(1) as of ____________, 199_, __________________ is the duly elected and
acting Chief Executive Officer of Borrower;
(2) all representations and warranties set forth in the Environmental
Certificate and in Section 5.14 of the Loan Agreement are true and correct as of
the date hereof; and
(3) Borrower is in compliance with all of the covenants set forth in the
Environmental Certificate and in subsection 6.9.1 of the Loan Agreement as of
the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Environmental
Compliance Certificate on this ____ day of ___________, 199_.
AQUIS COMMUNICATIONS, INC.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE>
EXHIBIT 1.1(C)
LIBOR ELECTION NOTICE
AQUIS COMMUNICATIONS, INC.
FINOVA Capital Corporation
311 South Wacker Drive
Suite 6000
Chicago, Illinois 60606
Attention: Andrew Pluta
Telecopy No. (312) 322-3540
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement dated as of January 4,
1999 (such Loan Agreement, as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement"), between Aquis Communications,
Inc., a Delaware corporation, and FINOVA Capital Corporation, a Delaware
corporation. All capitalized terms used but not elsewhere defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
The undersigned represent and warrant to Lenders that as of the date of
this notice:
1. no Event of Default has occurred and is continuing;
2. no more than three LIBOR Loans will exist after giving effect to the
requests specified below; and
3. to the extent the request specified below relates to a partial
continuation of any Loan as a LIBOR Loan, or to a partial conversion
of any Loan to a LIBOR Loan, such request is in a minimum amount of
$1,000,000 or integral multiples of $100,000 in excess thereof.
Borrower hereby irrevocably requests that Lenders:
o continue as a LIBOR Loan, on _____________, ____, $____________ of
the $____________ portion of the Principal Balance now bearing
interest determined by reference to the LIBOR Rate for an additional
interest period of ____ months;
o convert to a LIBOR Loan, on ____________, ____, $____________ of the
$____________ portion of the Principal Balance now bearing interest
at the Base Rate, such LIBOR Loan to bear interest determined by
reference to the LIBOR Rate for an interest period of ____________
months.
<PAGE>
Very truly yours,
AQUIS COMMUNICATIONS, INC.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
NOTE
$30,000,000 December 31, 1998
FOR VALUE RECEIVED, the undersigned, AQUIS COMMUNICATIONS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of FINOVA
CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), the principal sum of
THIRTY MILLION DOLLARS ($30,000,000), or, if less, the aggregate unpaid amount
of the Loan made by FINOVA pursuant to and in accordance with the applicable
provisions of that certain Loan Agreement of even date herewith (as the same may
be amended, modified, supplemented or restated from time to time, the "Loan
Agreement") among Maker, FINOVA, in its individual capacity and as Agent for all
Lenders, and the other Lenders party thereto, at the office of FINOVA at 1850
North Central Avenue, Phoenix, Arizona 85004, or at such other place as the
holder hereof may appoint, plus interest thereon as set forth below.
This Note is delivered by Maker to FINOVA pursuant to and in accordance
with the applicable provisions of the Loan Agreement. All capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in the Loan Agreement.
The Principal Balance of this Note shall bear interest at the per annum
rate of interest set forth in subsection 2.2.1 of the Loan Agreement.
Accrued and unpaid interest on, and the Principal Balance of, this Note
shall be paid in the manner set forth in Section 2.4 of the Loan Agreement.
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Note shall
bear interest at the Default Rate, which interest at such Default Rate shall be
paid by Maker to FINOVA immediately upon demand. In addition, if a payment of
principal or interest to be made pursuant to this Note becomes past due for a
period in excess of five days, Maker shall pay on demand to FINOVA a late charge
of 2% of the amount of such overdue payment.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of an Event of Default,
without further notice or demand, the Principal Balance of this Note, and all
accrued and unpaid interest thereon, shall be and become immediately due and
payable in full. Failure to exercise this option shall not constitute a waiver
of the right to exercise the same in the event of any subsequent Event of
Default, and such failure shall not be deemed to establish a custom or course of
dealing or performance between Maker and FINOVA.
<PAGE>
This Note shall or may be prepaid, in whole or in part, at the times and
in accordance with Section 2.8 of the Loan Agreement.
All funds received by FINOVA during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Maker pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by FINOVA until FINOVA is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, FINOVA shall not collect a rate of interest, including
the Loan Fees, on any obligation or liability due and owing by Maker to FINOVA
in excess of the maximum contract rate of interest permitted by applicable law
("Excess Interest"). All fees, charges, goods, things in action or any other
sums or things of value (other than items (a), (b), (c) and (d) below) paid or
payable by Maker (collectively, the "Additional Sums"), whether pursuant to this
Note, the Loan Agreement, the other Loan Instruments or any other document or
instrument in any way pertaining to the Loan, that, under the laws of the State
of Arizona, may be deemed to be interest with respect to the Loan, for the
purpose of any laws of the State of Arizona that may limit the maximum amount of
interest to be charged with respect to the Loan shall be payable by Maker and
shall be deemed to be additional interest, and for such purposes only, the
agreed upon and "contracted for rate of interest" with respect to the Loan shall
be deemed to be increased by the rate of interest resulting from the Additional
Sums. FINOVA and Maker agree that the interest laws of the State of Arizona
shall govern the relationship between them and understand and believe that the
transactions contemplated by the Loan Instruments comply with the usury laws of
the State of Arizona, but in the event of a final adjudication to the contrary,
Maker shall be obligated to pay, nunc pro tunc, to FINOVA only such interest as
then shall be permitted by the laws of the state found to govern the contract
relationship between FINOVA and Maker. For the purpose of any laws of the State
of Arizona that may limit the maximum amount of interest to be charged with
respect to a loan, the "contracted for rate of interest" for the Loan shall
consist of the following: (a) interest calculated in accordance with the
provisions of subsection 2.2.1 of the Loan Agreement; (b) interest calculated in
accordance with the provisions of Section 2.5 of the Loan Agreement; (c) the
late charges, described and payable in accordance with provisions of Section 2.6
of the Loan Agreement; (d) the Loan Fees; and (e) all Additional Sums, if any.
Maker agrees to pay an effective "contracted for rate of interest" which is the
sum of items (a), (b), (c), (d) and (e), as applicable, above. If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Note, the Loan Agreement or any other Loan
Instrument, then in such event (i) Maker shall not be obligated to pay such
Excess Interest, (ii) any Excess Interest collected by FINOVA shall be, at
FINOVA's option, (A) applied to the Principal Balance or to accrued and unpaid
interest not in excess of the maximum rate permitted by applicable law or (B)
refunded to the payor thereof, (iii) the interest rates provided for herein
(collectively, including, without limitation, the Loan Fees, the "Stated Rate")
shall be automatically reduced to the maximum rate allowed from time to time
under applicable
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law (the "Maximum Rate") and this Note, the Loan Agreement and the other Loan
Instruments, as applicable, shall be deemed to have been, and shall be, modified
to reflect such reduction, and (iv) Maker shall not have any action against
FINOVA or Lenders for any damages arising out of the payment or collection of
such Excess Interest; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Rate, Maker shall, to the extent permitted
by law, continue to pay interest at the Maximum Rate until such time as the
total interest received by FINOVA is equal to the total interest which FINOVA
would have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again exceeds the
Maximum Rate, in which event the provisions contained in this paragraph again
shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Note or any part thereof, Maker promises and agrees to pay all costs of
collection, including all court costs and reasonable attorneys' fees.
Maker hereby waives presentment for payment, protest and demand and notice
of protest, demand, dishonor and nonpayment of this Note, and expressly agrees
that this Note, or any payment hereunder, may be extended from time to time
before, at or after maturity, without in any way affecting the liability of
Maker hereunder or any guarantor hereof.
Maker hereby agrees that all actions or proceedings initiated by Maker and
arising directly or indirectly out of this Note or any or all of the other Loan
Instruments shall be litigated in the Superior Court of Arizona, Maricopa County
Division, or the United States District Court for the District of Arizona, or,
if FINOVA initiates such action, in addition to the foregoing courts, any court
in which FINOVA shall initiate or to which FINOVA shall remove such action, to
the extent such court has jurisdiction. Maker hereby expressly submits and
consents in advance to such jurisdiction in any action or proceeding commenced
in or removed by FINOVA to any of such courts, and hereby agrees that personal
service of the summons and complaint, or other process or papers issued therein,
may be made by registered or certified mail addressed to Maker at the address to
which notices are to be sent pursuant to Section 12.1 of the Loan Agreement.
Maker waives any claim that Mariocopa County, Arizona or the District of Arizona
is an inconvenient forum or an improper forum based on lack of venue. To the
extent provided by law, should Maker, after being so served, fail to appear or
answer to any summons, complaint, process or papers so served within the number
of days prescribed by law after the mailing thereof, Maker shall be deemed in
default and an order and/or judgment may be entered by the court against Maker
as demanded or prayed for in such summons, complaint, process or papers. The
exclusive choice of forum for Maker set forth in this paragraph shall not be
deemed to preclude the enforcement by FINOVA of any judgment obtained in any
other forum or the taking by FINOVA of any action to enforce the same in any
other appropriate jurisdiction, and Maker hereby waives the right to
collaterally attack any such judgment or action.
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This Note shall be construed in accordance with and governed by the laws
and decisions of the State of Arizona. All funds disbursed to or for the benefit
of Maker will be deemed to have been disbursed in Phoenix, Arizona.
Maker acknowledges and agrees that any controversy which may arise under
this Note would be based upon difficult and complex issues and therefore Maker
agrees that any lawsuit arising out of any such controversy will be tried in a
court of competent jurisdiction by a judge sitting without a jury.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or
amendment is sought.
This Note shall be binding upon Maker and upon Maker's successors and
assigns, and shall inure to the benefit of the successors and permitted assigns
of FINOVA.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, including, but not limited to, any of the
rules and regulations and policies of the FCC, or by reason of the
interpretation placed thereon by any court or the FCC or any other Governmental
Body, as applicable, the validity, legality and enforceabiltiy of the remaining
terms and provisions of this Note shall not in any way be affected or impaired
thereby, all of which shall remain in full force and effect, and the affected
term or provision shall be modified to the minimum extent permitted by law so as
to achieve most fully the intention of this Note.
Time for the performance of Maker's obligations under this Note is of the
essence.
This Note is entitled to the benefit of certain collateral security, all
as more fully set forth in the Loan Agreement and the other Loan Instruments.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, this Note has been executed and delivered by Maker by
its duly authorized officer on the date first set forth above.
AQUIS COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ John X. Adiletta
----------------------------------------
Name: John X. Adiletta
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
FIRST AMENDMENT TO LOAN INSTRUMENTS
This FIRST AMENDMENT TO LOAN INSTRUMENTS (this "First Amendment"), dated
as of March 31, 1998, is between AQUIS COMMUNICATIONS, INC., a Delaware
corporation ("Borrower"), and FINOVA CAPITAL CORPORATION, a Delaware corporation
("FINOVA"), in its individual capacity and as agent for all Lenders (this and
all other capitalized terms used but not elsewhere defined herein are defined in
Section 2 below).
R E C I T A L S
A. Borrower and FINOVA entered into a Loan Agreement dated as of December
31, 1998 (the "Loan Agreement"), pursuant to which Lenders agreed to make loans
and other financial accommodations to Borrower.
B. Borrower has requested that Agent and Lenders agree to certain
amendments of the Loan Agreement in connection with the consummation of the
Paging Partners Merger.
C. Agent and Lenders are willing to agree to the requests of Borrower
subject to the terms and conditions of this First Amendment.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, in order to induce Lenders to consent to the consummation of the Paging
Partners Merger and the terms presently contemplated and to disburse the Merger
Portion, and subject to the terms and conditions hereof, Borrower and FINOVA
agree as follows:
1. Incorporation of Recitals. The Recitals set forth above are
incorporated herein, are acknowledged by Borrower to be true and correct and are
made a part hereof.
2. Definitions. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Loan
Agreement, as amended by this First Amendment.
3. Amendments to Loan Instruments. The Loan Instruments are amended as set
forth below:
(a) Section 1.1 - Amended Definitions. Section 1.1 of the Loan
Agreement is amended by deleting the current versions of the following
definitions and substituting the following versions of such definitions in
appropriate alphabetical order:
Business Insurance: such property, casualty, liability,
business interruption and other insurance as Agent from time to time
requires Borrower or Guarantor to maintain.
Collateral: (I) all existing and after-acquired Property of
Borrower and Guarantor, including without limitation all existing
and after-acquired accounts,
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equipment, inventory and general intangibles, (ii) the Borrower
Capital Stock and (iii) all proceeds of the foregoing.
Lease: any lease of real estate under which Borrower or
Guarantor is the lessee.
Obligors: collectively, Borrower, Guarantor and each other
Person (other than Agent) which is a party to any Security
Instrument.
Paging Partners: at any point before or after such name
change, Paging Partners Corporation, a Delaware corporation, to be
known as of March 31, 1999 as Aquis Communications Group, Inc.
Paging Partners Merger Additional Loan Instruments:
collectively, the following documents to be executed and delivered
by Borrower in connection with the Paging Partners Merger:
(I) the Paging Partners Guaranty, the Paging Partners
Assignment of Leases, the Paging Partners Security Agreement,
the Paging Partners Pledge Agreement, a Notice of Borrowing
with respect to the disbursement of the Merger Portion, any
amendments to the Loan Instruments and such UCC Financing
Statements and any other mortgages, security agreements and
other agreements required by Agent to (A) reflect the effect
of the Paging Partners Merger and (B) grant to Agent a
perfected Lien, subject in priority only to Permitted Prior
Liens, upon all existing and after-acquired Property of Paging
Partners acquired by Borrower as a result of the consummation
of the Paging Partners Merger, all existing and after-acquired
Property of Guarantor and, to the extent permitted by
applicable law, the FCC Licenses (and the proceeds thereof)
transferred to Borrower in connection with the Paging Partners
Merger;
(ii) an Environmental Certificate covering any real
estate acquired or leased by Borrower in connection with the
Paging Partners Merger and any real estate owned or leased by
Guarantor;
(iii) a Landlord's Consent executed by the Landlord
under such Leases assumed or executed by Borrower in
connection with the Paging Partners Merger and such Leases to
which Guarantor is a party as Agent may require;
(iv) such assignments and third party consents with
respect to any agreements related to the Paging Business
acquired by Borrower as a result of the Paging Partners Merger
as Agent reasonably shall request; and
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(v) such other instruments, documents, certificates,
consents, waivers and opinions as Agent reasonably may require
in connection with the Paging Partners Merger.
Required Amount: as of any date, an amount equal to the lesser
of (I) the aggregate undrawn face amount of the Letters of Credit as
of such date and (ii) the amount which, if applied to reduce the
Principal Balance as of the last day of the most recent month prior
to such date with respect to which Agent has been in receipt for at
least 10 days of the financial statements required under Section
6.3.1 for such month, would have caused the Target Leverage Ratio as
of such last day to be equal to the amount set forth opposite such
last day in Section 7.18.
Security Instruments: collectively, the Security Agreement,
the BAP Investors Pledge Agreement, the Assignment of Leases, the
Assignment of Bell Atlantic Acquisition Instruments, the Paging
Partners Security Agreement, the Paging Partners Assignment of
Leases, the Paging Partners Pledge Agreement and each Mortgage now
or hereafter granted by Borrower to Agent, all as amended from time
to time.
Target Leverage Ratio: the ratio of the Principal Balance as
of the last day of any month to (I) in the case of months ending on
or prior to December 31, 1999, the lesser of (A) the product of (1)
Operating Cash Flow for the period from the Closing Date through
such last day multiplied by (2) a fraction, the (x) numerator of
which is 365 and (y) denominator of which is the number of days
elapsed from the Closing Date through such last day and (B) Pro
Forma Operating Cash Flow for the twelve month period ending on such
last day and (ii) in the case of months ending after December 31,
1999, Pro Forma Operating Cash Flow for the twelve month period
ending on such last day.
(b) Section 1.1 - Additional Definitions. Section 1.1 of the Loan
Agreement is amended by inserting the following definitions in appropriate
alphabetical order:
Guarantor: until the release of the Paging Partners Guaranty
pursuant to Section 8.1.12, Paging Partners, and thereafter shall be
deemed to refer to no one.
Guarantor's Obligations: (I) any and all Indebtedness due or
to become due, now existing or hereafter arising, of Guarantor to
Lenders and/or Agent pursuant to the terms of this Loan Agreement or
any other Loan Instrument and (ii) the performance of the covenants
of Guarantor contained in the Loan Instruments.
Letters of Credit Release Date: the date of the consent by the
FCC to the transactions effected by the consummation of the Paging
Partners Merger (other than
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<PAGE>
pro forma assignments or transfers incidental to the Paging Partners
Merger) has become final and is no longer subject to administrative
or judicial reconsideration, review or appeal.
Paging Partners Assignment of Leases: a collateral assignment
of leases executed by Guarantor in favor of Agent.
Paging Partners Guaranty: a guaranty executed by Guarantor in
favor of Agent.
Paging Partners Participation Agreement: the Participation
Agreement dated March 31, 1999 between Borrower and Paging Partners.
Paging Partners Security Agreement: a security agreement
between Guarantor and Agent.
Second Letters of Credit Account Parties Payment: an amount
equal to the sum of (i) 10% of the aggregate amount drawn on the
Letters of Credit as of the Letters of Credit Release Date plus (ii)
an amount equal to the product of (A) the aggregate face amount of
the Letters of Credit as of the Paging Partners Merger Closing Date
multiplied by (B) 15.0% per annum multiplied by (C) a fraction, the
(x) numerator of which is the number of days elapsed from the Paging
Partners Merger Closing Date through the Letters of Credit Release
Date and (y) denominator of which is 365.
Second Letters of Credit Account Parties Payment Date: the
date which is the earlier of (I) the date any Letter of Credit is
fully drawn and (ii) the Letters of Credit Release Date.
(c) Subsection 3.2. Section 3.2 of the Loan Agreement is deleted in
its entirety and the following is substituted therefor:
"3.2 Letters of Credit.
3.2.1 Draws on Letters of Credit. Lenders may direct
Agent to draw on the Letters of Credit (I) in an aggregate
amount equal to the amount of the applicable unmade payment if
an Event of Default under subsection 8.1.1 occurs, (ii) in
full or in part at any time if any Event of Default described
in clauses (ii), (iii), (iv) or (v) of subsection 8.1.5(a),
subsection 8.1.5(b) or subsection 8.1.7 occurs, (iii) in whole
or in part if (A) the Letters of Credit Release Date does not
occur on or prior to May 31, 1999 and (B) the expiry date of
the Letters of Credit are not extended to a date mutually
satisfactory to Borrower and Agent or the Letters of Credit
are not replaced by letters of
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<PAGE>
credit in the same face amount as the Letters of Credit or
such lesser amount and with expiry dates mutually satisfactory
to Borrower and Agent upon substantially the same terms and
conditions as the Letters of Credit, and (iv) in an aggregate
amount equal to the Required Amount at any time prior to the
Letters of Credit Release Date if the Target Leverage Ratio as
of April 30, 1999 or the last day of any month thereafter with
respect to which Agent has been in receipt for at least 10
days of the financial statements required under Section 6.3.1
for such month exceeds the amount set forth opposite such last
day in Section 7.18. The amount drawn on each Letter of Credit
in connection with the aggregate amount of any permitted
drawing on all Letters of Credit shall be equal the aggregate
amount of such permitted drawing multiplied by a fraction, the
numerator of which is the undrawn face amount of such Letter
of Credit and the denominator of which is the undrawn face
amount of all Letters of Credit. Any partial draw upon the
Letters of Credit shall not prevent Agent from making
additional full or partial draws thereon to the extent
permitted hereunder, and Agent and Lenders shall not be
precluded from exercising any other rights and remedies under
the Loan Instruments in the event the Letters of Credit are
drawn upon. Agent shall be entitled to draw upon the Letters
of Credit to the extent permitted hereunder regardless of
whether Borrower or any of its Affiliates has any claim,
set-off or defense against Agent or any Lender. Neither
Borrower nor any of its Affiliates shall file any motion, suit
or claim (other than any compulsory counterclaim excluding any
compulsory counterclaim the assertion of which could result in
Agent being enjoined from drawing upon the Letters of Credit),
or commence any other judicial proceeding at law or in equity
or institute any non-judicial action to challenge the right or
authority of Agent to make any permitted drawing upon the
Letters of Credit or otherwise attempt to enjoin, impede or
impair any such permitted drawing.
3.2.2 Application of Draw Proceeds. The proceeds of any
draw upon the Letters of Credit shall be applied to reduce the
Principal Balance in the inverse order of maturity of the
installments thereof.
3.2.3 Release of Letters of Credit. Agent shall release
and deliver to Borrower the Letters of Credit, subject to any
notation thereon or reduction in the face amount thereof as a
result of any permitted draw upon the Letters of Credit,
promptly after the Letters of Credit Release Date provided
Agent has received written confirmation from Wiley, Rein &
Fielding that the Letters of Credit Release Date has occurred.
(d) Subsection 5.22. Subsection 5.22 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
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<PAGE>
"5.22 Broker Fees. The services of a broker or other similar
agent have not been used in connection with the Loan, other than (I)
with respect to the Initial Portion, Deerfield Partners and PCS
Management, whose fees, not to exceed $300,000 in the case of
Deerfield Partners or $225,000 in the case of PCS Management, were
paid in full by Borrower upon the Closing in the manner permitted
under Section 7.16 and (ii) with respect to the Merger Portion,
Deerfield Partners, whose fees, not to exceed $100,000 will be paid
in full by Borrower upon the Paging Partners Merger Closing Date."
(e) Subsection 7.5. Subsection 7.5 of the Loan Agreement is deleted
in its entirety and the following is substituted therefor:
"7.5 Distributions. Make any dividends, distributions or other
shareholder expenditures with respect to the Borrower Capital Stock
or apply any of its Property to the purchase, redemption or other
retirement of, or set apart any sum for the payment of, or make any
other distribution by reduction of capital or otherwise in respect
of, any of the Borrower Capital Stock, except that, provided that no
Event of Default or Incipient Default exists and is continuing, any
Required Excess Cash Flow Prepayment has been made, and any payment
required under the Bell Atlantic Seller Indebtedness Instruments has
been made, Borrower may, (i) within 120 days after the end of 2000
and the end of each year thereafter, pay dividends to its
shareholders in an aggregate amount not to exceed the remainder of
(A) the Net Excess Cash Flow for such year minus (B) the amount of
any prepayment of the Bell Atlantic Seller Indebtedness during such
120 day period permitted under subsection 7.7.3, and (ii) make
regular payments to Paging Partners as contemplated under the Paging
Partners Participation Agreement."
(f) Subsection 7.7.4. Subsection 7.7.4 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"7.7.4 Letters of Credit Indebtedness. Make (I) the (A)
Letters of Credit Account Parties Payment on or after the Paging
Partners Merger Closing Date provided that (1) no Event of Default
exists and is continuing or would be created by the making of such
payment and (2) after giving effect to the Letters of Credit Account
Parties Payment, the Cash Equivalents would exceed $500,000 and (B)
the Second Letters of Credit Account Parties Payment on or after the
Second Letters of Credit Account Parties Payment Date provided that
(1) no Event of Default exists and is continuing or would be created
by the making of such payment and (2) after giving effect to the
Second Letters of Credit Account Parties Payment, the Cash
Equivalents would exceed $500,000, (ii) an annual payment within 120
days after the end of 1999 and each year thereafter on account of
accrued and unpaid interest on
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<PAGE>
and the outstanding principal balance of the Letters of Credit
Indebtedness provided that (A) no Event of Default or Incipient
Default exists and is continuing or would be created by the making
of any such annual payment, (B) any Required Excess Cash Flow
Prepayment has been made, (C) any payment required under the Bell
Atlantic Seller Indebtedness Instruments has been made and (D) the
amount of any such annual payment does not exceed the remainder of
(x) the Net Excess Cash Flow for such year minus (y) the amount of
any prepayment of the Bell Atlantic Seller Indebtedness during such
year permitted under subsection 7.7.3 minus (z) the aggregate amount
of all dividends paid to its shareholders during such 120 day period
permitted under Section 7.5 and (iii) prepayments on account of the
Letters of Credit Indebtedness from proceeds of the Acquisition
Portion subject to the satisfaction of the conditions set forth in
Section 4.5, provided no Event of Default or Incipient Default
exists and is continuing or would be created by the making of any
such prepayment."
(g) Subsection 8.1.2. Subsection 8.1.2 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"8.1.2 Breach of Covenants.
(a) If Borrower shall fail to observe or perform any covenant
or agreement made by Borrower contained in subsection 2.8.1(c) or
2.8.2 with respect to payments required to be made to Motorola,
subsection 3.2.1, Section 6.1, 6.2, 6.5, 6.6, 6.9, 6.10, 6.11, 6.13,
6.14 or 6.16 or in Article VII;
(b) If Guarantor shall fail to observe or perform any covenant
or agreement made by Guarantor contained in Section 8.1, 8.2, 8.5,
8.6, 8.7, 8.8, 8.9 or in Section 9 of the Guaranty; or
(c) If any Obligor shall fail to observe or perform any
covenant or agreement (other than those referred to in subparagraph
(a) or (b) above or specifically addressed elsewhere in this Section
8.1) made by such Person in any of the Loan Instruments to which
such Person is a party, and such failure shall continue for a period
of 30 days after written notice of such failure is given by
Lenders."
(h) Subsection 8.1.5. Subsection 8.1.5 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"8.1.5 Bankruptcy.
(a) Subject to Section 8.1.12, if Borrower or Guarantor shall
(I) generally not be paying its debts as they become due, (ii) file,
or consent, by answer or otherwise, to the filing against it of a
petition for relief or reorganization or
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<PAGE>
arrangement or any other petition in bankruptcy or insolvency under
the laws of any jurisdiction, (iii) make an assignment for the
benefit of creditors, (iv) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers
for it or for any substantial part of its Property, or (v) be
adjudicated insolvent.
(b) If any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of Borrower or Guarantor,
a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its
Property, or if an order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding-up or liquidation of Borrower
or Guarantor of any petition for any such relief shall be filed
against it and such petition shall not be dismissed or stayed within
60 days."
Subject to Section 8.1.12, if any Governmental Body of competent
jurisdiction shall enter an order appointing, without consent of Borrower
or Guarantor, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
Property, or if an order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of Borrower or
Guarantor of any petition for any such relief shall be filed against it
and such petition shall not be dismissed or stayed within 60 days."
(i) Subsection 8.1.6. Subsection 8.1.6 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"8.1.6 Judgments. Subject to 8.1.12, if there shall be entered
against Borrower or Guarantor one or more judgments, awards or
decrees, or orders of attachment, garnishment or any other writ,
which exceed $250,000 in the aggregate at any one time outstanding,
excluding judgments, awards, decrees, orders or writs (I) for which
there is full insurance and with respect to which the insurer has
assumed responsibility in writing, (ii) for which there is full
indemnification (upon terms and by creditworthy indemnitors which
are satisfactory to Lenders) or (iii) which have been in force for
less than the applicable period for filing an appeal so long as
execution has not been levied thereunder (or in respect of which
Borrower or Guarantor shall at the time in good faith be prosecuting
an appeal or proceeding for review and in respect of which a stay of
execution or appropriate appeal bond shall have been obtained
pending such appeal or review.)"
(j) Subsection 8.1.12. The Loan Agreement is amended by the addition
of the following subsection 8.1.12 immediately following 8.1.11:
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<PAGE>
"8.1.12 Release of Guarantor. The Paging Partners Guaranty
shall be released and the references to Guarantor in Sections 8.1.2,
8.1.5 and 8.1.6 shall be deemed to be deleted promptly after
delivery by Guarantor to Agent of evidence reasonably satisfactory
to Agent that (I) all right, title and interest of Guarantor under
the leases and agreement described on Exhibit 8.1.12 (except to the
extent Guarantor is no longer a party to such leases or agreement as
a result of its being cancelled or terminated or the premises
subject thereto surrendered as permitted under the Loan Instruments
and excluding those leases and agreements which are not necessary to
the operations of the Paging Business) have been validly assigned to
and assumed by Borrower and (ii) Borrower has obtained all consents
of all Persons whose consent is required, as reasonably determined
by Agent, in connection with such assignments and assumptions and
(iii) the consent by the FCC to the transactions effected by the
Paging Partners Merger (other than pro forma assignments or
transfers incidental to the Paging Partners Merger) has become final
and is no longer subject to administrative or judicial
reconsideration, review or appeal."
(k) Loan Agreement Exhibits. The Loan Agreement is amended by
replacing the current versions of Exhibits 5.3.1, 5.3.2, 5.5.2, 5.5.3,
5.5.4, 5.5.5, 5.8 and 6.6.1 attached thereto with the revised versions
thereof attached hereto.
(l) Security Agreement. The Security Agreement is amended by
replacing the current versions of Exhibits A and B attached thereto with
the revised versions thereof attached hereto.
4. References. From and after the Paging Partners Merger Closing Date, all
terms used in the Loan Instruments which are defined in the Loan Agreement shall
be deemed to refer to such terms as amended by this First Amendment.
5. Representations and Warranties. Borrower hereby confirms to Agent and
Lenders that the representations and warranties set forth in the Loan
Instruments, as amended by this First Amendment, to which any Obligor is a party
are true and correct in all material respects as of the date hereof, and shall
be deemed to be remade as of the date hereof. Borrower represents and warrants
to Agent and Lenders that (I) Borrower has full power and authority to execute
and deliver this First Amendment and to perform its obligations hereunder, (ii)
upon the execution and delivery hereof, this First Amendment will be valid,
binding and enforceable upon Borrower in accordance with its terms, (iii) the
execution and delivery of this First Amendment does not and will not contravene,
conflict with, violate or constitute a default under (A) its articles of
incorporation or by-laws or (B) any applicable law, rule, regulation, judgment,
decree or order or any agreement, indenture or instrument to which Borrower is a
party or is bound or which is binding upon or applicable to all or any portion
of Borrower's Property and (iv) as of the date hereof no Incipient Default or
Event of Default exists.
6. Costs and Expenses. Borrower agrees to reimburse Agent for all fees and
expenses incurred in the preparation, negotiation and execution of this First
Amendment and the consummation
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of the transactions contemplated hereby, including, without limitation, the fees
and expenses of counsel for Agent.
7. No Further Amendments; Ratification of Liability. Except as amended
hereby, the Loan Agreement and each of the other Loan Instruments shall remain
in full force and effect in accordance with its respective terms. Borrower
hereby ratifies and confirms its liabilities, obligations and agreements under
the Loan Agreement and the other Loan Instruments, all as amended by this First
Amendment, and the Liens created thereby, and acknowledges that (I) it has no
defenses, claims or set-offs to the enforcement by Agent and Lenders of such
liabilities, obligations and agreements, (ii) Agent and Lenders have fully
performed all obligations to Borrower which any such Person may have had or has
on and as of the date hereof and (iii) other than as specifically set forth
herein, neither Agent nor any Lender waives, diminishes or limits any term or
condition contained in the Loan Agreement or the other Loan Instruments. Agent
and Lenders' agreement to the terms of this First Amendment or any other
amendment of the Loan Agreement shall not be deemed to establish or create a
custom or course of dealing among Agent, Lenders and Borrower. The Loan
Instruments, as amended by this First Amendment, contain the entire agreement
among Agent, Lenders and Borrower with respect to the transactions contemplated
hereby.
8. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
9. Further Assurances. Borrower covenants and agrees that it will at any
time and from time to time do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further acts,
documents and instruments as reasonably may be required by Agent and Lenders in
order to effectuate fully the intent of this First Amendment.
10. Severability. If any term or provision of this First Amendment or the
application thereof to any party or circumstance shall be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the validity, legality and enforceability of the remaining terms and provisions
of this First Amendment shall not in any way be affected or impaired thereby,
and the affected term or provision shall be modified to the minimum extent
permitted by law so as most fully to achieve the intention of this First
Amendment.
11. Captions. The captions in this First Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this First Amendment or any of the provisions hereof.
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10
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been executed and delivered
by each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
AQUIS COMMUNICATIONS, INC., a Delaware
corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By: /s/ David A. Meier
----------------------------------
David A. Meier
Vice President
GUARANTY
(Equipment Lease)
This GUARANTY (this "Guaranty"), dated as of March 31, 1999, is made by
AQUIS COMMUNICATIONS GROUP, INC., a Delaware corporation ("Guarantor"), for the
benefit of FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lessor").
Preliminary Statement:
A. Aquis Communications, Inc., a Delaware corporation ("Lessee"), and
Lessor have entered into an Equipment Lease of even date herewith (the "Lease"),
pursuant and subject to the terms and conditions of which Lessor has agreed to
lease to Lessee and Lessee has agreed to lease from Lessor the Equipment.
B. Guarantor is the owner of all of the issued and outstanding capital
stock of Lessee. Accordingly, Guarantor has a direct financial interest in
inducing Lessor to enter into the Lease.
C. One of the conditions precedent to the obligations of Lessor under the
Lease is the execution and delivery by Guarantor of this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Guarantor hereby agrees as
follows:
1. Definitions. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Lease.
2. Guaranty of Payment. Guarantor hereby unconditionally and irrevocably
guarantees to Lessor the punctual payment and performance when due, whether on
scheduled payment dates or by acceleration or otherwise, of any and all
indebtedness due or to become due, now existing or hereafter arising, of Lessee
to Lessor pursuant to the terms of the Lease and the performance of the
covenants of Lessee contained in the Lease (such indebtedness and performance of
covenants is referred to hereinafter collectively as "Lessee's Obligations").
Guarantor agrees that this Guaranty is a present and continuing guaranty of
payment and not of collectibility, and that Lessor shall not be required to
prosecute collection, enforcement or other remedies against Lessee or any other
person or entity, or to enforce or resort to any of its rights or remedies under
the Lease, before calling Guarantor for payment.
3. Continuing Guaranty. Guarantor agrees that the obligations of Guarantor
hereunder ("Guarantor's Obligations") shall be primary obligations of Guarantor,
shall not be subject to any counterclaim, set-off, abatement, deferment or
defense based upon any claim that Guarantor may have against Lessor, Lessee or
any other person or entity, and shall remain in full force and effect without
regard to, and shall not be released, discharged, limited or affected in any way
by any circumstance or condition (whether or not Guarantor shall have any
knowledge thereof), including, without limitation:
(a) any lack of validity or enforceability of any of the Lease
Documents;
<PAGE>
(b) any termination, restatement, amendment, modification or other
change in any of the Lease Documents;
(c) any furnishing, exchange, substitution or release of the
Equipment, or any failure to perfect any lien in any of the Equipment;
(d) any failure, omission or delay on the part of Lessee or Lessor
to conform or comply with any term of any of the Lease Documents or any
failure of Lessor to give notice of any default thereunder;
(e) any waiver, compromise, release, settlement or extension of time
of payment or performance or observance of any of the obligations or
agreements contained in any of the Lease Documents;
(f) any action or inaction by Lessor under or in respect of any of
the Lease Documents, any failure, lack of diligence, omission or delay on
the part of Lessor or any Lender to enforce, assert or exercise any right,
power or remedy conferred on Lessor in any of the Lease Documents, or any
other action or inaction on the part of Lessor;
(g) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets
and liabilities or similar events or proceedings with respect to
Guarantor, Lessee or any other person or entity or any of their respective
property or creditors, or any action taken by any trustee or receiver or
by any court in any such proceeding;
(h) any merger or consolidation of Guarantor, Lessee or any other
person or entity into or with any person or entity, or any sale, lease or
transfer of any of the assets of Guarantor, Lessee or any other person to
any other person or entity;
(i) any change in the ownership of any of the equity interests of
Lessee or any change in the relationship between Guarantor and Lessee, or
any termination of any such relationship;
(j) any release or discharge by operation of law of Guarantor or
Lessee from any obligation or agreement contained in any of the Lease
Documents;
(k) any other occurrence, circumstance, happening or event, whether
similar or dissimilar to the foregoing and whether foreseen or unforeseen,
which otherwise might constitute a legal or equitable defense or discharge
of the liabilities of a guarantor or surety or which otherwise might limit
recourse against Guarantor or Lessee.
4. Waivers. Guarantor unconditionally waives, to the extent permitted by
law, (i) notice of any of the matters referred to in Section 3 above, (ii) all
notices which may be required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve intact any rights against Guarantor, including,
without limitation, any demand, presentment and protest, proof of notice of
non-payment
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<PAGE>
under any of the Lease Documents and notice of any default thereunder or any
failure on the part of Guarantor or Lessee to perform or comply with any
covenant, agreement, term or condition of any of the Lease Documents, (iii) any
right to the enforcement, assertion or exercise against Guarantor or Lessee of
any right or remedy conferred under any of the Lease Documents, (iv) any
requirement of diligence on the part of any person or entity, (v) any
requirement to exhaust any remedies or to mitigate the damages resulting from
any default under any of the Lease Documents, (vi) any notice of any sale,
transfer or other disposition of any right, title or interest of Lessor under
any of the Lease Documents, and (vii) any rights of Guarantor pursuant to
Sections 12-1641 and 12-1643 of the Arizona Civil Code or Rule 17(f) of the
Arizona Rules of Civil Procedure.
5. Subordination. Guarantor agrees that any and all present and future
debts and obligations of Lessor to Guarantor hereby are subordinated to the
claims of Lessor and hereby are assigned by Guarantor to Lessor, as security for
the payment and performance of Lessee's Obligations.
6. Reinstatement. The obligations of Guarantor pursuant to this Guaranty
shall continue to be effective or automatically be reinstated, as the case may
be, if at any time payment of any of Lessee's Obligations is rescinded or
otherwise must be restored or returned by any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Guarantor or Lessee or
for any other reason, all as though such payment had not been made.
7. Successors and Assigns. This Guaranty shall inure to the benefit of
Lessor and its respective successors and assigns. This Guaranty shall be binding
on Guarantor and its successors and assigns, and shall continue in full force
and effect until all of Lessee's Obligations are paid and performed in full.
Notwithstanding the foregoing, Guarantor may not assign all or any of its
obligations hereunder.
8. No Waiver of Rights. Neither any delay in exercising, nor any failure
on the part of Lessor to exercise any right, power or privilege under this
Guaranty or any of the other Lease Documents shall operate as a waiver thereof,
and no single or partial exercise of any right, power or privilege shall
preclude any other or further exercise thereof or the exercise of any other
power or right, or be deemed to establish a custom or course of dealing or
performance among the parties hereto. The rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies provided by law. No
notice to or demand on Guarantor in any case shall entitle Guarantor to any
other or further notice or demand in the same, similar or any other
circumstance.
9. Modification. The terms of this Guaranty may be waived, discharged or
terminated only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of Lessor.
10. Costs and Expenses. Guarantor agrees to pay on demand all costs and
expenses incurred by or on behalf of Lessor (including, without limitation,
reasonable attorneys' fees and expenses) in enforcing Guarantor's Obligations.
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<PAGE>
11. Jurisdiction. Guarantor hereby agrees that all actions or proceedings
arising directly or indirectly out of this Guaranty or any of the other Lease
Documents to which it is a party shall be litigated in the Superior Court of
Arizona, Maricopa County, or the United States District Court for the District
of Arizona or, if Lessor initiates such action, in addition to the foregoing
courts, any other court in which Lessor shall initiate or to which Lessor shall
remove such action, to the extent such court has jurisdiction. Guarantor hereby
expressly submits and consents in advance to jurisdiction in any action or
proceeding commenced in or removed by Lessor in any of such courts, and hereby
waives personal service of the summons and complaint, or other process or papers
issued therein, and agrees that service of such summons and complaint or other
process or papers may be mailed, postage prepaid, either by registered or
certified mail, return receipt requested, or by overnight express carrier,
addressed to Guarantor at the address to which notices are to be sent to Lessee
set forth in the Lease. Guarantor waives any claim that Phoenix, Arizona or the
District of Arizona is an inconvenient forum or an improper forum based on lack
of venue. Should Guarantor, after being so served, fail to appear or answer to
any summons, complaint, process or papers so served within the period of time
prescribed by law after the mailing thereof, Guarantor shall be deemed in
default and an order and/or judgment may be entered by Lessor against Guarantor
as demanded or prayed for in such summons, complaint, process or papers. The
exclusive choice of forum for Guarantor set forth in this section shall not be
deemed to preclude the enforcement by Lessor of any judgment obtained in any
other forum or the taking by Lessor of any action to enforce the same in any
other appropriate jurisdiction.
12. Applicable Law. This Guaranty shall be governed as to validity,
interpretation, effect and in all other respects by laws and decisions of the
State of Arizona. For purposes of this section, this Guaranty shall be deemed to
be performed and made in the State of Arizona.
13. Waiver of Right to Jury Trial. Lessor and Guarantor acknowledge and
agree that any controversy which may arise under this Guaranty or any of the
other Lease Documents, or with respect to the transactions contemplated thereby,
would be based upon difficult and complex issues and therefore, Lessor and
Guarantor agree that any court proceeding arising out of any such controversy
will be tried in a court of competent jurisdiction by a judge sitting without a
jury.
14. Waiver of Rights Against Lessee. Notwithstanding anything to the
contrary which may be contained herein, Guarantor hereby unconditionally and
irrevocably agrees that Guarantor (i) will not at any time assert against Lessee
(or such Lessee's estate if such Lessee becomes bankrupt or becomes the subject
of any case or proceeding under the bankruptcy laws of the United States of
America) any right or claim, at law or in equity, to indemnification,
reimbursement, contribution, restitution or payment for or with respect to any
and all amounts Guarantor may pay or be obligated to pay to Lessee, including,
without limitation, Guarantor's Obligations and any and all other obligations
which Guarantor may perform, satisfy or discharge, under or with respect to this
Guaranty, and (ii) waives and releases all such rights and claims, at law or in
equity, to indemnification, reimbursement, contribution, restitution or payment
which Guarantor may have now or at any time against Lessee (or Lessee's estate
if Lessee becomes bankrupt or becomes the subject of any case or proceeding
under the bankruptcy laws of the United States of America). Guarantor further
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<PAGE>
unconditionally and irrevocably agrees that Guarantor shall have no right of
subrogation, and waives any right to enforce any remedy which Lender now has or
hereafter may have against Lessee, and waives any defense based upon an election
of remedies by Lenders, which destroys or otherwise impairs any subrogation
rights of Guarantor and/or the right of Guarantor to proceed against Lessee for
reimbursement.
15. Time of Essence. Time is of the essence in the performance by
Guarantor of the obligations under this Guaranty.
16. No Joinder. Guarantor agrees that any action to enforce this Guaranty
may be brought against Guarantor without any reimbursement or joinder of Lessee
in such action.
17. Severability. In the event that any provision of this Guaranty is
deemed to be invalid by reason of the operation of any law, including, but not
limited to, any of the rules and regulations and policies of the FCC, or by
reason of the interpretation placed thereon by any court or the FCC or any other
Governmental Body, as applicable, the validity, legality and enforceability of
the remaining terms and provisions of this Guaranty shall not in any way be
affected or impaired thereby, all of which shall remain in full force and
effect, and the affected term or provision shall be modified to the minimum
extent permitted by law so as to achieve most fully the intention of this
Guarant.
18. Financial Statements. Upon request by Lessor, Guarantor agrees
promptly to deliver any and all financial statements of Guarantor and other
documents relating to Guarantor's property as Lessor may reasonably request.
19. Security. Guarantor's Obligations are secured in accordance with the
terms of the other Lease Documents to which Guarantor is a party.
19. Termination. This Guaranty shall terminate upon payment and
satisfaction in full of Lessee's Obligations and Guarantor's Obligations.
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<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
AQUIS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
GUARANTY
This GUARANTY (this "Guaranty"), dated as of March 31, 1999, is made by
AQUIS COMMUNICATIONS GROUP, INC., a Delaware corporation ("Guarantor"), for the
benefit of FINOVA CAPITAL CORPORATION, a Delaware corporation, in its individual
capacity and as agent ("Agent") for the financial institutions (the "Lenders")
from time to time parties to the Loan Agreement described below.
Preliminary Statement:
A. Aquis Communications, Inc., a Delaware corporation formerly known as
BAP Acquisition Corporation ("Borrower"), Agent and Lenders have entered into a
Loan Agreement dated December 31, 1998 (the "Original Loan Agreement"), as
amended by a First Amendment to Loan Instruments of even date herewith (the
"First Amendment") among Borrower, Agent and Lenders (the Original Loan
Agreement, as amended by the First Amendment and as the same may be further
amended, supplemented, modified or restated from time to time, hereinafter is
referred to as the "Loan Agreement") pursuant and subject to the terms and
conditions of which Lenders have agreed to make loans and other financial
accommodations to Borrower.
B. Guarantor is the owner of all of the issued and outstanding capital
stock of Borrower. Accordingly, Guarantor has a direct financial interest in
inducing Lenders to enter into the Loan Agreement.
C. One of the conditions precedent to the consent of Lenders to the Paging
Partners Merger (as defined in the Loan Agreement) and the obligation of Lenders
to disburse the Merger Portion (as defined in the Loan Agreement) is the
execution and delivery by Guarantor of this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Guarantor hereby agrees as
follows:
1. Definitions. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Loan
Agreement.
2. Guaranty of Payment. Guarantor hereby unconditionally and irrevocably
guarantees to Agent and Lenders the punctual payment and performance when due,
whether at stated maturity or by acceleration or otherwise, of Borrower's
Obligations. Guarantor agrees that this Guaranty is a present and continuing
guaranty of payment and not of collectibility, and that neither Agent nor any
Lender shall be required to prosecute collection, enforcement or other remedies
against Borrower or any other Person, or to enforce or resort to any of the
Collateral or other rights or remedies pertaining thereto, before calling
Guarantor for payment.
3. Continuing Guaranty. Guarantor agrees that Guarantor's Obligations
shall be primary obligations of Guarantor, shall not be subject to any
counterclaim, set-off, abatement, deferment or defense based upon any claim that
Guarantor may have against Agent, any Lender, Borrower or any other Person, and
shall remain in full force and effect without regard to, and
<PAGE>
shall not be released, discharged, limited or affected in any way by any
circumstance or condition (whether or not Guarantor shall have any knowledge
thereof), including, without limitation:
(a) any lack of validity or enforceability of any of the Loan
Instruments;
(b) any termination, restatement, amendment, modification or other
change in any of the Loan Instruments;
(c) any furnishing, exchange, substitution or release of any
Collateral, or any failure to perfect any Lien in any of the Collateral;
(d) any failure, omission or delay on the part of Borrower, Agent or
any Lender to conform or comply with any term of any of the Loan
Instruments or any failure of Agent or any Lender to give notice of any
Incipient Default or any Event of Default;
(e) any waiver, compromise, release, settlement or extension of time
of payment or performance or observance of any of the obligations or
agreements contained in any of the Loan Instruments;
(f) any action or inaction by Agent or any Lender under or in
respect of any of the Loan Instruments, any failure, lack of diligence,
omission or delay on the part of Agent or any Lender to enforce, assert or
exercise any right, power or remedy conferred on Agent or any Lender in
any of the Loan Instruments, or any other action or inaction on the part
of Agent or any Lender;
(g) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets
and liabilities or similar events or proceedings with respect to
Guarantor, Borrower or any other Person or any of their respective
Property or creditors, or any action taken by any trustee or receiver or
by any court in any such proceeding;
(h) any merger or consolidation of Guarantor, Borrower or any other
Person into or with any Person, or any sale, lease or transfer of any of
the assets of Guarantor, Borrower or any other person to any other Person;
(i) any change in the ownership of any of the equity interests of
Borrower or any change in the relationship between Guarantor and Borrower,
or any termination of any such relationship;
(j) any release or discharge by operation of law of Guarantor or
Borrower from any obligation or agreement contained in any of the Loan
Instruments;
(k) any other occurrence, circumstance, happening or event, whether
similar or dissimilar to the foregoing and whether foreseen or unforeseen,
which otherwise might
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<PAGE>
constitute a legal or equitable defense or discharge of the liabilities of
a guarantor or surety or which otherwise might limit recourse against
Guarantor or Borrower.
4. Waivers. Guarantor unconditionally waives, to the extent permitted by
law, (i) notice of any of the matters referred to in Section 3 above, (ii) all
notices which may be required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve intact any rights against Guarantor, including,
without limitation, any demand, presentment and protest, proof of notice of
non-payment under any of the Loan Instruments and notice of any Incipient
Default, any Event of Default or any failure on the part of Guarantor or
Borrower to perform or comply with any covenant, agreement, term or condition of
any of the Loan Instruments, (iii) any right to the enforcement, assertion or
exercise against Guarantor or Borrower of any right or remedy conferred under
any of the Loan Instruments, (iv) any requirement of diligence on the part of
any Person, (v) any requirement to exhaust any remedies or to mitigate the
damages resulting from any default under any of the Loan Instruments, (vi) any
notice of any sale, transfer or other disposition of any right, title or
interest of Agent or any Lender under any of the Loan Instruments, and (vii) any
rights of Guarantor pursuant to Sections 12-1641 and 12-1643 of the Arizona
Civil Code or Rule 17(f) of the Arizona Rules of Civil Procedure.
5. Subordination. Guarantor agrees that any and all present and future
debts and obligations of Borrower to Guarantor hereby are subordinated to the
claims of Agent and Lenders and hereby are assigned by Guarantor to Agent, for
the benefit of Lenders, as security for the payment and performance of
Borrower's Obligations.
6. Reinstatement. The obligations of Guarantor pursuant to this Guaranty
shall continue to be effective or automatically be reinstated, as the case may
be, if at any time payment of any of Borrower's Obligations is rescinded or
otherwise must be restored or returned by any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Guarantor or Borrower
or for any other reason, all as though such payment had not been made.
7. Representations and Warranties.
7.1 Existence and Power. Guarantor is a corporation duly formed,
validly existing and in good standing under the laws of the State of
Delaware. Guarantor is in good standing under the laws of each other
jurisdiction in which the failure to be in good standing could have a
Material Adverse Effect. Guarantor has all requisite power and authority
to own its Property and to carry on its business as now conducted and as
proposed to be conducted following the Paging Partners Merger Closing
Date.
7.2 Authority. Guarantor has full power and authority to enter into,
execute, deliver and carry out the terms of the Instruments to which it is
a party and to incur the obligations provided for therein, all of which
have been duly authorized by all proper and necessary action and are not
prohibited by its articles of incorporation or by-laws.
7.3 Binding Agreements. This Guaranty and the other Loan Instruments
to which Guarantor is a party, when executed and delivered, will
constitute the valid and legally binding obligations of Guarantor to the
extent Guarantor is a party thereto, enforceable
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<PAGE>
against Guarantor in accordance with their respective terms, except as
such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and (ii)
equitable principles (whether or not any action to enforce such document
is brought at law or in equity).
7.4 Business and Property of Guarantor. Guarantor does not engage
and does not propose to engage in any business or activity other than (i)
the ownership of all of the issued and outstanding capital stock of
Borrower and (ii) providing to Borrower the benefit of certain operating
agreements and leases to which Guarantor is a party, all of which
operating agreements and leases are described in Exhibit 5.5.3 and Exhibit
5.5.5, respectively, of the Loan Agreement. Each such operating agreement
and lease is in full force and effect, there has been no default in the
performance of any of its terms or conditions by Guarantor or, to the best
knowledge of Guarantor, any other party thereto, and, to the best
knowledge of Guarantor, no claims of default have been asserted with
respect thereto. Guarantor does not own any real estate. Guarantor has no
subsidiaries other than Borrower.
7.5 Title to Property; Liens. Guarantor has (i) good title to all of
its Property except the portion thereof consisting of a leasehold estate
and (ii) a valid leasehold estate in each portion of its Property which
consists of a leasehold estate. All of such Property is free and clear of
all Liens, except Permitted Liens. Upon the proper filing with the
appropriate Governmental Bodies of appropriate Uniform Commercial Code
financing statements, the applicable Loan Instruments will create valid
and perfected first Liens in the Property described therein, subject in
priority only to Permitted Prior Liens.
7.6 Litigation. There are no action, suits, arbitration proceedings
or claims pending or, to the best knowledge of Guarantor, threatened
against Guarantor or maintained by Guarantor at law or in equity or before
any Governmental Body which if adversely determined could reasonably be
expected to have a Material Adverse Effect.
7.7 Defaults in Other Agreements; Consents; Conflicting Agreements.
Guarantor is not in default under any agreement to which it is a party or
by which it or any of its Property is bound, the effect of which default
could have a Material Adverse Effect. No material authorization, consent,
approval or other action by, and no notice to or filing with, any
Governmental Body or any other Person which has not already been obtained,
taken or filed, as applicable, is required (i) for the due execution,
delivery or performance by Guarantor of any of the Instruments to which
Guarantor is a party or (ii) as a condition to the validity or
enforceability of any of the Instruments to which Guarantor is a party or
any of the transactions contemplated thereby or the priority of the
Security Interests, except for (A) certain filings to establish and
perfect the Security Interests and (B) filing of certain of the Loan
Instruments with the FCC. No provision of any mortgage, indenture,
material contract, material agreement, statute, rule, regulation,
judgment, decree or order binding on Guarantor or affecting its Property
conflicts with, or requires any consent which has not already been
obtained under, or would in any way prevent the execution, delivery or
performance of the terms of any of the Instruments or affect the validity
or priority of the Security Interests. The execution, delivery and
performance of the terms of the Instruments will not constitute a
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<PAGE>
default under, or result in the creation or imposition of, or obligation
to create, any Lien other than Permitted Liens upon the Property of
Guarantor pursuant to the terms of any such mortgage, indenture, contract
or agreement.
7.8 Taxes. Guarantor has filed all tax returns required to be filed,
and has paid, or made adequate provision for the payment of, all taxes
shown to be due and payable on such returns or in any assessments made
against it, except such taxes or assessments as are being contested in
good faith and by appropriate proceedings diligently conducted and for
which adequate reserves have been set aside in accordance with GAAP, and
no tax liens have been filed and, to the best knowledge of Guarantor, no
claims are being asserted in respect of such taxes which are required by
GAAP to be reflected in the financial statements of Guarantor and are not
so reflected therein. The charges, accruals and reserves on the books of
Guarantor with respect to all federal, state, local and other taxes are
considered by the management of Guarantor to be adequate, and Guarantor
does not know of any unpaid assessment which is or might be due and
payable by Guarantor or create a Lien against any of Guarantor's Property,
except such assessments as are being contested in good faith and by
appropriate proceedings diligently conducted, and for which adequate
reserves have been set aside in accordance with GAAP. None of the tax
returns of Guarantor are under audit and Guarantor is not the subject or
target of any investigation by the Internal Revenue Service.
7.9 Compliance with Applicable Laws. Guarantor is not in default in
respect of any judgment, order, writ, injunction, decree or decision of
any Governmental Body, which default could have a Material Adverse Effect.
Guarantor is in compliance in all material respects with all applicable
statutes and regulations, including, without limitation, the
Communications Act, all Environmental Laws, ERISA, ADA and all laws and
regulations relating to unfair labor practices, equal employment
opportunity and employee safety, of all Governmental Bodies, the
non-compliance with which could reasonably be expected to have a Material
Adverse Effect. No material condemnation, eminent domain or expropriation
has been commenced or, to the best knowledge of Guarantor, threatened
against Guarantor's Property.
7.10 FCC Matters. Guarantor (i) has duly and timely filed all
reports and other filings which are required to be filed by Guarantor
under the Communications Act and any other applicable law, rule or
regulation of any Governmental Body, the non-filing of which could have a
Material Adverse Effect, and (ii) is in compliance with the Communications
Act and all such laws, rules and regulations, the noncompliance with which
could have a Material Adverse Effect. All information provided by or on
behalf of Guarantor in any material filing with the FCC was at the time of
filing true, complete and correct in all material respects, and the FCC
has been notified of any substantial or significant changes in such
information as required in accordance with the Communications Act and all
other applicable laws, rules and regulations.
7.11 Environmental Matters. Guarantor is in compliance in all
material respects with all applicable Environmental Laws and no portion of
any of Real Estate or the Leasehold Property has been used as a land fill.
To the best knowledge of Guarantor, there currently are not any known
Hazardous Materials generated, manufactured, released, stored, buried or
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deposited over, beneath, in or on (or used in the construction and/or
renovation of) the Real Estate or Leasehold Property in violation of
applicable Environmental Laws.
7.12 Other Indebtedness. There is no Indebtedness for Borrowed Money
owed by Guarantor to any Person, except Guarantor's Obligations.
7.13 No Misrepresentation. Neither this Guaranty nor any other Loan
Instrument, certificate, information or report furnished or to be
furnished by or on behalf of Guarantor to Agent or any Lender in
connection with any of the transactions contemplated hereby or thereby,
contains or will contain a misstatement of material fact, or omits or will
omit to state a material fact required to be stated in order to make the
statements contained herein or therein, taken as a whole, not misleading
in the light of the circumstances under which such statements were made.
There is no fact, other than information known to the public generally,
known to Guarantor after diligent inquiry, that could have a Material
Adverse Effect that has not expressly been disclosed to Agent in writing.
7.14 Burdensome Obligations. After giving effect to the transactions
contemplated by the Instruments (i) Guarantor (A) will not be a party to
or be bound by any franchise, agreement, deed, lease or other instrument,
or be subject to any restriction, which is so unusual or burdensome so as
to cause, in the foreseeable future, a Material Adverse Effect and (B)
does not intend to incur, or believe that it will incur, debts beyond its
ability to pay such debts as they become due, and (ii) Guarantor (A) owns
and will own Property, the fair saleable value of which is (I) greater
than the total amount of its liabilities (including contingent
liabilities) and (II) greater than the amount that will be required to pay
the probable liabilities of its then existing debts as they become
absolute and matured, and (B) has and will have capital that is not
unreasonably small in relation to its business as presently conducted and
as proposed to be conducted. Guarantor does not presently anticipate that
future expenditures needed to meet the provisions of federal or state
statutes, orders, rules or regulations will be so burdensome so as to have
a Material Adverse Effect.
7.15 Insurance. No notice of cancellation has been received with
respect to any insurance policies required pursuant to Section 8.5 and
Guarantor is in material compliance with all conditions contained in such
policies.
7.16 Year 2000 Problem. Guarantor has taken all action necessary to
assure that there will be no Material Adverse Effect by reason of the
advent of the year 2000, including without limitation, that all
computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999.
8. Affirmative Covenants. Until all of Borrower's Obligations and
Guarantor's Obligations are paid and performed in full, Guarantor agrees that it
will:
8.1 Legal Existence; Good Standing. Maintain its existence and its
good standing in Delaware and maintain its qualification in each other
jurisdiction in which the failure so to qualify could have a Material
Adverse Effect.
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<PAGE>
8.2 Inspection. Permit representatives of Agent and Lenders, upon
reasonable prior notice and during normal business hours if no Event of
Default or Incipient Default exists and is continuing, or without notice
at any time if an Event of Default or Incipient Default exists and is
continuing, to (i) visit its offices, (ii) examine its books and records
and Accountants' reports relating thereto, (iii) make copies or extracts
therefrom, (iv) discuss its affairs with its employees, (v) examine and
inspect its Property and (vi) meet and discuss its affairs with the
Accountants, and such Accountants, as a condition to their retention by
Guarantor, are hereby irrevocably authorized by Guarantor to fully discuss
and disclose all such affairs with Agent and Lenders.
8.3 Reports to Governmental Bodies and Other Persons. Timely file
all material reports, applications, documents, instruments and information
required to be filed pursuant to all rules, regulations or requests of any
Governmental Body or other Person having jurisdiction over the operation
of the business of Guarantor, including, but not limited to, such of the
Loan Instruments as are required to be filed with any such Governmental
Body or other Person pursuant to applicable rules and regulations
promulgated by such Governmental Body or other Person, except where the
failure to file could not reasonably be expected to have a Material
Adverse Effect.
8.4 Maintenance of Leases and Operating Agreements. Maintain in full
force and effect at all times (subject to any modification in the ordinary
of business which could not reasonably be expected to have a Material
Adverse Effect), and apply in a timely manner for renewal of, all the
leases and the agreement set forth on Exhibit A hereto, the loss of any of
which could have a Material Adverse Effect.
8.5 Insurance.
8.5.1 Maintenance of Insurance. Maintain in full force and
effect Business Insurance as required by the insurance letter
agreement between Borrower and Agent attached to the Loan Agreement
as Exhibit 6.6.1, all of which shall be written by insurers and in
amounts and forms satisfactory to Agent and otherwise comply with
the terms of such insurance letter agreement, and deliver to Agent
such evidence of compliance with this subsection 8.5.1 as Agent may
require.
8.5.2 Claims and Proceeds. Guarantor hereby directs all
insurers under all policies of Business Insurance to pay all
proceeds payable thereunder directly to Agent and Guarantor hereby
authorizes Agent to collect all such proceeds. Guarantor irrevocably
appoints Agent (and all officers, employees or agents designated by
Agent) as Guarantor's true and lawful attorney and agent in fact for
the purpose of and with power to make, settle and adjust claims
under such policies of insurance, endorse the name of Guarantor on
any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance, and to make all
determinations and decisions with respect to such policies of
insurance. Guarantor acknowledges that such appointment as attorney
and agent in fact is a power coupled with an interest, and therefore
is irrevocable. The insurance proceeds received on account of any
loss, damage, destruction or other casualty (i) if any Event of
Default exists and
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is continuing or if the aggregate amount thereof exceeds $200,000,
at the option of Agent may be applied to the payment of Guarantor's
Obligations in the following order of priority: (A) first, to the
payment of any and all sums which then are due and payable pursuant
to the terms of the Loan Instruments, other than the Principal
Balance and interest accrued thereon, (B) next, to accrued and
unpaid interest on the Principal Balance and (C) then, to the
Principal Balance of the Loan in the inverse order of the maturity
of the installments thereof, or (ii) at the option of Agent may be
(or if no Event of Default exists and is continuing and the
aggregate amount thereof is $200,000 or less, shall be), held by
Agent and applied to pay for the cost of repair or replacement of
the Property which was the subject of such loss, damage, destruction
or other casualty, in which event such proceeds shall be made
available in the manner and under such conditions as Agent may
require. In the event such proceeds are to be applied to the repair
or replacement of Property, the Property shall be repaired or
replaced so as to be of at least equal value and substantially the
same character as prior to such loss, damage, destruction or other
casualty within 90 days after receipt of such proceeds.
8.6 Environmental Matters. At all times comply with, and be
responsible for, its material obligations under all Environmental Laws
applicable to the Leasehold Property and any other Property owned by
Guarantor or used by Guarantor. At its sole cost and expense, Guarantor
shall (i) comply in all respects with (A) any notice of any violation or
administrative or judicial complaint or order having been filed against
Guarantor, any portion of any Leasehold Property or any other Property
owned by Guarantor or used by Guarantor in the operation of its business
alleging violations of any law, ordinance and/or regulation requiring
Guarantor to take any action in connection with the release,
transportation and/or clean-up of any Hazardous Materials, and (B) any
notice from any Governmental Body or any other Person alleging that
Guarantor is or may be liable for costs associated with a response or
clean-up of any Hazardous Materials or any damages resulting from such
release or transportation, or (ii) diligently contest in good faith by
appropriate proceedings any demands set forth in such notices, provided
(A) reserves in an amount reasonably satisfactory to Agent to pay the
costs associated with complying with any such notice are established by
Guarantor and (B) no Lien would or will attach to the Property which is
the subject of any such notice as a result of any compliance by Guarantor
which is delayed during any such contest. Promptly upon receipt of any
notice described in the foregoing clause (i), Guarantor shall deliver to
Agent a copy thereof.
8.7 Compliance with Laws. Comply with the Communications Act and all
other federal, state and local laws, ordinances, requirements and
regulations and all judgments, orders, injunctions and decrees applicable
to Guarantor and its operations, the failure to comply with which could
have a Material Adverse Effect.
8.8 Taxes and Claims. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any Property belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien (other than a Permitted Lien) upon the Property of
Guarantor, provided that Guarantor shall not be required by this Section
8.8 to pay any such amount if the same is being contested diligently and
in good faith by appropriate
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<PAGE>
proceedings and as to which Guarantor has set aside reserves on its books
reasonably satisfactory to Agent.
8.9 Governmental Approvals. Upon the exercise by Agent and/or
Lenders of any power, right or privilege pursuant to the provisions of any
of the Loan Instruments after the occurrence and during the continuance of
any Event of Default requiring any consent, approval or authorization of
any Governmental Body (including, without limitation, transfers of
Licenses), promptly execute and cause the execution of all applications,
certificates, instruments and other documents that Agent and/or Lenders
may be required to obtain for such consent, approval or authorization.
8.10 Year 2000 Problem. Take all action reasonably necessary to
assure that there will be no Material Adverse Effect by reason of the
advent of the year 2000, including without limitation that all
computer-based systems, embedded microchips and other processing
capabilities of Guarantor effectively recognize and process dates after
April 1, 1999; and, at Agent's request, provide to Agent assurance
reasonably acceptable to Agent that Guarantor's computer-based systems,
embedded microchips and other processing capabilities are year 2000
compatible.
9. Negative Covenants. Until Guarantor's Obligations and Guarantor's
Obligations are paid and performed in full, except to the extent permitted under
the Loan Agreement, Guarantor shall not:
9.1 Borrowing. Create, incur, assume or suffer to exist any
liability for Indebtedness for Borrowed Money except Guarantor's
Obligations and the obligations of Guarantor under that certain Guaranty
(Equipment Lease) of even date herewith in favor of FINOVA.
9.2 Liens. Create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except
Permitted Liens.
9.3 Merger and Acquisition. Consolidate with or merge with or into
any Person, or acquire directly or indirectly all or substantially all of
the capital stock, equity interests or Property of any Person.
9.4 Contingent Liabilities. Assume, guarantee, endorse, contingently
agree to purchase, become liable in respect of any letter of credit, or
otherwise become liable upon the obligation of any Person, except
liabilities arising from the endorsement of negotiable instruments for
deposit or collection and similar transactions in the ordinary course of
business.
9.5 Restricted Payments. Make any dividends, distributions or other
shareholder expenditures with respect to its capital stock or warrants,
options or other rights to acquire its capital stock or apply any of its
Property to the purchase, redemption or other retirement of, or set apart
any sum for the payment of, or make any other distribution by reduction of
capital or otherwise in respect of, any of its capital stock or warrants,
options
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or other rights to acquire its capital stock except from the proceeds of
dividends permitted to be paid by Borrower to Guarantor pursuant to the
Loan Agreement.
9.6 Sale or Transfer of Assets. Sell, lease, assign, transfer or
otherwise dispose of any Property (other than in the ordinary course of
business) to any Person other than Borrower.
9.7 Business Activities. Make or incur any Capital Expenditures,
acquire any additional Property, enter into any leases or operating
agreements other than those leases and operating agreements to which
Guarantor is a party described on Exhibit 5.5.3 and 5.5.5 of the Loan
Agreement, or engage in any business other than (i) the ownership of all
of the issued and outstanding capital stock of Borrower, (ii) the
transactions contemplated by such leases and operating agreement,
including making payments required thereunder, (iii) providing to Borrower
the benefit of such leases, (iv) the issuance of capital stock in
connection with transactions permitted under the Loan Agreement and (v)
other business activities reasonably incidental thereto.
9.8 Transactions with Affiliates. Sell, lease, assign, transfer or
otherwise dispose of any Property to any Affiliate other than Borrower,
lease Property, render or receive services or purchase assets from any
Affiliate other than Borrower, or otherwise enter into any contractual
relationship with any Affiliate other than Borrower on terms which are
less favorable to Guarantor than those otherwise reasonably attainable on
an arm's length basis from a Person which is not one of its Affiliates.
9.9 Investments, Loans. At any time purchase or otherwise acquire,
hold or invest in the capital stock of, or any other interest in, any
Person, or make any loan or advance to, or enter into any arrangement for
the purpose of providing funds or credit to, or make any other investment,
whether by way of capital contribution or otherwise, in or with any
Person, including, without limitation, any Affiliate, except (i)
investments in direct obligations of, or instruments unconditionally
guaranteed by, the United States of America or in certificates of deposit
issued by a Qualified Depository, (ii) investments in commercial or
finance paper which, at the time of investment, is rated "A" or better by
Moody's Investors Service, Inc., or Standard & Poor's Corporation,
respectively, or at the equivalent rate by any of their respective
successors, (iii) any interests in any money market account maintained, at
the time of investment, with a Qualified Depository, the investments of
which, at the time of investment, are restricted to the types specified in
clause (i) above and (iv) investments in Borrower. All investments
permitted pursuant to this Section 9.9 shall have a maturity not exceeding
one year.
10. Successors and Assigns. This Guaranty shall inure to the benefit of
Agent, Lenders and their respective successors and assigns. This Guaranty shall
be binding on Guarantor and its successors and assigns, and shall continue in
full force and effect until all of Borrower's Obligations are paid and performed
in full. Notwithstanding the foregoing, Guarantor may not assign all or any of
its obligations hereunder.
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<PAGE>
11. No Waiver of Rights. Neither any delay in exercising, nor any failure
on the part of Agent or any Lender to exercise any right, power or privilege
under this Guaranty or any of the other Loan Instruments shall operate as a
waiver thereof, and no single or partial exercise of any right, power or
privilege shall preclude any other or further exercise thereof or the exercise
of any other power or right, or be deemed to establish a custom or course of
dealing or performance among the parties hereto. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies provided by
law. No notice to or demand on Guarantor in any case shall entitle Guarantor to
any other or further notice or demand in the same, similar or any other
circumstance.
12. Modification. The terms of this Guaranty may be waived, discharged or
terminated only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of the Lenders.
13. Costs and Expenses. Guarantor agrees to pay on demand all costs and
expenses incurred by or on behalf of Agent and/or any other Lender (including,
without limitation, reasonable attorneys' fees and expenses) in enforcing
Guarantor's Obligations.
14. Jurisdiction. Guarantor hereby agrees that all actions or proceedings
arising directly or indirectly out of this Guaranty or any of the other Loan
Instruments to which it is a party shall be litigated in the Superior Court of
Arizona, Maricopa County, or the United States District Court for the District
of Arizona or, if Agent or any Lender initiates such action, in addition to the
foregoing courts, any other court in which Agent or such Lender shall initiate
or to which Agent or such Lender shall remove such action, to the extent such
court has jurisdiction. Guarantor hereby expressly submits and consents in
advance to jurisdiction in any action or proceeding commenced in or removed by
Agent or any Lender in any of such courts, and hereby waives personal service of
the summons and complaint, or other process or papers issued therein, and agrees
that service of such summons and complaint or other process or papers may be
mailed, postage prepaid, either by registered or certified mail, return receipt
requested, or by overnight express carrier, addressed to Guarantor at the
address to which notices are to be sent to Borrower set forth in the Loan
Agreement. Guarantor waives any claim that Phoenix, Arizona or the District of
Arizona is an inconvenient forum or an improper forum based on lack of venue.
Should Guarantor, after being so served, fail to appear or answer to any
summons, complaint, process or papers so served within the period of time
prescribed by law after the mailing thereof, Guarantor shall be deemed in
default and an order and/or judgment may be entered by Agent or any Lender
against Guarantor as demanded or prayed for in such summons, complaint, process
or papers. The exclusive choice of forum for Guarantor set forth in this section
shall not be deemed to preclude the enforcement by Agent or any Lender of any
judgment obtained in any other forum or the taking by Agent or any Lender of any
action to enforce the same in any other appropriate jurisdiction.
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<PAGE>
15. Applicable Law. This Guaranty shall be governed as to validity,
interpretation, effect and in all other respects by laws and decisions of the
State of Arizona. For purposes of this section, this Guaranty shall be deemed to
be performed and made in the State of Arizona.
16. Waiver of Right to Jury Trial. Agent, Lenders and Guarantor
acknowledge and agree that any controversy which may arise under this Guaranty
or any of the other Loan Instruments, or with respect to the transactions
contemplated thereby, would be based upon difficult and complex issues and
therefore, Agent, Lenders and Guarantor agree that any court proceeding arising
out of any such controversy will be tried in a court of competent jurisdiction
by a judge sitting without a jury.
17. Waiver of Rights Against Borrower. Notwithstanding anything to the
contrary which may be contained herein, Guarantor hereby unconditionally and
irrevocably agrees that Guarantor (i) will not at any time assert against
Borrower (or such Borrower's estate if such Borrower becomes bankrupt or becomes
the subject of any case or proceeding under the bankruptcy laws of the United
States of America) any right or claim, at law or in equity, to indemnification,
reimbursement, contribution, restitution or payment for or with respect to any
and all amounts Guarantor may pay or be obligated to pay to Agent or any Lender,
including, without limitation, Guarantor's Obligations and any and all other
obligations which Guarantor may perform, satisfy or discharge, under or with
respect to this Guaranty, and (ii) waives and releases all such rights and
claims, at law or in equity, to indemnification, reimbursement, contribution,
restitution or payment which Guarantor may have now or at any time against
Borrower (or Borrower's estate if Borrower becomes bankrupt or becomes the
subject of any case or proceeding under the bankruptcy laws of the United States
of America). Guarantor further unconditionally and irrevocably agrees that
Guarantor shall have no right of subrogation, and waives any right to enforce
any remedy which Lender now has or hereafter may have against Borrower, and
waives any defense based upon an election of remedies by Lenders, which destroys
or otherwise impairs any subrogation rights of Guarantor and/or the right of
Guarantor to proceed against Borrower for reimbursement.
18. Time of Essence. Time is of the essence in the performance by
Guarantor of the obligations under this Guaranty.
19. No Joinder. Guarantor agrees that any action to enforce this Guaranty
may be brought against Guarantor without any reimbursement or joinder of
Borrower in such action.
22. Severability. In the event that any provision of this Guaranty is
deemed to be invalid by reason of the operation of any law, including, but not
limited to, any of the rules and regulations and policies of the FCC, or by
reason of the interpretation placed thereon by any court or the FCC or any other
Governmental Body, as applicable, the validity, legality and enforceability of
the remaining terms and provisions of this Guaranty shall not in any way be
affected or impaired thereby, all of which shall remain in full force and
effect, and the affected term or provision shall be modified to the minimum
extent permitted by law so as to achieve most fully the intention of this
Guaranty.
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<PAGE>
23. Financial Statements. Upon request by Agent, Guarantor agrees promptly
to deliver any and all financial statements of Guarantor and other documents
relating to Guarantor's Property as Agent may reasonably request.
24. Security. Guarantor's Obligations are secured in accordance with the
terms of the other Loan Instruments to which Guarantor is a party.
25. Release of Guaranty. This Guaranty shall be released, Guarantor's
Obligations shall be deemed to have been satisfied and performed in full, and
the Liens granted by Guarantor to Agent pursuant to the Paging Partners
Assignment of Leases and the Paging Partners Security Agreement shall be
released, promptly after delivery by Guarantor to Agent of evidence reasonably
satisfactory to Agent that (i) all right, title and interest of Guarantor under
the leases and agreement described on Schedule A hereto (except to the extent
Guarantor is no longer a party to such lease or agreement as a result of its
being canceled or terminated or the premises subject thereto being surrendered
as permitted under the Loan Instruments and excluding those leases and
agreements which are not necessary to the operations of the Paging Business)
have been validly assigned to and assumed by Borrower, (ii) Borrower has
obtained all consents of all Persons whose consent is required, as reasonably
determined by Agent, in connection with such assignments and assumptions and
(iii) the consent by the FCC to the transactions effected by the Paging Partners
Merger (other than pro forma assignments or transfers incidental to the Paging
Partners Merger) has become final and is no longer subject to administrative or
judicial reconsideration, review or appeal. In connection with such releases,
Agent shall execute UCC-3 financing statements and such other documents as are
necessary to release Agent's (or Lender's) security interests, at Guarantor's
expense.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
AQUIS COMMUNICATIONS GROUP, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
-----------------------------------
D. Brian Plunkett
Chief Financial Officer
<PAGE>
Exhibit A
Excluded Agreements
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of March 31, 1999 (this "Security
Agreement"), is between AQUIS COMMUNICATIONS GROUP, INC., a Delaware corporation
("Debtor"), and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Secured
Party"), in its individual capacity and as Agent for all Lenders (as defined
below).
Preliminary Statement:
A. Aquis Communications, Inc., a Delaware corporation ("Borrower"), Agent
and Lenders have entered into a Loan Agreement dated December 31, 1998 (the
"Original Loan Agreement"), as amended by a First Amendment to Loan Instruments
of even date herewith (the "First Amendment") among Borrower, Agent and Lenders
(the Original Loan Agreement, as amended by the First Amendment and as the same
may be further amended, supplemented, modified or restated from time to time,
hereinafter is referred to as the "Loan Agreement") pursuant and subject to the
terms and conditions of which Lenders have agreed to make loans and other
financial accommodations to Borrower.
B. Debtor is the owner of all of the issued and outstanding capital stock
of Borrower. Accordingly, Debtor has a direct financial interest in inducing
Lenders to enter into the Loan Agreement.
C. One of the conditions precedent to the consent of Lenders to the Paging
Partners Merger and the obligation of Lenders to disburse the Merger Portion is
the execution and delivery by Debtor of this Security Agreement.
NOW, THEREFORE, in order to induce Lenders to enter into the Loan
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meaning herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms used but not elsewhere defined in this Security
Agreement shall have the respective meanings ascribed to such terms in the Loan
Agreement.
2. Security Interests. In order to secure the performance and payment of
Guarantor's Obligations, Debtor hereby grants to Secured Party, for the benefit
of Lenders, a security interest in all Property of Debtor, whether now owned or
hereafter acquired, and all additions and accessions thereto, including, without
limitation, the Property described below:
2.1 Goods, Machinery, Equipment and Inventory. All of Debtor's
goods, machinery, equipment and inventory, wherever located, and all
additions and accessions thereto or replacements thereof, including, but
not limited to, all machinery, inventory and
<PAGE>
equipment of any and every kind and description comprising, belonging to
or used in connection with the operation of the Paging Business of Debtor
(collectively, the "Tangible Collateral");
2.2 Accounts, General Intangibles. All of Debtor's accounts,
contract rights, chattel paper, instruments, investment property, deposit
accounts, documents and general intangibles (excluding any general
intangibles other than for the payment of money which, by their terms,
prohibit assignment or the grant of a security interest, unless any
required consent to such assignment or grant of security interest is
obtained), and all additions and accessions thereto and replacements
thereof, including, but not limited to, all licenses, franchises, permits
and authorizations heretofore or hereafter granted or issued to Debtor
under federal, state or local laws (excluding, however, any licenses,
franchises, permits and authorizations issued by the FCC, any other
Governmental Body or any other Person to the extent, and only to the
extent, it is unlawful to grant a security interest in such licenses,
franchises, permits and authorizations, but including, without limitation,
the right to receive all proceeds derived or arising from or in connection
with the sale or assignment of such licenses, franchises, permits and
authorizations) which permit or pertain to the operation of the Paging
Business of Debtor, and all of Debtor's Operating Agreements, income tax
refunds, copyrights, patents, trademarks, trade names, trade styles,
goodwill, going concern value, franchise, supply and distributorship
agreements, non-competition agreements and employment contracts
(collectively, the "Intangible Collateral").
2.3 Proceeds. All proceeds (including proceeds of insurance, eminent
domain and other governmental taking and tort claims) and products of the
Property described in Sections 2.1 and 2.2 above; and
2.4 Books and Records. All of the books and records pertaining to
the Property described in Sections 2.1, 2.2 and 2.3 above.
All of the Property described above hereinafter is referred to collectively as
the "Collateral." The security interest of Secured Party in the Collateral shall
be superior and prior to all other Liens except Permitted Prior Liens.
3. Representations and Warranties. Debtor hereby represents and warrants
to Secured Party and Lenders as follows:
3.1 Ownership of Collateral. It is the owner of all of the
Collateral in which a security interest is granted hereunder, except the
portion thereof consisting of after-acquired Property, and Debtor will be
the owner of such after-acquired Property, free from any Lien except for
Permitted Liens.
3.2 Places of Business. There is listed on Exhibit A hereto the
location of the chief executive office of Debtor, all of the other places
of business of Debtor and all locations
2
<PAGE>
where the Tangible Collateral and the books and records of Debtor are
kept. Debtor shall not change the location of (i) Debtor's (A) chief
executive office or (B) books and records or (ii) any Tangible Collateral,
in each case without first giving Secured Party notice of such change not
later than 10 Business Days after such change and having taken any and all
action reasonably requested by Secured Party to maintain and preserve the
Lien in favor of Secured Party hereby granted free and clear of any Lien
whatsoever except for Permitted Liens.
3.3 Trade or Assumed Names. All trade or assumed names under which
Debtor has done business are listed in Exhibit B.
3.4 Financing Statements. Except for the financing statements of
Secured Party and the financing statements pertaining to the Permitted
Senior Indebtedness, if any, the Motorola Indebtedness, if any, and the
Bell Atlantic Seller Indebtedness, no financing statement covering any
Collateral or any portion or proceeds thereof is on file in any public
office.
3.5 Intangible Collateral. The Intangible Collateral in which a
security interest is granted by Debtor hereunder represents bona fide and
existing indebtedness, obligations, liabilities, rights and privileges
owed or belonging to Debtor to which, to the best of Debtor's knowledge,
there is no valid defense, set-off or counterclaim against Debtor and in
connection with which there is no default with respect to any material
payment or material performance on the part of Debtor, or, to the best of
Debtor's knowledge, any other party.
3.6 Tangible Collateral-Personal Property. All Tangible Collateral
at all times shall be considered personal property.
4. Affirmative Covenants. Until all of Guarantor's Obligations are paid
and performed in full, Debtor agrees that it will:
4.1 Taxes. Pay promptly when due all taxes, levies, assessments and
governmental charges upon and relating to any of the Property, income or
receipts of Debtor or otherwise for which Debtor is or may be liable,
except to the extent that the failure to pay any of such taxes, levies,
assessments or charges is permitted by the Loan Agreement.
4.2 Insurance. At its sole expense, keep the Collateral insured
against loss or damage by insurance policies which shall be in such form,
with such companies and in such amounts as may be reasonably satisfactory
to Secured Party and otherwise comply with the provisions of Section 6.6
of the Loan Agreement.
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4.3 Tangible Collateral.
4.3.1 Good Repair. Keep the Tangible Collateral in good
working order and repair and make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency
thereof at all times shall be maintained and preserved.
4.3.2 Insurance Requirements. Maintain the Tangible Collateral
at all times in accordance with the requirements of all insurance
carriers which provide insurance with respect to such Tangible
Collateral so that such insurance shall remain in full force and
effect.
4.3.3 Certificates of Title. Upon the request of Secured Party
(i) promptly deliver to Secured Party all certificates of title
pertaining to the Tangible Collateral and (ii) take all actions
reasonably requested by Secured Party to cause the Lien granted to
Secured Party hereunder to be noted on such certificates of title.
4.3.4 Use of Collateral. Use the Tangible Collateral in
material compliance with all statutes, regulations, ordinances,
requirements and regulations and all judgments, orders, injunctions
and decrees applicable thereto, and all other federal, state and
local laws, the failure to comply with which could have a Material
Adverse Effect.
4.4 Intangible Collateral.
4.4.1 Payments. Make all payments and perform all acts
reasonably necessary to maintain and preserve the Intangible
Collateral, including, without limitation, filing of documents,
renewals or other information with any Governmental Body or any
other Person.
4.4.2 Delivery of Instruments. Upon the request of Secured
Party, promptly deliver to Secured Party the executed originals of
all instruments which constitute part of the Intangible Collateral,
together with such endorsements, assignments and other agreements as
Secured Party may reasonably request in order to perfect the
Security Interests.
4.4.3 Accurate Records. At all times keep accurate and
complete records of payment and performance by Debtor and other
Persons of their respective obligations with respect to the
Intangible Collateral and permit Secured Party or any of its agents
to call at Debtor's place of business without hindrance or delay to
inspect, audit, check or make extracts from the books, records,
correspondence or other data relating to the Intangible Collateral.
4
<PAGE>
4.4.4 Verification of Indebtedness. After any during the
continuance of an Event of Default, permit Secured Party itself, at
any time, in the name of Secured Party or Debtor, to verify directly
with the obligors the indebtedness due Debtor on any account or
other item of Intangible Collateral.
4.4.5 Defaults, Other Claims. Immediately inform Secured Party
of any material default in payment or performance by Debtor or any
other Person of any obligation with respect to the Intangible
Collateral or of material claims made by others in regard to the
Intangible Collateral.
4.5 Collection of Proceeds. Collect the proceeds of indebtedness
owing to Debtor by any Person under any instrument or by any account
debtor with respect to any account, contract right, chattel paper or
general intangible.
4.6 Financing Statements, Further Assurances. Execute and deliver to
Secured Party such financing statements, continuation statements,
termination statements, amendments to any of the foregoing and other
documents, in form satisfactory to Secured Party, as Secured Party from
time to time may reasonably require to perfect and continue in effect the
Security Interests, to carry out the purposes of this Security Agreement
and to protect Secured Party's rights hereunder. Debtor, upon demand,
shall pay the cost of filing all such financing statements, continuation
statements, termination statements, amendments to any of the foregoing and
other documents.
5. Negative Covenants. Until all of Guarantor's Obligations are paid and
performed in full, Debtor agrees that it will not:
5.1 Sales and Transfer of Collateral. Sell, lease, assign or
otherwise dispose of any of the Collateral, except as may be permitted by
and in accordance with the applicable provisions the Loan Agreement.
5.2 Installation of Tangible Collateral. Permit any of the Tangible
Collateral to be installed, affixed or attached to the real estate of
Debtor or any other Person so as to become a part thereof or become in any
sense a fixture not otherwise pledged to Secured Party.
5.3 Valuation of Licenses. Assert or allege that the value of the
Licenses of Debtor is not included in determining the value of the
Collateral in any insolvency, bankruptcy, receivership, custodianship,
liquidation, reorganization, assignment for the benefit of creditors or
other similar proceeding.
6. Protection of Collateral. In the event of any failure of Debtor to (i)
maintain in force and pay for any insurance or bond which Debtor is required to
provide pursuant to this Security Agreement or the other Loan Instruments, (ii)
keep the Tangible Collateral in good repair and
5
<PAGE>
operating condition, general wear and tear excepted, (iii) keep the Collateral
free from all Liens except for Permitted Liens, (iv) pay when due all taxes,
levies and assessments on or in respect of the Collateral, except as permitted
pursuant to the terms of Section 4.1 above or otherwise permitted pursuant to
the Loan Agreement, (v) make all payments and perform all acts on the part of
Debtor to be paid or performed with respect to any of the Collateral, including,
without limitation, all expenses of protecting, storing, warehousing, insuring,
handling and maintaining the Collateral or (vi) keep fully and perform promptly
any other of the obligations of Debtor under this Security Agreement or the
other Loan Instruments, Secured Party, at its option, may (but shall not be
required to) procure and pay for such insurance, place such Collateral in good
repair and operating condition, pay or contest or settle such Liens or taxes or
any judgments based thereon or otherwise make good any other aforesaid failure
of Debtor. Debtor shall reimburse Secured Party immediately upon demand for all
sums paid or advanced on behalf of Debtor for any such purpose, together with
all costs, expenses and attorneys' fees paid or incurred by Secured Party in
connection therewith and interest at the Default Rate on all sums so paid or
advanced from the date of such payment or advancement until repaid to Secured
Party. All such sums paid or advanced by Secured Party, with interest thereon,
immediately upon payment or advancement thereof, shall be deemed to be part of
Guarantor's Obligations secured hereby.
7. Event of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Loan Agreement.
8. Remedies Upon Default. Upon the occurrence and during the continuance
of an Event of Default:
8.1 Rights of Secured Party. Secured Party shall have all of the
rights and remedies of a secured party under the Code and all other rights
and remedies accorded to Secured Party at equity or law, including,
without limitation, the right to apply for and have a receiver appointed
by a court of competent jurisdiction to manage, protect and preserve the
Collateral, to continue operating the Paging Business of Debtor and to
collect all revenues and profits thereof. Any notice of sale or other
disposition of Collateral given not less than ten (10) Business Days prior
to such proposed action shall constitute reasonable and fair notice of
such action. Secured Party may postpone or adjourn any such sale from time
to time by announcement at the time and place of sale stated in the notice
of sale or by announcement of any adjourned sale, without being required
to give a further notice of sale. Any such sale may be for cash or, upon
such credit or installment terms as Secured Party shall determine. Debtor
shall be credited with the net proceeds of such sale only when such
proceeds actually are received by Secured Party in Good Funds. Despite the
consummation of any such sale, Debtor shall remain liable for any
deficiency on Guarantor's Obligations which remains outstanding following
any such sale. All net proceeds received pursuant to a sale shall be
applied in the manner set forth in Section 8.4 of the Loan Agreement.
6
<PAGE>
8.2 Assembly of Collateral. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured Party
at a place designated by Secured Party.
8.3 Proceeds. Debtor shall hold all proceeds of the Collateral
collected by any Debtor in trust for Secured Party, and promptly upon
receipt thereof, turn over such proceeds to Secured Party in the exact
form in which they were received.
8.4 Other Rights. Secured Party, at its election, and without notice
to Debtor, may:
8.4.1 Terminate Right of Collection. Terminate the rights of
Debtor to collect the proceeds described in Section 8.3.
8.4.2 Notification. Notify the obligors under any instruments
and the account debtors of any account, contract right, chattel
paper or general intangible to make all payments directly to Secured
Party.
8.4.3 Collection of Payments. Demand, sue for, collect or
receive, in the name of Debtor or Secured Party, any money or
Property payable or receivable on any item of Collateral.
8.4.4 Settlement. Settle, release, compromise, adjust, sue
upon or otherwise enforce any item of Collateral as Secured Party
may determine.
8.4.5 Mail of Debtor; Endorsement of Checks. For the purpose
of enforcing Secured Party's rights under this Security Agreement,
receive and open mail addressed to Debtor, and endorse notes,
checks, drafts, money orders, documents of title or other forms of
payment on behalf and in the name of Debtor.
8.5 Applications to Governmental Bodies. Debtor shall take any
action that Secured Party may request in order to enable Secured Party to
obtain and enjoy the full rights and benefits granted to Secured Party
hereunder, including, without limitation, all rights necessary or
desirable to obtain, use, sell, assign or otherwise transfer control of
the Licenses of Debtor. Without limiting the generality of the foregoing,
upon the occurrence of any Event of Default, at the request of Secured
Party and at Debtor's sole cost and expense, Debtor shall (i) assist
Secured Party in obtaining any required FCC approval for any action or
transaction contemplated hereby, including preparing, signing and filing
with the FCC and/or any other Governmental Body the assignor's or
transferor's portion of any application or applications for consent to the
assignment of or transfer of control over any license necessary or
appropriate under the Communications Act or the rules and regulations of
any Governmental Body for approval of any sale, assignment or transfer to
Secured Party or any other Person of any or all Collateral (including
without limitation any Licenses of Debtor),
7
<PAGE>
and (ii) execute all applications and other documents and take all other
actions requested by Secured Party to enable Secured Party, its designee,
any receiver, trustee or similar official or any purchaser of all or any
part of the Collateral to obtain from the FCC or any other Governmental
Body or Person any required authority necessary to operate the Paging
Business of Debtor.
All monies received by Secured Party pursuant to this Section 8 shall be applied
by Secured Party in accordance with the applicable provisions of Section 8.4 of
the Loan Agreement.
9. Power of Attorney. To effectuate the rights and remedies of Secured
Party under this Security Agreement, Debtor hereby irrevocably appoints Secured
Party as its attorney-in-fact, in the name of Debtor or in the name of Secured
Party, to:
9.1 Execution of Financing Statements. Execute and file from time to
time financing statements, continuation statements, termination statements
and amendments thereto, covering the Collateral, in form satisfactory to
Secured Party.
9.2 Execution of Other Documents. Take all action and execute all
documents referred to in Section 8.4 and 8.5 above.
The power of attorney granted pursuant to this Section 9 is coupled with an
interest and shall be irrevocable until all of Guarantor's Obligations have been
paid and performed in full.
10. Certain Agreements of Debtor.
10.1 Waiver of Notice. Debtor hereby waives notice of the acceptance
of this Security Agreement and, except as otherwise specifically provided
in Section 8.1 above or in the Loan Agreement, all other notices, demands
or protests to which Debtor otherwise might be entitled by law (and which
lawfully may be waived) with respect to this Security Agreement,
Guarantor's Obligations and the Collateral.
10.2 Rights of Secured Party. Debtor agrees that Secured Party (i)
shall have no duty as to the collection or protection of the Collateral or
any income thereon, (ii) may exercise the rights and remedies of Secured
Party with respect to the Collateral without resort or regard to other
security or sources for payment and (iii) shall not be deemed to have
waived any of the rights or remedies granted to Secured Party hereunder
unless such waiver shall be in writing and shall be signed by Secured
Party. Debtor and Secured Party acknowledge their intent that, upon the
occurrence of an Event of Default, Secured Party shall receive, to the
fullest extent permitted by law and governmental policy (including,
without limitation, the rules, regulations and policies of the FCC), all
rights necessary or desirable to obtain, use or sell the Collateral, and
to exercise all remedies available to Secured Party under the Loan
Instruments, the Code or other applicable law. Debtor and Secured Party
further acknowledge and agree that, in the event of changes in law or
governmental policy occurring subsequent to the date hereof that affect in
any manner Secured Party's rights of access to, or use or sale of, the
Collateral, or the procedures necessary to enable
8
<PAGE>
Secured Party to obtain such rights of access, use or sale, Secured Party
and Debtor shall amend the Loan Instruments, in such manner as Secured
Party shall request, in order to provide Secured Party such rights to the
greatest extent possible consistent with then applicable law and
governmental policy.
10.3 No Delay, Single or Partial Exercise Permitted. No delay or
omission on the part of Secured Party in exercising any rights or remedies
contained herein shall operate as a waiver of such right or remedy or of
any other right or remedy, and no single or partial exercise of any right
or remedy shall preclude any other or further exercise thereof, or the
exercise of any other right or remedy. A waiver of any right or remedy on
any one occasion shall not be construed as a bar or waiver of any right or
remedy on future occasions, and no delay, omission, waiver or single or
partial exercise of any right or remedy shall be deemed to establish a
custom or course of dealing or performance between the parties hereto.
11. Rights Cumulative. All rights and remedies of Secured Party pursuant
to this Security Agreement, the Loan Agreement or otherwise, shall be cumulative
and non-exclusive, and may be exercised singularly or concurrently.
12. Severability. In the event that any provision of this Security
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, any of the rules, regulations and policies of the
FCC, or by reason of the interpretation placed thereon by any court or the FCC
or any other Governmental Body, as applicable, the validity, legality and
enforceability of the remaining terms and provisions of this Security Agreement
shall not in any way be affected or impaired thereby, all of which shall remain
in full force and effect, and the affected term or provision shall be modified
to the minimum extent permitted by law so as to achieve most fully the intention
of this Security Agreement.
13. Notices. All notices and communications under this Security Agreement
shall be in writing and delivered in the manner set forth in Section 12.1 of the
Loan Agreement.
14. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
15. Captions. The headings in this Security Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Counterparts. This Security Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall be one and the same instrument.
17. Survival of Security Agreement; Release. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of the Loan Agreement and shall continue in full force and effect until
this Agreement is released. This Agreement shall be released, Debtor's
obligations hereunder shall be deemed to have been satisfied
9
<PAGE>
and performed in full, and the Liens granted hereunder shall be released,
promptly after delivery by Debtor to Agent of evidence reasonably satisfactory
to Agent that (i) all right, title and interest of Debtor under the Leases and
agreements described on Exhibit C hereto (except to the extent Debtor is no
longer a party to such lease or agreement as a result of its being canceled or
terminated, or the premises subject thereto being surrendered as permitted under
the Loan Instruments and except for those leases and agreements which are not
necessary to the operations of the Paging Business) have been validly assigned
to and assumed by Borrower, (ii) Borrower has obtained all consents of all
Persons whose consent is required, as reasonably determined by Agent, in
connection with such assignments and assumptions and (iii) the consent by the
FCC to the transactions effected by the Paging Partners Merger (other than pro
forma assignments or transfers incidental to the Paging Partners Merger) has
become final and is no longer subject to administrative or judicial
reconsideration, review or appeal. In connection with such release, the Secured
Party shall execute UCC-3 termination statements and such other documents as are
necessary to release the Secured Party's interests, at Debtor's expense.
18. Governing Law. This Security Agreement shall be construed in
accordance with and governed by the laws and decisions of the State of Arizona.
For purposes of this Section 18, this Security Agreement shall be deemed to be
performed and made in the State of Arizona.
19. Jurisdiction and Venue. Debtor hereby agrees that all actions or
proceedings initiated by Debtor and arising directly or indirectly out of this
Security Agreement shall be litigated in the Superior Court of Arizona, Maricopa
County Division, or the United States District Court for the District of
Arizona, or, if Secured Party initiates such action, in addition to the
foregoing courts, any court in which Secured Party shall initiate or to which
Secured Party shall remove such action, to the extent such court has
jurisdiction. Debtor hereby expressly submits and consents in advance to such
jurisdiction in any action or proceeding commenced in or removed by Secured
Party to any of such courts, and hereby agrees that personal service of the
summons and complaint, or other process or papers issued therein, may be made by
registered or certified mail addressed to Debtor at the address to which notices
are to be sent pursuant to Section 13. Debtor waives any claim that Maricopa
County, Arizona or the District of Arizona is an inconvenient forum or an
improper forum based on lack of venue. To the extent provided by law, should
Debtor, after being so served, fail to appear or answer to any summons,
complaint, process or papers so served within the number of days prescribed by
law after the mailing thereof, Debtor shall be deemed in default and an order
and/or judgment may be entered by the court against Debtor as demanded or prayed
for in such summons, complaint, process or papers. The exclusive choice of forum
set forth in this Section 19 shall not be deemed to preclude the enforcement by
Secured Party of any judgment obtained in any other forum or the taking by
Secured Party of any action to enforce the same in any other appropriate
jurisdiction and Debtor hereby waives any right to collaterally attack any such
judgment or action.
20. Waiver of Right to Jury Trial. Secured Party and Debtor acknowledge
and agree that any controversy which may arise under this Security Agreement
would be based upon difficult and complex issues and therefore, Secured Party
and Debtor agree that any
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<PAGE>
lawsuit arising out of any such controversy will be tried in a court of
competent jurisdiction by a judge sitting without a jury.
21. Time of the Essence. Time for the performance of Debtor's obligations
under this Security Agreement is of the essence.
22. Secured Party's Right to Specific Performance. Debtor acknowledges
that FCC authorization is integral to Secured Party's realization of the value
of all of the Collateral, that Debtor's Licenses are unique assets, that there
is no adequate remedy at law for failure by Debtor to comply with the provisions
of Section 8.5 and that such failure would not be adequately compensable in
monetary damages; therefore, Debtor agrees that, in addition to all other
remedies available at law or in equity, Secured Party shall be entitled to
obtain decree(s) of specific performance entitling it to temporary restraining
order(s), preliminary injunction(s), or permanent injunction(s) to enforce
specifically and require specific performance of the provisions of Section 8.5.
Debtor agrees that notice shall be adequate for the entry of a decree of
specific performance with respect to any such matter (i) in the case of a
temporary restraining order, upon twenty-four (24) hours' prior notice of the
hearing thereof and (ii) in the case of any other proceeding, upon three (3)
days' prior notice of the hearing thereof, and hereby waives all requirements
and demands that the Secured Party give any greater notice of such hearings or
post a bond or other surety arrangement in connection with the issuance of such
decree.
23. FCC Approval. Notwithstanding anything to the contrary contained in
this Security Agreement or any other Loan Instrument, no party hereto shall take
any action, including, but not limited to, the operation of Debtor's Paging
Business, that would constitute or result in the transfer or assignment of any
License issued to or held by Debtor, or a transfer of control over any such
License, whether de jure or de facto, if such assignment or transfer would
require under then existing law the prior approval of and/or any notice to the
FCC, without such party first having notified the FCC of any such assignment or
transfer and, if required under then existing law, obtaining the approval of the
FCC therefor, notifying the FCC of the consummation thereof and complying with
all other applicable provisions of the Communications Act. The parties hereto
intend that the powers of Secured Party hereunder, in all relevant aspects,
shall be governed by the Communications Act and all other applicable statutory
requirements and rules and regulations, including, without limitation, those of
the FCC.
[remainder of page left intentionally blank]
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<PAGE>
IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by the parties hereto by a duly authorized officer of each such party
on the date first set forth above.
AQUIS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
FINOVA CAPITAL CORPORATION, a Delaware
corporation, as Agent
By:
----------------------------------
David A. Meier
Vice President
<PAGE>
IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by the parties hereto by a duly authorized officer of each such party
on the date first set forth above.
AQUIS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
FINOVA CAPITAL CORPORATION, a Delaware
corporation, as Agent
By: /s/ David A. Meier
----------------------------------
David A. Meier
Vice President
<PAGE>
EXHIBIT A
to Security Agreement
=============================================================
Location Exp. Date Purpose Other
-------- --------- ------- -----
-------------------------------------------------------------
Freehold, NJ Aug 1999 Main Office renewal
option
exists
-------------------------------------------------------------
Woburn, NJ Dec. 2000 Point of renewal
presence option
exists
-------------------------------------------------------------
Blue Bell, PA Feb. 2000 Point of renewal
presence option
exists
-------------------------------------------------------------
West Orange, NJ Nov. 2002 Point of renewal
presence option
exists
-------------------------------------------------------------
Outer space Dec. 2005 Satellite
=============================================================
<PAGE>
EXHIBIT B
List of Trade Names
(to be provided by Debtor)
None.
AQUIS COMMUNICATIONS GROUP, INC. PLEDGE AGREEMENT
This AQUIS COMMUNICATIONS GROUP, INC. PLEDGE AGREEMENT (this "Pledge
Agreement"), dated as of March , 1999, is between AQUIS COMMUNICATIONS GROUP,
INC., a Delaware corporation ("Pledgor"), and FINOVA CAPITAL CORPORATION, a
Delaware corporation ("Pledgee"), in its individual capacity and as Agent for
all Lenders (as defined below).
Preliminary Statement:
A. Aquis Communications, Inc., a Delaware corporation ("Borrower"), Agent
and Lenders have entered into a Loan Agreement dated December 31, 1998 (the
"Original Loan Agreement"), as amended by a First Amendment to Loan Instruments
of even date herewith (the "First Amendment") among Borrower, Agent and Lenders
(the Original Loan Agreement, as amended by the First Amendment and as the same
may be further amended, supplemented, modified or restated from time to time,
hereinafter is referred to as the "Loan Agreement") pursuant and subject to the
terms and conditions of which Lenders have agreed to make loans and other
financial accommodations to Borrower.
B. Pledgor is the owner of all of the issued and outstanding capital stock
of Borrower. Accordingly, Pledgor has a direct financial interest in inducing
Lenders to enter into the Loan Agreement.
C. One of the conditions precedent to the consent of Lenders to the Paging
Partners Merger and the obligation of Lenders to disburse the Merger Portion is
the execution and delivery by Pledgor of this Pledge Agreement.
NOW, THEREFORE, in order to induce Lenders to enter into the Loan
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Pledgor and Pledgee hereby agree
as follows:
1. Definitions. All capitalized terms used but not elsewhere defined in
this Pledge Agreement shall have the respective meanings ascribed to such terms
in the Loan Agreement. The following terms shall have the following meanings in
this Pledge Agreement:
Collateral: the Securities and all dividends, distributions and
other amounts or additional securities of Borrower or any successor in
interest to Borrower and other Property to which Pledgor or any successor
in interest to Pledgor (with or without additional consideration) is or
becomes entitled by virtue of the ownership by such Person of any of the
Securities or as the result of any corporate reorganization, merger,
consolidation, stock split, stock dividend, distribution, conversion,
preemptive right or otherwise, and the proceeds thereof.
Securities: all of the capital stock of Borrower and any warrants,
options or other rights to purchase the capital stock of Borrower
described in Exhibit A hereto, and duly executed assignments separate from
certificates, in form and substance satisfactory to Pledgee.
<PAGE>
Pledgors' Obligations: (i) any and all Indebtedness, due or to
become due, now existing or hereafter arising, of Pledgor to Lenders
pursuant to the terms of this Pledge Agreement or any other Loan
Instrument to which Pledgor is a party and (ii) the performance of the
covenants of Pledgor contained in this Pledge Agreement and all other Loan
Instruments to which Pledgor is a party.
2. Pledge of Collateral. To secure payment and performance of Borrower's
Obligations and Pledgors' Obligations, Pledgor hereby pledges, assigns and
grants to Pledgee, for the benefit of Lenders, a Lien in all Collateral now
owned or hereafter acquired by Pledgor.
3. Representations, Warranties and Covenants. Pledgor hereby represents,
warrants and covenants to Pledgee that with respect to the Collateral pledged by
Pledgor to Pledgee on the date hereof, (i) such Collateral represents 100% of
the issued and outstanding capital stock and warrants, options and other rights
to purchase capital stock of Borrower, (ii) Pledgor is the legal and beneficial
owner of such Collateral, (iii) such Collateral is validly issued, fully paid
and non-assessable and is registered in the name of Pledgor, (iv) the pledge of
such Collateral pursuant to the terms of this Pledge Agreement creates a valid,
and, upon the delivery of certificates representing the Securities included in
such Collateral to Pledgee, a perfected, first Lien on such Collateral in favor
of Pledgee, (v) none of such Collateral is subject to any Lien of any kind
whatsoever, except for the first Lien on such Collateral granted to Pledgee
hereby, (vi) no authorization, approval or other action by, or notice to or
filing with, any Governmental Body is required for the pledge by Pledgor of such
Collateral pursuant to the terms of this Pledge Agreement and (vii) until all of
Borrower's Obligations and Pledgors' Obligations have been paid and performed in
full, Pledgor: (A) will not create or permit to exist any Lien upon or with
respect to such Collateral, except for the first Lien thereon granted to Pledgee
by this Pledge Agreement, and (B) will not sell, transfer, convey, assign, or
otherwise divest Pledgor's interest in such Collateral, or any part thereof, to
any other Person. Pledgor further represents and warrants to Pledgee that the
address of the chief executive office of Pledgor is set forth below Pledgor's
signature on the signature page to this Pledge Agreement, which address is also
the address to which notices under this Pledge Agreement may be given to
Pledgor.
4. Additional Securities; Stock Splits; Stock Dividends.
4.1 Additional Securities. Pledgor agrees that in the event that
Pledgor, by virtue of the ownership by Pledgor of any of the Collateral,
now is, or hereafter becomes, entitled (with or without additional
consideration) to other or additional capital stock as the result of any
reorganization, merger, consolidation, stock split, stock dividend,
conversion, exercise of warrant or preemptive right or otherwise, Pledgor
shall:
4.1.1 Delivery. Cause the issuer of such additional capital
stock to deliver to Pledgee all certificates and other documents, if
any, evidencing the ownership by Pledgor of such additional capital
stock and hereby authorizes and empowers Pledgee to demand the same
from such issuer, and agrees if such certificates and other
documents are delivered to Pledgor, to take possession thereof in
trust for Pledgee;
4.1.2 UCC Financing Statements and Assignments Separate from
Certificate. Deliver to Pledgee (i) such UCC financing statements
and other
2
<PAGE>
documents executed by Pledgor as Pledgee reasonably may request to
perfect Pledgee's security interest in such additional capital stock
and (ii) an assignment separate from certificate with respect to
such capital stock, executed in blank by Pledgor;
4.1.3 Representations and Warranties. Deliver to Pledgee a
certificate, executed by Pledgor and dated the date of such pledge
as to the truth and accuracy on such date of the representations and
warranties set forth in Section 3 hereof; and
4.1.4 Additional Documents. Deliver to Pledgee such other
certificates, documents and other instruments as Pledgee may
reasonably request in connection with the pledge of such additional
capital stock by Pledgor.
4.2 Additional Collateral. Pledgor agrees that such additional
capital stock shall constitute a portion of the Collateral and be subject
to this Pledge Agreement in the same manner and to the same extent as the
Securities pledged hereby to Pledgee on the date hereof.
5. Voting Power; Distributions. Unless and until an Event of Default shall
have occurred and be continuing, Pledgor shall be entitled to exercise all
voting powers in all company matters pertaining to the Collateral pledged by
Pledgor hereunder or otherwise, for any purpose not inconsistent with, or in
violation of, any of the Loan Instruments. Except as otherwise provided in the
Loan Agreement, unless and until all of Borrower's Obligations and Pledgors'
Obligations have been performed and paid in full, no Pledgor shall be entitled
to receive any dividends or distributions with respect to any portion of the
Collateral. If any such dividends or distributions are received by Pledgor in
violation of the terms of this Section 5, such distributions shall be (i) held
in trust by Pledgor on behalf of Pledgee, (ii) turned over to Pledgee by Pledgor
immediately upon receipt thereof and (iii) deemed to constitute a portion of the
Collateral pledged by Pledgor to Pledgee hereunder.
6. Default and Remedies.
6.1 Occurrence. The occurrence of an Event of Default under the Loan
Agreement shall constitute an Event of Default hereunder.
6.2 Remedies. If an Event of Default shall occur and be continuing,
Pledgee, at its option, may:
6.2.1 Registration. Cause the Collateral to be registered in
its name or in the name of its nominee;
6.2.2 Voting Power. Subject to the provisions of Section 12,
exercise all voting powers pertaining to the Collateral and
otherwise act with respect thereto as though Pledgee were the owner
thereof;
6.2.3 Distributions. Receive all dividends and distributions
of any kind whatsoever on all or any part of the Collateral;
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6.2.4 Collection; Conversion. Exercise any and all rights of
collection, conversion or exchange, and any and all other rights,
privileges, options or powers of Pledgor pertaining or relating to
the Collateral;
6.2.5 Sale of Collateral. Subject to any applicable state or
federal securities laws, sell, assign and deliver the whole, or from
time to time, any part of the Collateral at any broker's board or at
any private sale or at public auction, with or without demand for
performance or advertisement of the time or place of sale or
adjournment thereof or otherwise, and free from any right of
redemption (all of which hereby expressly are waived by Pledgor) for
cash, for credit or for other property, for immediate or future
delivery, and for such price and on such terms as Pledgee in its
sole discretion may determine;
6.2.6 Other Remedies. Exercise any other remedy specifically
granted under this Pledge Agreement or now or hereafter existing in
equity, or at law, by virtue of statute or otherwise; and
6.3 Agreement to Sell Collateral. For the purposes of this Section
6, an agreement to sell all or any part of the Collateral shall be treated
as a sale thereof and Pledgee shall be free to carry out such sale
pursuant to such agreement, and Pledgor shall not be entitled to the
return of any of the same subject thereto, notwithstanding the fact that
after Pledgee shall have entered into such an agreement, all Events of
Default hereunder may have been remedied or all of Borrower's Obligations
and Pledgor's Obligations may have been paid and/or performed in full,
provided that Pledgee shall have given to Pledgor the notice referred to
in subsection 6.2.5 at least 30 days prior to Pledgee's entry into any
agreement to sell all or any part of the Collateral in a private sale.
6.4 Pledgee May Bid. At any sale made pursuant to Section 6.2 above,
Pledgee may bid for and purchase, free from any right of equity or
redemption on the part of Pledgor (the same hereby being waived and
released by Pledgor), any part or all of the Collateral that is offered
for sale, and Pledgee, upon compliance with the terms of sale, may hold,
retain and dispose of such Collateral without further accountability
therefor.
6.5 Proceeds of Sale. The proceeds of any sale of the whole or any
part of the Collateral and any other monies at the time held by Pledgee
under the provisions of this Pledge Agreement shall be applied in
accordance with the terms of Section 8.4 of the Loan Agreement.
6.6 No Duty of Pledgee. Pledgee shall not have any duty to exercise
any of the rights, privileges, options or powers or to sell or otherwise
realize upon any of the Collateral, as hereinbefore authorized, and
Pledgee shall not be responsible for any failure to do so or delay in so
doing.
6.7 Effect of Sale. Any sale of all or any portion of the Collateral
pursuant to Section 6.2 above shall operate to divest all right, title and
interest of Pledgor to the Collateral which is the subject of any such
sale.
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6.8 Securities Act. Pledgor acknowledges that Pledgee may be unable
to effect a public sale of all or a part of the Collateral by reason of
certain prohibitions contained in the Securities Act, or that it may be
able to do so only after delay which might adversely affect the value that
might be realized upon the sale of the Collateral. Accordingly, Pledgor
agrees that Pledgee, without the necessity of attempting to cause any
registration of the Collateral to be effected under the Securities Act,
may sell the Collateral or any part thereof in one or more private sales
to a restricted group of purchasers who may be required to agree, among
other things, that they are acquiring the Collateral for their own
account, for investment purposes only, and not with a view toward the
distribution or resale thereof. Pledgor agrees that any such private sale
may be at prices or on terms less favorable to the owner of the Collateral
sold than would be the case if such Collateral was sold at public sale,
and that any such private sale shall not be deemed not to have been made
in a commercially reasonable manner by virtue of such sale having been a
private sale.
6.9 Applications to Government Bodies. Upon the occurrence of an
Event of Default, Pledgor, upon the request of Pledgee and at Pledgor's
sole cost and expense, shall assist Pledgee in obtaining any required
approval for any action or transaction contemplated hereby, including, but
not limited to (i) preparing, signing and filing with the FCC and/or any
other Governmental Body the assignor's or transferor's portion of any
application or applications for consent to the assignment of or transfer
of control over license necessary or appropriate under the Communications
Act, applicable law or the rules and regulations of any other Governmental
Body to any sale, assignment or transfer to Pledgee or any other Person of
any or all Collateral hereunder or any Licenses of Borrower and (ii)
executing all applications and other documents and taking all other
actions requested by Pledgee to enable Pledgee, its designee, any
receiver, trustee or similar official or any purchaser to obtain from the
FCC or any other Person any required authority necessary to operate the
Paging Business of Borrower.
6.10 Transfer of Control to Other Persons. Pledgor acknowledges and
agrees that a transfer of control of the Collateral or an assignment of
any License of Borrower may be made to a receiver, trustee or similar
official or to any purchaser of all or any part of the other Collateral
hereunder, pursuant to any court order, public or private sale, judicial
sale, foreclosure or the exercise of any other remedies available to
Pledgee hereunder or under applicable law.
6.11 Notice. Pledgee shall give not less than 10 Business Days'
prior written notice to Pledgor of any sale pursuant to this Section 6.
Pledgor hereby agrees that such notice is commercially reasonable.
7. Power of Attorney. To effectuate the rights and remedies of Pledgee
under this Pledge Agreement, Pledgor hereby irrevocably appoints Pledgee as its
attorney-in-fact, in the name of such Pledgor or in the name of Pledgee, to:
7.1 Execution of Financing Statements. Execute and file from time to
time financing statements, continuation statements, termination statements
and amendments thereto, covering the Collateral, in form reasonably
satisfactory to Pledgee.
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7.2 Execution of Other Documents. Take all action and execute all
documents referred to in Section 6.2 and 6.9 above.
The power of attorney granted pursuant to this Section 7 is coupled with an
interest and shall be irrevocable until all of Borrower's Obligations have been
paid and performed in full.
8. Pledgee's Obligations, Custodial Agreement, Performance Rights, Pledge
Does Not Make Pledgee a Shareholder. Pledgee shall not have any duty to protect,
preserve or enforce rights against the Collateral other than a duty of
reasonable custodial care of any such Collateral in its possession, it being
understood that Pledgee shall (i) have no responsibility for (A) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to the Collateral, whether or not Pledgee has or is
deemed to have knowledge of such matters, (B) taking any necessary steps to
preserve rights against any parties with respect to the Collateral or (C) making
any capital contributions or other payments on behalf of Pledgor and (ii) not be
deemed to be a shareholder of Borrower unless Pledgee purchases or otherwise
retains the applicable portion of the Collateral in connection with a
foreclosure.
9. Termination of Pledge Agreement. Pledgee shall deliver to Pledgor the
Collateral in its possession and this Pledge Agreement thereupon shall terminate
upon the the payment and performance in full of all of Borrower's Obligations
and Pledgor's Obligations.
10. Miscellaneous.
10.1 Exercise of Rights. Pledgor unconditionally agrees that if an
Event of Default has occurred and is continuing, Pledgee may exercise its
rights and remedies hereunder prior to, concurrently with, or subsequent
to the exercise by Pledgee of its rights and remedies against Pledgor or
any other Person under any of the Loan Instruments or otherwise. The
obligations of Pledgor under this Pledge Agreement shall be absolute and
unconditional and shall remain in full force and effect without regard to,
and shall not be released or discharged or in any way affected by:
10.1.1 Amendments. Any amendment or modification of or
supplement to any of the Loan Instruments;
10.1.2 Exercise or Non-Exercise of Rights. Any exercise or
non-exercise of any right or remedy under any of the Loan
Instruments, or the granting of any postponements or extensions for
time of payment or other indulgences to Pledgor or any other Person,
or the settlement or adjustment of any claim or the release or
discharge or substitution of any Person primarily or secondarily
liable with respect to any of the Loan Instruments;
10.1.3 Bankruptcy. The institution of any bankruptcy,
insolvency, reorganization, debt arrangement, readjustment,
composition, receivership or liquidation proceedings by or against
Pledgor, Borrower or any other Person; or
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10.1.4 Other Defenses. Any other circumstance which otherwise
might constitute a defense to, or a discharge of, Pledgor with
respect to Borrower's Obligations and/or Pledgor's Obligations.
10.2 Rights Cumulative. Each and every right, remedy and power
granted to Pledgee hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein or now or
hereafter existing in equity, at law, by virtue of statute or otherwise
and may be exercised by Pledgee, from time to time, concurrently or
independently and as often and in such order as Pledgee may deem
expedient. Any failure or delay on the part of Pledgee in exercising any
such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect the
right of Pledgee thereafter to exercise the same, and any single or
partial exercise of any such right, remedy or power shall not preclude any
other or further exercise thereof or the exercise of any other right,
remedy or power, and no such failure, delay, abandonment or single or
partial exercise of rights of Pledgee hereunder shall be deemed to
establish a custom or course of dealing or performance among the parties
hereto.
10.3 Modification. Any modification or waiver of any provision of
this Pledge Agreement, or any consent to any departure by Pledgor
therefrom, shall not be effective in any event unless the same is in
writing and signed by Pledgee and then such modification, waiver or
consent shall be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Pledgor in any event
not specifically required of Pledgee hereunder shall not entitle such or
Pledgor to any other or further notice or demand in the same, similar or
other circumstances unless specifically required hereunder.
10.4 Further Assurances. Pledgor agrees that at any time, and from
time to time, after the execution and delivery of this Pledge Agreement,
Pledgor promptly will execute and deliver to Pledgee such financing
statements, continuation statements, termination statements, amendments to
any of the foregoing and other documents, in form satisfactory to Pledgee,
as Pledgee from time to time reasonably may require to perfect and
continue in effect the Security Interests, to carry out the purposes of
this Pledge Agreement and to protect Pledgee's rights hereunder. Pledgor,
upon demand, shall pay the cost of filing all such financing statements,
continuation statements, termination statements, amendments to any of the
foregoing and other documents.
10.5 Preservation of Collateral. Pledgor agrees that it will
warrant, preserve, maintain and defend, at the expense of Pledgor, the
right, title and interest of Pledgee in and to the Collateral and all
right, title and interest represented thereby against all claims, charges
and demands of all Persons whomsoever which are based on a breach of
Borrower's Obligations and/or Pledgor's Obligations hereunder.
10.6 Notices. All notices and communications under this Pledge
Agreement shall be delivered in the manner set forth in the Loan
Agreement, with all notices to Pledgor to be sent to the address of
Pledgor set forth below its signature on the signature page to this Pledge
Agreement executed by Pledgor.
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10.7 Governing Law. This Pledge Agreement shall be governed by the
laws and decisions of the State of Arizona. For the purposes of this
Section 9.7, this Pledge Agreement shall be deemed to be performed and
made in the State of Arizona.
10.8 Severability. In the event that any provision of this Pledge
Agreement is deemed to be invalid by reason of the operation of any law,
including, but not limited to, any of the rules and regulations and
policies of the FCC, or by reason of the interpretation placed thereon by
any court or the FCC or any other Governmental Body, as applicable, the
validity, legality and enforceability of the remaining terms and
provisions of this Pledge Agreement shall not in anyway be affected or
impaired thereby, all of which shall remain in full force and effect, and
the affected term or provision shall be modified to the minimum extent
permitted by law so as to achieve most fully the intention of this Pledge
Agreement.
10.9 Successors and Assigns. This Pledge Agreement shall inure to
the benefit of the successors and assigns of Pledgee and shall be binding
upon the successors and assigns of Pledgor.
10.10 Counterparts. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but
all of which when taken together shall be deemed to be one and the same
instrument. Each party hereto may execute a separate signature page to
this Pledge Agreement which signature page need not contain the signatures
of or a reference to any other party hereto.
10.11 Notation on Books. Concurrently with the execution and
delivery hereof, Pledgor shall cause Borrower to register in its books the
security interests in and the pledge of the Collateral effected hereby.
11. Pledgee's Right to Specific Performance. Pledgor acknowledges that FCC
authorization is integral to Pledgee's realization of the value of all of the
Collateral, that Borrower's Licenses are unique assets, that there is no
adequate remedy at law for failure by Pledgor to comply with the provisions of
Section 6 and that such failure would not be adequately compensable in monetary
damages; therefore, Pledgor agrees that, in addition to all other remedies
available at law or in equity, Pledgee shall be entitled to obtain decree(s) of
specific performance entitling it to temporary restraining order(s), preliminary
injunction(s) or permanent injunction(s) to specifically enforce and require
specific performance of the provisions of Section 6. Pledgor agrees that notice
shall be adequate for the entry of a decree of specific performance in respect
of any such matter (i) in the case of a temporary restraining order, upon 24
hours' prior notice of the hearing hereof and (ii) in the case of any other
proceeding, upon 5 days' prior notice of the hearing thereof. Pledgor agrees
that notice shall be adequate for the entry of a decree of specific performance
with respect to any such matter (i) in the case of a temporary restraining
order, upon twenty-four (24) hours' prior notice of the hearing thereof and (ii)
in the case of any other proceeding, upon three (3) days' prior notice of the
hearing thereof, and hereby waives all requirements and demands that Pledgor
give any greater notice of such hearings or post a bond or other surety
arrangement in connection with the issuance of such decree.
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12. FCC Approval. Notwithstanding anything to the contrary contained in
this Pledge Agreement or any of the other Loan Instruments, no party hereto
shall take any action, including, but not limited to, the operation of any
Paging Business that would constitute or result in the transfer or assignment of
any License issued to or held by Borrower, or a transfer of control over any
such License, whether de jure or de facto, if such assignment or transfer would
require under then existing law the prior approval of and/or any notice to the
FCC, without such party first having notified the FCC of any such assignment or
transfer and, if required under then existing law, obtaining the approval of the
FCC therefor, notifying the FCC of the consummation thereof and complying with
all other applicable provisions of the Communications Act. The parties hereto
intend that the powers of Pledgee hereunder, in all relevant aspects, shall be
governed by the Communications Act and all other applicable statutory
requirements and rules and regulations, including, without limitation, those of
the FCC.
13. Jurisdiction And Venue. Pledgor hereby agrees that all actions or
proceedings initiated by Pledgor in any capacity and arising directly or
indirectly out of this Pledge Agreement shall be litigated in the Superior Court
of Arizona, Maricopa County Division, or the United States District Court for
the District of Arizona, or, if Pledgee or any Lender initiates such action, in
addition to the foregoing courts, any court in which Pledgee or such Lender
shall initiate or to which Pledgee or such Lender shall remove such action, to
the extent such court has jurisdiction. Pledgor hereby expressly submits and
consents in advance to such jurisdiction in any action or proceeding commenced
in or removed by Pledgee or any Lender to any of such courts, and hereby waives
personal service of the summons and complaint, or other process or papers issued
therein, and agrees that service of such summons and complaint or other process
or papers may be made by registered or certified mail addressed to Pledgor at
the address to which notices are to be sent to Pledgor pursuant to Section 9.6.
Pledgor waives any claim that Maricopa County, Arizona or the district of
Arizona is an inconvenient forum or an improper forum based on lack of venue.
Should Pledgor, after being so served, fail to appear or answer to any summons,
complaint, process or papers so served within the number of days prescribed by
law after the mailing thereof, Pledgor shall be deemed in default and an order
and/or judgment may be entered by Pledgee or any lender against Pledgor as
demanded or prayed for in such summons, complaint, process or papers. The
exclusive choice of forum for Pledgor set forth in this Section 12 shall not be
deemed to preclude the enforcement, by Pledgee or any Lender, of any judgment
obtained in any other forum or the taking, by Pledgee or any Lender, of any
action to enforce the same in any other appropriate jurisdiction, and Pledgor
hereby waives the right to collaterally attack any such judgment or action.
14. Waiver of Right To Jury Trial. Pledgee and Pledgor acknowledge and
agree that any controversy which may arise under this Pledge Agreement or any
other Loan Instrument or with respect to the transactions contemplated thereby
would be based upon difficult and complex issues and, therefore, the parties
agree that any lawsuit arising out of any such controversy will be tried in a
court of competent jurisdiction by a judge sitting without a jury.
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IN WITNESS WHEREOF, Pledgor and Pledgee have caused this Pledge Agreement
to be executed as of the date first above written.
AQUIS COMMUNICATIONS GROUP, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
<PAGE>
Borrower's Acknowledgment
The undersigned hereby (i) acknowledges the pledge of the Securities
described above pursuant to the terms of this Pledge Agreement, (ii) confirms to
Pledgor and Pledgee that the undersigned has registered such pledge on its books
and records per the instructions of Pledgor and (iii) confirms to Pledgee that
its books and records reflect no other Liens on the Securities described above
and that the undersigned has no knowledge of any such other Liens.
AQUIS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
Pledgee's Acknowledgment
Pledgee acknowledges receipt of the certificates representing the
Securities described above.
FINOVA CAPITAL CORPORATION, a Delaware
corporation, as Agent
By: /s/ David A. Meier
----------------------------------
David A. Meier
Vice President
<PAGE>
Borrower's Acknowledgment
The undersigned hereby (i) acknowledges the pledge of the Securities
described above pursuant to the terms of this Pledge Agreement, (ii) confirms to
Pledgor and Pledgee that the undersigned has registered such pledge on its books
and records per the instructions of Pledgor and (iii) confirms to Pledgee that
its books and records reflect no other Liens on the Securities described above
and that the undersigned has no knowledge of any such other Liens.
AQUIS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ D. Brian Plunkett
----------------------------------
D. Brian Plunkett
Chief Financial Officer
Pledgee's Acknowledgment
Pledgee acknowledges receipt of the certificates representing the
Securities described above.
FINOVA CAPITAL CORPORATION, a Delaware
corporation, as Agent
By:
----------------------------------
David A. Meier
Vice President
<PAGE>
EXHIBIT A
Pledged Securities
Owner Number of Shares Stock Certificate Number
- ----- ---------------- ------------------------
Aquis Communications Group, Inc. 100 1
THIS IS COUNTERPART NO. ___. ONLY COUNTERPART NO. 1 SHALL CONSTITUTE "CHATTEL
PAPER" OR OTHER "COLLATERAL" WITHIN THE MEANING OF THE UNIFORM COMMERCIAL
CODE.
FINOVA Capital Corporation
115 West Century Road
P.O. Box 907
Paramus, New Jersey 07653
Telephone (201) 634-3300
EQUIPMENT LEASE
No. C0903001
FINOVA Capital Corporation, (herein called "Lessor"), with its
principal place of business at 1850 North Central Avenue, Dial
Tower, Phoenix, Arizona, 85004 hereby agrees to lease to the Lessee
named on the signature page hereof (herein called "Lessee") and
Lessee hereby agrees to lease and rent from Lessor, the equipment
described on any attached schedule(s), (herein with all replacement
parts, repairs, additions, and accessories called "Equipment"), on
the terms and conditions hereof and as set forth on any schedule
(herein called "Schedule"). Lessee agrees that, at the option of
Lessor, any Schedule shall be a separately enforceable Lease which
incorporates all of the terms and conditions set forth herein.
1. BACKGROUND; SALE AND LEASEBACK; CAPITALIZED LEASE.
(a) Lessee acquired the Equipment existing on the date hereof from various
vendors, including, without limitation, Motorola, Inc. (such vendors hereinafter
are referred to collectively as "Supplier"). Lessee (i)
<PAGE>
desires to finance the Equipment with Lessor pursuant to the terms of this Lease
by selling all of its right, title and interest in and to the Equipment to
Lessor and leasing the Equipment back from Lessor, and (ii) in connection
therewith represents and warrants to Lessor that Lessee has good and marketable
title to the Equipment, free and clear of all liens, claims and encumbrances.
(b) Accordingly, in consideration of the payment by Lessor to Lessee of
the sum of $1,300,000, the receipt and sufficiency of which hereby are
acknowledged (i) Lessee hereby sells and conveys to Lessor all of Lessee's
right, title and interest in and to the Equipment and (ii) Lessor hereby leases
back to Lessee, and Lessee hereby leases and rents from Lessor, the Equipment,
subject to any liens, claims and encumbrances created by Lessee, and subject to
all of the terms and conditions of this Lease and any Schedule hereto.
(c) The conveyance of the Equipment to Lessor pursuant to the preceding
clause (b) is intended to vest title in and to the Equipment in Lessor for the
financing purposes set forth in this Lease, and therefore such conveyance may be
construed as being solely for the purpose of granting a security interest in the
Equipment to Lessor. Except as otherwise contemplated herein, legal title to,
and possession of, the Equipment will remain with Lessee. Lessor and Lessee
intend for all purposes for the rental obligations of Lessee hereunder to be
capitalized in accordance with generally accepted accounting principles.
2. DISCLAIMER OF WARRANTIES AND WAIVER OF DEFENSES.
LESSOR, NEITHER BEING THE MANUFACTURER, NOR A SUPPLIER, NOR A DEALER IN
THE EQUIPMENT, MAKES NO WARRANTY, EXPRESS OR IMPLIED, TO ANYONE, AS TO DESIGN,
CONDITION, CAPACITY, PERFORMANCE OR ANY OTHER ASPECT OF THE EQUIPMENT OR ITS
MATERIAL OR WORKMANSHIP. LESSOR ALSO DISCLAIMS ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR USE OR PURPOSE WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE.
LESSOR FURTHER DISCLAIMS ANY LIABILITY FOR LOSS, DAMAGE OR INJURY TO LESSEE OR
THIRD PARTIES AS A RESULT OF ANY DEFECTS, LATENT OR OTHERWISE, IN THE EQUIPMENT
WHETHER ARISING FROM THE APPLICATION OF THE LAWS OF STRICT LIABILITY OR
OTHERWISE. AS TO THE LESSOR, LESSEE LEASES THE EQUIPMENT "AS IS." LESSEE
ACKNOWLEDGES THAT LESSEE HAS SELECTED THE SUPPLIER OF THE EQUIPMENT AND THAT
LESSOR HAS NOT RECOMMENDED SUPPLIER. LESSOR SHALL HAVE NO OBLIGATION TO INSTALL,
MAINTAIN, ERECT, TEST, ADJUST OR SERVICE THE EQUIPMENT. REGARDLESS OF CAUSE,
LESSEE AGREES NOT TO ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR FOR LOSS OF
ANTICIPATORY PROFITS OR ANY OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES,
NOR SHALL LESSOR BE RESPONSIBLE FOR ANY DAMAGES OR COSTS WHICH MAY BE ASSESSED
AGAINST LESSEE IN ANY ACTION FOR INFRINGEMENT OF ANY UNITED STATES LETTERS
PATENT. LESSOR MAKES NO WARRANTY AS TO THE TREATMENT OF THIS LEASE FOR TAX OR
ACCOUNTING PURPOSES. LESSEE HEREBY WAIVES AND RELEASES LESSOR FROM AND AGAINST
ANY AND ALL CLAIMS AND DEFENSES WHICH LESSEE MAY HAVE AGAINST LESSOR ARISING
2
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AS A RESULT OF ANY USE, INSTALLATION OR ACTION TAKEN BY LESSEE, OR ANY LIENS,
CLAIMS OR ENCUMBRANCES GRANTED BY LESSEE, WITH RESPECT TO THE EQUIPMENT. If the
Equipment is unsatisfactory for any reason, Lessee shall make claim on account
thereof solely against the manufacturer, the Supplier or any dealer and shall
nevertheless pay Lessor all rent and other charges payable under the Lease.
Lessor hereby assigns to Lessee, any rights which Lessor may have against the
Supplier, the manufacturer or any dealer for breach of warranty or other
representations respecting the Equipment. Lessee understands and agrees that
neither the Manufacturer, the Supplier, any dealer nor any agent of the
foregoing is an agent of Lessor or is authorized to waive or alter any term or
condition of this Lease.
3. TERM AND RENT. The Lease term of each Schedule shall commence as of the
date hereof (the "Commencement Date") and shall continue until the obligations
of Lessee under this Lease shall have been fully performed. The sum of all
periodic installments of rent indicated on any Schedule shall constitute the
aggregate rent reserved. The aggregate rent reserved shall be payable
periodically in arrears on the last day of each month, in the installments
indicated on any Schedule, the first such payment being due on April 30, 1999
(the "First Payment Date"), until the balance of the rent and any charges or
expenses payable by Lessee under this Lease shall have been paid in full.
Lessee's obligation to pay all rent shall be absolute and unconditional and not
subject to any abatement, setoff, defense or counterclaim for any reason
whatsoever.
4. NON-CANCELABLE LEASE. NEITHER THE LEASE NOR ANY SCHEDULE CAN BE
CANCELED BY LESSEE DURING THE TERM HEREOF OR THEREOF, EXCEPT AS SET FORTH IN ANY
SPECIFIC SCHEDULE.
5. TITLE, RECORDING, DOCUMENTATION, ADMINISTRATIVE FEES AND PERSONAL
PROPERTY. The Equipment is, and shall at all times remain, the property of
Lessor, except as set forth in Section 1(c) hereof or as otherwise set forth
herein, and, except as herein set forth, Lessee shall have no right, title or
interest therein. If Lessor supplies Lessee with labels indicating that the
Equipment is owned by Lessor, Lessee shall affix such labels to and keep them in
a prominent place on the Equipment. Lessee hereby authorizes Lessor to insert in
this Lease or any Schedule the serial numbers, and other identification data, of
Equipment when determined by Lessor. In the event this Lease is determined to be
a security agreement, in order to secure the due payment and performance of all
of the indebtedness, liabilities and obligations, whether now existing or
hereafter arising, of Lessee to Lessor, whether under this Lease (including all
Schedules) or otherwise, Lessee hereby grants to Lessor a lien on and security
interest in the Equipment (and all accessions and additions thereto,
substitutions for and all replacements of, the Equipment other than "Removable
Additions" (as hereinafter defined)), and all proceeds of the foregoing,
including, without limitation, insurance proceeds. Lessee authorizes Lessor, at
Lessee's expense, to cause this Lease, or any statement or other instrument in
respect of this Lease showing the interest of Lessor in the Equipment, including
Uniform Commercial Code Financing Statements, to be filed or recorded, and
grants Lessor, where permitted, the right to execute Lessee's name thereto.
Lessee agrees to pay or reimburse Lessor for its costs and out of pocket
expenses relating to any searches undertaken by Lessor, or any filing,
recording, stamp fees or taxes arising from the filing or recording of any such
instrument or statement and any other costs, expenses
3
<PAGE>
or charges incurred by Lessor in documenting, administering and terminating this
Lease. Lessee shall, at its expense, protect and defend Lessor's title to the
Equipment against all persons claiming against or through Lessee, at all times
keeping the Equipment free from any legal process or encumbrance whatsoever
including but not limited to liens, attachments, levies and executions, and
shall give Lessor immediate written notice thereof and shall indemnify Lessor
from any loss caused thereby. Upon Lessor's request, Lessee shall execute or
obtain from third parties and deliver to Lessor such further instruments and
assurances as Lessor deems necessary or advisable for the confirmation or
perfection of Lessor's rights hereunder. The Equipment is, and shall at all
times be and remain, personal property notwithstanding that the Equipment or any
part thereof may now be, or hereafter become, in any manner affixed or attached
to real property or any improvements thereon.
6. CARE, USE, LOCATION AND ALTERATION. Lessee shall, at its sole cost and
expense, service, repair, overhaul and maintain each item of Equipment in good
operating order and in the condition when delivered to Lessee, ordinary wear and
tear excepted. All such maintenance shall be consistent with prudent industry
practice and all maintenance practices recommended by the Supplier or
manufacturer and meet all legal and regulatory requirements except where the
failure to meet such requirements could not reasonably be expected to have a
material adverse effect upon the commercial value or utility of the Equipment,
the ability of Lessee to perform its obligations hereunder or on the ability of
Lessor to enforce the obligations of Lessee hereunder (a "Material Adverse
Effect"). Upon request, Lessee shall provide Lessor with evidence of such
compliance. Lessee shall maintain logs of the maintenance and service of the
Equipment and permit Lessor, on reasonable prior notice, to inspect the
Equipment and the right to make copies of the logs and service reports. Lessee
shall forthwith correct any material deficiencies disclosed by such inspection.
Lessee shall use the Equipment solely for business purposes, in compliance with
all applicable laws, ordinances, regulations, the non-compliance with which
could reasonably be expected to have a Material Adverse Effect, and the
conditions of all insurance policies required to be maintained by Lessee
pursuant to the Lease. Lessee shall make all additions, modifications and
improvements to the Equipment required by applicable law and except for such
required changes, shall not alter the Equipment without Lessor's prior written
consent, which consent shall not be unreasonably withheld, unless any such
alteration consists of Removable Additions or are made in connection with
ordinary maintenance. Lessee shall replace all worn, lost, stolen or destroyed
parts of the Equipment with replacement parts at least meeting the standards
required herein, all of which shall become the property of Lessor, except for
such additions, modifications and improvements that can be readily removed
without causing damage to, or impairing the commercial value or utility of, such
Equipment (such additions, modifications and improvements herein are referred to
collectively as "Removable Additions"), which shall remain Lessee's property and
may be removed by Lessee at its expense before the Equipment is surrendered to
Lessor. Lessee shall repair all damage to any item resulting from such
installation or removal. Without in any way limiting any of Lessee's other
obligations hereunder, Lessee shall (i) lubricate the Equipment on a basis that
conforms to the maintenance manual and/or lubrication schedule recommended by
the manufacturer of the Equipment, and (ii) purchase replacement parts only from
sources approved by the manufacturer. Copies of all purchase orders for such
replacement parts are to be retained in Lessee's file relating to the Equipment.
If Lessee has not purchased the Equipment subject to a Schedule or extended the
term of such Schedule pursuant to the
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Options granted to Lessee at the end of the term of such Schedule, Lessor shall
be entitled to purchase any such addition, modifications and improvements from
Lessee for its then fair market value. The Equipment shall not be removed from
the Location without Lessor's prior written consent, which consent shall not be
unreasonably withheld.
7. NOTICE AND CONDITIONS OF REDELIVERY. Lessee shall provide Lessor not
less than One Hundred Twenty (120) days prior written notice of its intention to
exercise its option to purchase the Equipment or renew the related Schedule if
granted under such Schedule or return the Equipment to Lessor (the "Required
Notice"). If Lessee shall have timely provided such Required Notice and has
elected to return the Equipment to Lessor upon the expiration of the Term of the
Schedule, Lessee shall, at its sole expense, return the Equipment covered
thereby, freight prepaid, to Lessor in a manner and to a location within a 200
mile radius of its then location designated by Lessor in the condition and
repair required by the terms of this Lease, free of all liens and advertising
insignia. If Lessee shall fail to return any item of Equipment as provided
herein, Lessee shall be responsible for all cost and expense incurred by Lessor
in returning the Equipment to such required condition or any reduction in value
as a result thereof. If the Equipment or its component parts were packed or
crated for shipping when new, Lessee shall pack or crate the same carefully and
in accordance with any recommendations of the Supplier or manufacturer before
redelivering the item to Lessor. Lessee shall also deliver to Lessor the plans,
specifications, operating manuals, software documentation, discs, warranties and
other documents furnished by the manufacturer or Supplier of the Equipment and
such other documents in Lessee's possession relating to the maintenance and
method of operation of such Equipment. Lessee shall (i) dismantle and handle the
Equipment in accordance with the manufacturer's specifications or normal
industry accepted practices for new equipment, and any special transportation
devices, such as metal skids, lifting slings, brackets, etc., which were with
the Equipment when it was delivered or equivalent devices must be used; (ii)
block all sliding members, secure all swinging doors, pendants and other
swinging components, wrap, box, band and label all components and documents in
an appropriate manner to facilitate the efficient reinstallation of the
components; (iii) remove all process fluids from the Equipment and dispose of
the same in accordance with prevailing waste disposal laws and regulations; (iv)
clean and dry sumps and tanks; (v) not ship any "Hazardous Waste" materials with
the equipment; (vi) fill all internal fluids such as lube oil and hydraulic oil
to operating levels, secure filler caps and seal disconnected hoses; (vii) wire
together all lock keys and secure the same to a major external component of the
equipment; (viii) cause the Equipment to be complete, fully functional with no
missing components or attachments, rust free with all boots, guards and seals
clean and with all batteries for control memories fully charged. If Lessee fails
to timely provide such Required Notice the Equipment shall continue to be held
and leased hereunder, and this Lease and the related Schedule term shall
thereupon be extended for a period ending one hundred twenty (120) days
following receipt by Lessor of Lessee's notice of intent to return the
Equipment, for the fair market rental value of the Equipment as determined by
Lessor, not to exceed the periodic installment of rent with respect to such
Equipment for such period. If Lessee has timely provided the Required Notice but
upon expiration Lessee does not immediately return the Equipment to Lessor
(unless otherwise requested by Lessor), the Equipment shall continue to be held
and leased hereunder, and this Lease and the related Schedule term shall
thereupon be extended for successive thirty (30) day periods at the fair market
rental value of the Equipment as determined by Lessor, not to exceed the
periodic
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installment of rent with respect to such Equipment for such period. Upon
Lessor's written request, Lessor shall have the right, free of rent and other
charges, to attempt to resell and/or store the Equipment at the Location for a
period of 90 days from the expiration or termination of the Term of the Schedule
or any extensions thereof. During this period, the Equipment must remain
operational and Lessee must provide adequate electrical power, lighting, heat,
water and compressed air, necessary to permit Lessor to demonstrate the
Equipment to any potential buyer. During such period, Lessee shall grant access
to the Location to Lessor and its agents and to all potential purchasers, from
time to time as Lessor shall request, upon reasonable prior notice and during
normal business hours. At the expiration of such period, if such Equipment is
not sold, Lessee shall be obligated to return the Equipment to Lessor in
accordance with the terms of this Lease. If an auction is necessary to dispose
of the Equipment, Lessor shall be permitted to auction the Equipment at the
Location.
8. RISK OF LOSS. Lessee shall bear all risks of loss of and damage to the
Equipment from any cause and the occurrence of such loss or damage shall not
relieve Lessee of any obligation hereunder. In the event of loss or damage,
Lessee, at its option, provided it is not in default hereunder, otherwise at
Lessor's option, shall: (a) place the damaged Equipment in good repair,
condition and working order; or (b) replace lost or damaged Equipment with like
equipment in good repair, condition and working order with documentation
creating clear title thereto in Lessor; or (c) pay to Lessor, on the next rent
payment date, the rentals and other sums due on such date plus the Stipulated
Loss Amount as of the date of loss set forth on the Stipulated Loss Rider
annexed to the applicable Schedule (plus all applicable sales and other taxes
due with respect to such amount, if any). Upon Lessor's receipt of such payment,
Lessee and/or Lessee's insurer shall be entitled to Lessor's interest in said
item for salvage purposes, in its then condition and location, as is, without
warranty, express or implied.
9. INSURANCE. Until redelivered to Lessor, Lessee shall maintain and
deliver evidence to Lessor of such insurance required by Lessor and written by
insurers and in amounts satisfactory to Lessor. Should Lessee fail to provide
such insurance coverage, Lessor may obtain coverage for part or all of the term
of this Lease or any Schedule or such period beyond the term as is required by
the insurance company issuing such coverage protecting interests of Lessor and
Lessee or the interest of Lessor only. The proceeds of such insurance, at the
option of Lessee, provided it is not in default hereunder, otherwise at Lessor's
option, shall be applied toward (i) the replacement, restoration or repair of
the Equipment or (ii) payment of the obligations of Lessee hereunder. Lessee
hereby appoints Lessor as Lessee's attorney-in-fact after the occurrence and
during the continuance of a default under this Lease, to make claims for,
receive payment of, and execute and endorse all documents, checks, or drafts for
loss or damage under any said insurance policies.
10. NET LEASE; TAXES. Lessee intends the rental payments hereunder to be
net to Lessor, and Lessee shall pay all sales, use, excise, stamp, documentary
and ad valorem taxes, license and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession or use of the
Equipment during the term of this Lease or any Schedule; shall pay all taxes
(except Lessor's Federal or State net income taxes) imposed on Lessor or Lessee
with respect to the rental payments hereunder, and shall
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reimburse Lessor upon demand for any taxes paid by or advanced by Lessor. Unless
Lessee is otherwise directed by Lessor, in writing, Lessor shall file for and
pay all personal property taxes assessed with respect to the Equipment during
the term of this Lease and Lessee shall, upon Lessor's demand, forthwith
reimburse Lessor for the full amount of such taxes without regard to any
discounts obtained by Lessor due to early payment or otherwise. Lessor may, if
it elects, estimate such personal property taxes and bill Lessee periodically in
advance therefor.
11. INDEMNITY. Lessee assumes liability for, and covenants and agrees to
indemnify, protect, defend and pay on behalf of, save and keep harmless Lessor,
its officers, directors, shareholders, affiliates, agents and employees and any
successors and assignees of Lessor (together, the "Indemnitees"), from and
against: (a) any and all losses, claims, damages, actions, suits, proceedings,
costs and expenses (but excluding those resulting solely from an Indemnitee's
gross negligence or willful misconduct) resulting from, or arising out of: (i)
this Lease or any Schedule, (ii) the Equipment, (iii) the performance or
enforcement of any of the terms under this Lease, (iv) loss or damage to any of
the Equipment, and (b) any and all losses, damages, claims, demands, penalties,
obligations, actions, suits, proceedings and all expenses, legal or otherwise
(including court costs and attorneys' fees) of whatsoever kind and nature,
relating to or resulting from the death of any person or damage or injury to the
person or property of any person (including specifically, but without
limitation, payments under any worker's compensation law or under any plan for
employee's disability and death benefits), and arising on account of or any way
related to the purchase and sale, manufacture, selection, delivery, use,
possession, storage, removal, return, sale, leasing, maintenance, condition,
repair, sublease (including, but without limitation, latent and other defects,
whether or not discoverable by any Indemnitee) or operation of the Equipment
during the term of this Lease, and by whomsoever used, operated, or caused,
except to the extent of any gross negligence or willful misconduct of
Indemnitee; provided, however, that Lessee shall be subrogated to all rights
which Indemnitee may have against any unaffiliated third parties. Lessee shall
also pay when due, and assume liability for, and protect, save and on written
demand shall indemnify and hold harmless Lessor from and against any and all
taxes imposed against Lessor (other than franchise and income taxes), Lessee or
the Equipment by any federal, state or local taxing authority in the United
States or by any foreign government or international authority including, but
not limited to, any sales, use, excise, property tax or similar taxes. All
indemnities shall survive the termination or expiration of this Lease or any
Schedule.
12. DEFAULT AND REMEDIES. Any of the following shall be a default under
this Lease and all Schedules:
(a) Lessee shall fail to make any payment of rent, or any other payment
due hereunder, within five days of the date such payment is due; or
(b) Lessee shall fail to carry and maintain insurance at all times on or
with respect to the Equipment in accordance with the provisions of Paragraph 10
hereof or shall fail to provide evidence of such insurance at such times and in
such form as required in Paragraph 10 hereof or Lessor or Lessee shall receive
notice of cancellation, change or lapse for nonpayment of premium; or
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(c) Lessee shall use or permit any of the Equipment to be used for any
criminal or unlawful purpose; or
(d) Lessee shall fail to perform or observe any other covenant, condition,
warranty or agreement to be performed or observed by it under this Lease, any
Schedule or any agreement, document or certificate delivered by Lessee in
connection herewith (including, without limitation, the Lease Documents, as
hereinafter defined), and such failure shall continue unremedied for thirty (30)
days; or
(e) Aquis Communications Group, Inc. ("Guarantor") shall fail to perform
or observe any covenant, condition, warranty or agreement to be performed or
observed by it under its Guaranty (the "Guaranty") or any agreement, document or
certificate delivered by Guarantor in connection herewith or therewith
(including, without limitation, the Lease Documents, as hereinafter defined),
and such failure shall continue unremedied for thirty (30) days; or
(f) Any representation or warranty made by Lessee in this Lease, any
Schedule or any agreement, document or certificate delivered by Lessee in
connection herewith or pursuant hereto shall prove to be untrue or incorrect in
any material respect; or
(g) Lessee shall, or shall attempt to, make any unauthorized assignment or
transfer of this Lease or any Schedule or shall, or shall attempt to, sell,
transfer, encumber, alienate, assign or sublet all or any portion of the
Equipments or its leasehold interest therein, or shall permit the same to occur;
or
(h) Lessee or Guarantor shall consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial part of its property, or
Lessee or Guarantor shall admit in writing its inability to pay its debts
generally as they come due, or shall make a general assignment for the benefit
of creditors; or
(i) Lessee or Guarantor shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against Lessee or Guarantor in any such
proceeding, or Lessee or Guarantor shall by voluntary petition, answer or
consent seek relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or windingup of
corporations, or providing for an agreement, composition, extension or
adjustment with its creditors; or
(j) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee or Guarantor, a
receiver, trustee or liquidator of Lessee or Guarantor or of any substantial
part of its property, or sequestering any substantial part of the property of
Lessee or Guarantor, and any such order, judgment or decree of appointment or
sequestration shall remain in force undismissed, unstayed or unvacated for a
period of sixty (60) days after the date of entry thereof; or
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(k) a petition against Lessee or Guarantor in a proceeding under any
bankruptcy laws or other insolvency laws, as now or hereafter in effect, shall
be filed and shall not be withdrawn or dismissed within sixty (60) days
thereafter, or, under the provisions of any law providing for reorganization or
winding up of corporations which may apply to Lessee or Guarantor, any court of
competent jurisdiction shall assume jurisdiction, custody or control of Lessee
or Guarantor, or of any substantial part of its property, and such jurisdiction,
custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of sixty (60) days; or
(l) Lessee shall fail to perform or observe any covenant, condition,
warranty or agreement to be observed or performed by it under any agreement or
document, other than this Lease or other Lease Documents, or under any other
obligation, in each case, between Lessor and Lessee, as the case may be, and
such failure is not cured within any grace or cure period provided therein; or
(m) Guarantor shall fail to perform or observe any covenant, condition,
warranty or agreement to be observed or performed by it under any agreement or
document, other than the Guaranty or other Lease Documents, or under any other
obligation, in each case, between Lessor and Guarantor, as the case may be, and
such failure is not cured within any grace or cure period provided therein; or
(n) there shall be entered against Lessee or Guarantor one or more
judgments, awards or decrees, or orders of attachment, garnishment or any other
writ, which exceed $250,000 in the aggregate at any one time outstanding,
excluding judgments, awards, decrees, orders or writs (i) for which there is
full insurance and with respect to which the insurer has assumed responsibility
in writing, (ii) for which there is full indemnification (upon terms and by
creditworthy indemnitors which are satisfactory to Lenders) or (iii) which have
been in force for less than the applicable period for filing an appeal so long
as execution has not been levied thereunder (or in respect of which Lessee or
Guarantor, as applicable, shall at the time in good faith be prosecuting an
appeal or proceeding for review and in respect of which a stay of execution or
appropriate appeal bond shall have been obtained pending such appeal or review);
or
(o) Lessee or Guarantor shall sell, lease, transfer or otherwise dispose
of all or any substantial part of its assets; or
(p) if an Event of Default under subsection 8.1.11 of the Loan Agreement
dated as of December 31, 1998 between Lessor and Lessee, as the same has been
and from time to time hereafter may be amended, modified, supplemented or
restated (the "Loan Agreement"), shall occur; or
(q) If (i) Lessee or Guarantor at any time shall be in default (as
principal or guarantor or other surety) in the payment of any principal of or
premium or interest on any indebtedness for borrowed money (other than under the
Loan Agreement, this Lease or the other Lease Documents) beyond the grace
period, if any, applicable thereto and the aggregate amount of such payments
then in default beyond such grace period shall exceed $100,000 or (ii) any
default shall occur in respect of any issue of indebtedness for borrowed money
of Lessee or Guarantor (other than under the Loan Agreement, this Lease or the
other Lease
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Documents) outstanding in a principal amount of at least $200,000, or in respect
of any agreement or instrument relating to any such issue of indebtedness for
borrow ed money, and such default shall continue beyond the grace period, if
any, applicable thereto.
In the event of a default, Lessor may, to the extent permitted by law, exercise
any one or more of the following remedies: (a) to declare the entire balance of
rent for the full term of any or all Schedules covered hereby immediately due
and payable and to similarly accelerate the balances under any other leases or
agreements between Lessor and Lessee without notice or demand, (b) to sue for
and recover all rents and other sums due under this Lease and all Schedules plus
the Stipulated Loss Amount as of the date of first default set forth on the
Stipulated Loss Riders annexed to the Schedules (plus all applicable sales and
other taxes due with respect to such amount); (c) to require Lessee at Lessee's
expense, to assemble all the Equipment at a place reasonably designated by
Lessor, (d) to remove any physical obstructions for removal of the Equipment
from the place where the Equipment is located and take possession of any or all
items of Equipment, without demand or notice, wherever same may be located,
disconnecting and separating all such Equipment from any other property, with or
without any court order or pretaking hearing or other process of law, it being
understood that facility of repossession in the event of default is a basis for
the financial accommodation reflected by this Lease. Lessee hereby waives any
and all damages occasioned by such retaking. Lessor may, at its option, use,
ship, store, repair or lease all Equipment so removed and sell or otherwise
dispose of any such Equipment at a private or public sale. Lessor may expose and
resell the Equipment at Lessee's premises at reasonable business hours without
being required to remove the Equipment. In the event Lessor takes possession of
the Equipment, Lessor shall give Lessee credit for any sums received by Lessor
from the sale, or present value of the rental, of the Equipment computed at the
implicit rate of the Schedule after deduction of the expenses of sale or rental.
Lessee shall also be liable for and shall pay to Lessor on demand (a) all
expenses incurred by Lessor in connection with the enforcement of any of
Lessor's remedies, including all expenses of repossession, storing, shipping,
repairing and selling the Equipment, (b) Lessor's reasonable attorney's fees and
(c) interest on all sums due Lessor from the date of default until paid at the
rate of one and onehalf (1.5%) percent per month, but only to the extent
permitted by law. Lessor and Lessee acknowledge the difficulty in establishing a
value for the unexpired Lease term and owing to such difficulty agree that the
provisions of this paragraph represent an agreed measure of damages and are not
to be deemed a forfeiture or penalty.
Whenever any payment hereunder is not made by Lessee within ten (10) days when
due, Lessee agrees to pay to Lessor, not later than one month thereafter, an
amount calculated at the rate of ten cents per one dollar of each such delayed
payment, as an administrative fee to offset Lessor's collection costs, but only
to the extent allowed by law. Such amount shall be payable in addition to all
amounts payable by Lessee as a result of exercise of any of the remedies herein
provided.
All remedies of Lessor hereunder are cumulative, are in addition to any other
remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently or separately. The exercise of any one remedy shall not
be deemed to be an election of such remedy or to preclude the exercise of any
other remedy. No failure on the part of the Lessor to exercise and no delay in
exercising any right or remedy shall operate
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as a waiver thereof or modify the terms of this Lease. A waiver of default by
Lessor on any one occasion shall not be deemed a waiver of any other or
subsequent default. In the event this Lease is determined to be a security
agreement, Lessor's recovery shall in no event exceed the maximum permitted by
law.
13. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS. In the event Lessee
fails to comply with any provision of this Lease, Lessor shall have the right,
but shall not be obligated, to effect such compliance on behalf of Lessee upon
ten ( 10) days prior written notice to Lessee. In such event, all monies
advanced or expended by Lessor, and all expenses of Lessor in effecting such
compliance, shall be deemed to be additional rent, and shall be paid by Lessee
to Lessor at the time of the next periodic payment of rent.
14. ASSIGNMENT: QUIET ENJOYMENT. LESSOR MAY, WITHOUT LESSEE'S CONSENT,
ASSIGN THIS LEASE OR ANY SCHEDULE AND/OR THE RENTALS DUE THEREUNDER OR SELL OR
GRANT A SECURITY INTEREST IN THE EQUIPMENT AND LESSEE AGREES THAT NO ASSIGNEE OF
LESSOR SHALL BE BOUND TO PERFORM ANY DUTY, COVENANT OR CONDITION OR WARRANTY
(EXPRESS OR IMPLIED) ATTRIBUTABLE TO LESSOR AND LESSEE FURTHER AGREES NOT TO
RAISE ANY CLAIM OR DEFENSE ARISING OUT OF THIS LEASE OR OTHERWISE AGAINST LESSOR
AS A DEFENSE, COUNTERCLAIM OR OFFSET TO ANY ACTION BY ANY ASSIGNEE HEREUNDER. AT
ALL TIMES, AND NOTWITHSTANDING ANY ASSIGNMENT BY LESSOR, PROVIDING LESSEE IS NOT
IN DEFAULT HEREUNDER, LESSEE SHALL QUIETLY ENJOY UNRESTRICTED USE OF THE
EQUIPMENT, SUBJECT TO THE TERMS AND CONDITIONS OF THE LEASE, AND NEITHER LESSOR
NOR ANY ASSIGNEE OF LESSOR SHALL DISTURB SUCH QUIET ENJOYMENT.
WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE SHALL NOT ASSIGN, TRANSFER,
PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THE EQUIPMENT OR ANY INTEREST
THEREIN, OR SUBLET OR LEND EQUIPMENT OR PERMIT IT TO BE USED BY ANYONE OTHER
THAN LESSEE OR LESSEE'S EMPLOYEES.
15. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants to
Lessor that:
(a) Lessee is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Delaware, with full power and
authority to own its properties and to transact its business as now transacted
and as contemplated to be transacted. Lessee is qualified and in good standing
to transact business in each jurisdiction where the ownership of its properties
or the transaction of its business requires such qualification. Guarantor is
duly organized, validly existing and in good standing as a corporation under the
laws of the State of Delaware, with full power and authority to own its
properties and to transact its business as now transacted and as contemplated to
be transacted. Guarantor is qualified and in good standing to transact business
in each jurisdiction where the ownership of its properties or the transaction of
its business requires such qualification.
(b) Lessee has full power and authority to execute, deliver and carry out
the provisions of this
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Lease, the Schedules and all other agreements, instruments and documents
executed in connection herewith ("Lease Documents"), and to perform its
obligations hereunder and thereunder, and all such action has been duly and
validly authorized by all necessary proceedings on its part. Guarantor has full
power and authority to execute, deliver and carry out the provisions of the
Guaranty and any Lease Documents to which it is a party and to perform its
obligations thereunder, and all such action has been duly and validly authorized
by all necessary proceedings on its part.
(c) This Lease and the other Lease Documents to which Lessee is a party
have been duly and validly executed and delivered by Lessee and constitute the
legal, valid and binding obligation of Lessee enforceable in accordance with
their respective terms. The Guaranty and any Lease Documents to which Guarantor
is a party have been duly and validly executed and delivered by Guarantor and
each constitutes the legal, valid and binding obligation of Guarantor,
enforceable in accordance with their respective terms.
(d) Lessee and Guarantor have all requisite power and authority to own and
operate their respective properties and to carry on their businesses as now
conducted and as presently planned to be conducted.
(e) No authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation, declaration or
filing with, any governmental authority is or will be necessary or advisable in
connection with the execution and delivery of this Lease, the Guaranty, the
other Lease Documents or the consummation by Lessee and Guarantor of the
transactions herein and therein contemplated, or performance by Lessee and
Guarantor of or compliance by Lessee and Guarantor with, the terms and
conditions hereof or thereof, except where the failure to obtain the same could
not reasonably be expected to have a Material Adverse Effect.
(f) Neither the execution and delivery of this Lease or the other Lease
Documents, nor consummation of the transactions herein or therein contemplated
nor performance of, or compliance with the terms and conditions hereof or
thereof will (a) result in any violation or breach of (i) the provisions of
Lessee's or Guarantor's articles of incorporation or by-laws, or (ii) any law,
statute, ordinance, order, rule or regulation of any governmental body or agency
or of any court having jurisdiction over Lessee or Guarantor, or any of their
respective properties ("Laws"), or (iii) any agreement, bond, note, instrument
or indenture to which Lessee or Guarantor is a party or pursuant to which any of
their respective properties are affected, or (b) result in the creation or
imposition of any security interest, lien or encumbrance ("Lien") upon any
property (now owned or hereafter acquired) of Lessee or Guarantor.
(g) Lessee and Guarantor have heretofore furnished to Lessor certain
financial statements and related financial information ("Financial Statements").
Such Financial Statements (including the notes thereto) present fairly the
financial condition of Lessee or Guarantor (as the case may be) as of the dates
of the balance sheets contained therein, and the results of their respective
operations for the periods then ended, all in conformity with generally accepted
accounting principles ("GAAP") on a basis consistent with that of Financial
Statements for corresponding prior periods. Except as disclosed therein, neither
Lessee nor Guarantor has any material contingent liabilities (including
liabilities for taxes), unusual forward or longterm
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commitments or unrealized or anticipated losses from unfavorable commitments.
(h) There is no pending or threatened claim or proceeding by or before any
court or governmental agency against or affecting Lessee or Guarantor which, if
adversely decided would have a material adverse effect on the business,
operations or financial condition of Lessee or Guarantor or on the ability of
Lessee or Guarantor to perform their respective obligations under this Lease or
the other Lease Documents or on the Equipment.
(i) All tax returns required to be filed by Lessee have been properly
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon Lessee or upon any of its properties, incomes, sales
or franchises which are due and payable have been paid, except to the extent the
same are being contested in good faith by appropriate proceedings diligently
conducted, and for which adequate reserves have been set aside in accordance
with generally accepted accounting principles consistently applied.
(j) Lessee makes and keeps books, records and accounts which, in
reasonable detail, accurately and fairly reflect Lessee's transactions and
assets.
(k) Since the date of the Financial Statements referred to in subsection
(g), there has been no material adverse change in the business, operations or
financial condition of Lessee or Guarantor.
(l) Neither Lessee nor Guarantor is in violation of any Laws, except for
violations which in the aggregate do not have a material adverse effect on the
business, operations or financial condition of Lessee or Guarantor or on the
Equipment.
(m) Neither Lessee nor Guarantor is in default under any agreement, bond,
note, indenture or contract, except for defaults which in the aggregate do not
have a material adverse effect on the business, operation or financial condition
of Lessee or Guarantor or on the Equipment.
(n) Neither Lessee nor Guarantor has made or contemplate an assignment for
the benefit of creditors. No application or petition has been filed for the
appointment of a custodian, trustee, receiver or agent to take possession of any
of the properties or assets of Lessee or Guarantor. Lessee and Guarantor are
generally paying their respective debts as such debts become due. Neither Lessee
nor Guarantor is "insolvent" as that term is defined in Section 101(26) of the
"Bankruptcy Code" (Title 11 of the United States Code, 11 U.S.C. Section 101, et
seq.) or would be insolvent after giving effect to the transactions contemplated
by this Lease and the other Lease Documents. Neither Lessee nor Guarantor has
filed a petition with the Bankruptcy Court under the Bankruptcy Code, or
commenced any proceeding relating to Lessee or Guarantor under any bankruptcy or
reorganization statute or under any arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction. No petition or
application of the type described above has been filed or commenced against
Lessee or Guarantor, in which (i) Lessee or Guarantor, by any act, has indicated
or intends to indicate its approval thereof, consent thereto, or acquiescence
therein; (ii) an order has been or is expected to be entered appointing any such
custodian, trustee, receiver or agent,
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adjudicating Lessee or Guarantor bankrupt or insolvent, or approving such
petition or application in any such proceeding; (iii) the Bankruptcy Court has
ordered or is expected to order relief against Lessee or Guarantor under the
Bankruptcy Code; or (iv) such petition or application was not dismissed within
ninety (90) days of such filing or commencement.
(o) No representation or warranty made by Lessee in this Lease and no
statement made by Lessee or Guarantor in the Financial Statements furnished to
Lessee or otherwise, or any certificate, report, exhibit or document furnished
by Lessee or Guarantor to Lessor pursuant to or in connection with this Lease is
false or misleading in any material respect (including by omission of material
information necessary to make such representation, warranty or statement not
misleading).
(p) Lessee has not within the six-year period immediately preceding the
date hereof, changed its name (except from its prior name, BAP Acquisition
Corp.), been the surviving entity of a merger (except the merger with Paging
Partners Merger Corporation) or consolidation, acquired all or substantially all
of the assets of any person or entity ("Person"), acquired any asset from any
Person not in the business of selling such asset, or assumed any obligations of
any other Person.
(q) Lessee has taken all action necessary to assure that there will be no
material adverse change to Lessee's business by reason of the advent of the year
2000, including, without limitation, that all computer-based systems, embedded
microchips and other processing capabilities effectively recognize and process
dates after April 1, 1999.
16. CERTAIN COVENANTS
(a) As soon as available, and in any event within ninety (90) days after
the close of each fiscal year of Lessee and Guarantor, Lessee and Guarantor
shall furnish to Lessor their respective annual audit reports for such year for
Lessee and Guarantor (as the case may be), including audited statements of
income, retained earnings and changes in financial position of Lessee and
Guarantor for such fiscal year and audited balance sheets of Lessee and
Guarantor as of the close of such fiscal year, and notes to each, all in
reasonable detail, setting forth in comparative form the corresponding figures
for the preceding fiscal year where such presentation is appropriate under GAAP,
certified without qualification by independent certified public accountants of
recognized standing selected by Lessee and Guarantor and satisfactory to Lessor,
together with (or included in such certification) a written statement of such
accountants substantially to the effect that (i) such accountants examined such
financial statements in accordance with generally accepted auditing standards
and accordingly made such tests of accounting records and such other auditing
procedures as they considered necessary in the circumstances and (ii) in the
opinion of such accountants such financial statements present fairly the
financial position of Lessee and Guarantor as of the end of such fiscal year and
the results of its operations and the changes in its financial position for the
fiscal year then ended, in conformity with GAAP applied on a basis consistent
with that of the preceding fiscal year (except for changes in application in
which such accountants concur).
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(b) Within forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year, Lessee and Guarantor shall furnish to
Lessor a copy of their respective interim financial statements of the type
described in subsection (a) above, certified by the Chief Financial Officer of
Lessee and Guarantor or if Lessee or Guarantor chooses, audited, as set forth in
subsection (a) above, and certified by the Chief Financial Officer of Lessee.
(c) Lessee will promptly furnish to Lessor such other information
(financial or otherwise) concerning Lessee, its assets or the Equipment in such
form as Lessor may reasonably request.
(d) At the same time Lessee delivers the financial statements required
under the provisions of subsection (a) and (b) above, Lessee shall furnish to
Lessor a certificate of the Chief Financial Officer of Lessee to the effect that
no default exists, or, if such cannot be so certified, specifying in reasonable
detail the exceptions, if any, to such statement.
(e) Promptly upon becoming aware thereof, Lessee shall give Lessor written
notice about any material adverse change in the business, operations or
financial condition of Lessee or Guarantor or in the Equipment or on the ability
of Lessee or Guarantor to perform their obligations under this Lease or the
other Lease Documents.
(f) Promptly upon becoming aware thereof Lessee shall give Lessor written
notice of the commencement, existence or threat of any proceeding by or before
any court or administrative agency against or affecting Lessee, Guarantor or the
Equipment which, if adversely decided, would have a material adverse effect on
the business, operations or financial condition of Lessee or Guarantor or on the
ability of Lessee or Guarantor to perform its obligations under this Lease, the
other Lease Documents or on the Equipment.
(g) Lessee shall permit such persons as Lessor may designate to visit and
inspect the Equipment and to examine the books and records of Lessee and take
copies and extracts therefrom, and to discuss its affairs with officers of
Lessee and its independent accountants, at such reasonable times during normal
business hours and as often as Lessor may reasonably request.
(h) Promptly upon their becoming available, Lessee shall furnish to
Lessor, copies of all registration statements and any amendments and supplements
thereto and any regular and periodic reports filed by Lessee or Guarantor with
any securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions of said
commissions and all letters of comment or correspondence sent to Lessee or
Guarantor from such exchanges or to such exchanges from Lessee or Guarantor.
(i) Lessee shall take all action necessary to assure that there will be no
material adverse change to Lessee's business by reason of the advent of the year
2000, including, without limitation, that all computer-based systems, embedded
microchips and other processing capabilities effectively recognize and
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process dates after April 1, 1999. At Lessor's request, Lessee shall provide to
Lessor assurance reasonably acceptable to Lessor that Lessee's computer-based
systems, embedded microchips and other processing capabilities are year 2000
compatible.
(j) Lessee shall use its commercially reasonable efforts to obtain and
deliver to Lessor a landlord's waiver, in form and substance reasonably
acceptable to Lessor, from the landlord of any premises leased by Lessee in New
Jersey and Pennsylvania if any Equipment is located at such premises.
17. EXPENSES AND ENVIRONMENTAL
(a) Lessee shall promptly reimburse Lessor for all reasonable costs, fees
and expenses incurred by Lessor in connection with the negotiation, preparation,
execution, delivery and enforcement of this Lease and the other Lease Documents,
including, but not limited to, the attorneys' and paralegals' fees of in-house
and outside counsel, expert witness fees, lien, title search and insurance fees,
appraisal fees, all charges and expenses incurred in connection with any and all
environmental reports and environmental remediation activities, and all other
costs, expenses, taxes and filing or recording fees payable in connection with
the transactions contemplated by this Lease, including, without limitation, all
such costs, fees and expenses as Lessor shall incur or for which Lessor shall
become obligated in connection with (i) any inspection or verification of the
Equipment after a default, (ii) any proceeding relating to the Lease Documents
or the Equipment, (iii) actions taken with respect to the Equipment, including,
without limitation, the defense or prosecution of any action involving any third
party, (iv) enforcement of any of Lessor's rights and remedies with respect to
the obligations under this Lease, the other Lease Documents and the Equipment,
(v) consultation with Lessor's attorneys and participation in any workout,
bankruptcy or other insolvency or other proceeding involving any Lessee or
Guarantor or any affiliate, whether or not suit is filed, and (vi) any other
matters relating to or arising out of this Lease and/or the Lease Documents.
(b) The Environmental Certificate and Indemnity Agreement executed by
Lessee in connection herewith is incorporated herein for all purposes as if
fully stated in this Lease.
18. TAX INDEMNITY. With respect to each item of Equipment leased
hereunder, Lessee shall be entitled to such deductions and other benefits as are
provided to an owner of personal property by the Internal Revenue Code of 1986
(as defined in Section 2 of the Tax Reform Act of 1986) , as amended or
superseded from time to time, including, without limitation, depreciation
deductions based upon the Accelerated Cost Recovery System all at the maximum
federal income tax rates applicable to corporations in effect on the
Commencement Date.
19. MISCELLANEOUS
(a) This Lease shall be binding upon and inure to the benefit of the
respective heirs, successors and assignees of the parties, except as herein
provided. Lessee shall not assign or delegate all or any portion of this Lease
or any other Lease Documents without express written consent of Lessor.
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(b) All notices and other communications provided for or required under
the terms and provisions hereof shall be in writing and any such notice shall be
deemed given when delivered personally or by overnight carrier or five days
after being deposited in the United States mails, with proper postage prepaid,
for first class certified mail, return receipt requested, addressed as follows:
If to Lessor: FINOVA Capital Corporation
115 West Century Road
Paramus, New Jersey 07652
Facsimile No. 201-634-3325
Attn.: Ms. Pamela Marchant, VP
With copy to: FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85004
Facsimile No. 602-207-5036
Attn: Vice President, Law Department
and
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Attn.: Michael L. Owen, Esq.
If to Lessee: Aquis Communications, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
With a copy to:Phillips, Nizer, Benjamin, Krim & Ballon, LLP
666 Fifth Avenue
New York, New York 10103-0084
Attn: Adley Van Gartenstein, Esq.
or to such other address as Lessor or Lessee, may from time to time designate in
writing so delivered.
(c) THIS LEASE IS TO BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ARIZONA WITHOUT GIVING EFFECT TO ANY PROVISION OF SUCH LAWS WHICH WOULD
RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. Each party
hereby agrees that all actions or proceedings initiated by Lessee and arising
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directly or indirectly out of this Lease shall be litigated exclusively in the
Superior Court of Arizona, Maricopa County, or the United States District Court
for the District of Arizona (collectively the "Arizona Courts") and all actions
or proceedings initiated by Lessor and arising directly or indirectly out of
this Lease shall be litigated in any court in any jurisdiction chosen by Lessor
in its sole discretion. Each party hereby expressly submits and consents in
advance to the jurisdiction and venue of the Arizona Courts in any action or
proceeding commenced by either party in any of the Arizona Courts, and hereby
waives personal service of the summons and complaint, or other process of papers
issued therein, and agrees that such service of the summons and complaint may be
made by registered mail, return receipt requested, addressed to either party, at
the respective addresses set forth in Paragraph 20(b) . Each party waives any
claim that Phoenix, Arizona or the District of Arizona is an inconvenient forum
or an improper forum based on lack of venue. Should either party, after being so
served, fail to appear or answer any summons, complaint, process or paper so
served within thirty (30) days after the mailing thereof, each party
acknowledges that as a result thereof, an order and/or judgment may be entered
by either party against the other as demanded or pleaded for in such summons,
complaint, process or papers. The exclusive choice of forum set forth herein
shall not be deemed to preclude the enforcement by either party of any judgment
in any other appropriate jurisdiction. In construing any provision of this
Lease, no account shall be taken of the identity of the party who prepared this
Lease and no presumption shall arise as a result thereof. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, LESSEE WAIVES TRIAL BY JURY IN ANY ACTION BY OR
AGAINST LESSOR HEREUNDER.
(d) To the extent permitted by applicable law, Lessee hereby waives any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect. Otherwise, any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating any
of the remaining provisions hereof, and any such prohibition or unenforceability
in any one or more jurisdictions shall not invalidate or render unenforceable
such provisions in other jurisdictions. No delay by Lessor in exercising any
right, power or remedy under this Lease shall constitute a waiver, and any
waiver by Lessor on any one occasion shall not be construed as a waiver on any
future occasion or for any other purpose.
(e) This Lease and all Schedules attached hereto contain the entire
agreement between Lessor and Lessee with respect to the subject matter hereof
and thereof. To the extent inconsistent with this Lease, all prior agreements,
understanding, representations and statements, oral or written, with respect to
the transactions contemplated herein, are superseded by this Lease. Neither this
Lease nor any provision hereof may be waived, modified, amended, discharged or
terminated except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.
(f) Lessee agrees to deliver to Lessor, its successors and assigns, upon
the request of Lessor, such information, documentation, certificates,
acknowledgments, consents and other instruments, which Lessor may reasonably
determine to be necessary or proper to protect Lessor's rights hereunder and to
facilitate the encumbrance or assignment, if any, by Lessor of its rights, title
and interest in and to this Lease and the
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Equipment subject to this Lease. Lessee agrees to take any and all other action
and execute and deliver to Lessor all documents reasonably requested by Lessor
from time to time for the purpose of fully effectuating the contents and
purposes of this Lease, and to protect the interests of the Lessor, its
successors and assigns.
(g) In the event the Equipment or the use, operation, transportation,
storage, repair or maintenance thereof, or any other activity pertaining
thereto, or any fee or charge for any of the foregoing, is the subject of or
otherwise becomes involved in any litigation, whether or not Lessee is a party
to such litigation, Lessee shall promptly give notice of such litigation and
provide any details pertaining thereto to Lessor, and shall thereafter keep
Lessor advised as to the progress of such litigation.
(h) Lessor and Lessee each represents and warrants to the other that it
has not dealt with any broker. Each party hereto agrees to indemnify and hold
harmless the other against and in respect of all claims for brokerage
commissions, finder's fees and similar compensation arising out of the purchase
or lease of the Equipment, which claims are based in any way upon breach of the
foregoing representation by such indemnifying party.
(i) This Lease may be executed in any number of counterparts and by the
parties hereto on separate counterparts, of which only the Lease identified as
Counterpart No. 1 shall constitute "Chattel Paper" or other "Collateral" within
the meaning of the Uniform Commercial Code in any jurisdiction.
(j) All section headings contained herein are for convenience of reference
only and are not intended to define or limit the scope of any provision of this
Lease.
(k) Time is of the essence for the performance by Lessee of its
obligations under this Lease and the other Lease Documents.
(l) Except as necessary to enable Lessor to realize upon Lessee's
obligations under this Lease and the other Lease Documents and except in
connection with the administration or enforcement of Lessor's rights under this
Lease and the other Lease Documents, Lessor shall use its commercially
reasonable efforts not to disclose any information relative to the business of
Lessee designated by Lessee as confidential to any Person without the prior
written consent of Lessee, except that Lessor may disclose any such information
(i) in connection with any proposed assignment of this Lease, (ii) which
otherwise is in the public domain, (iii) to the extent required by applicable
law or any rule, regulation, decree, order or injunction of any governmental
authority, subject to any protective order obtained by Lessee or (iv) which is
obtained by Lessor from a third party not known to Lessor to be under an
obligation of confidentiality to Lessee.
20. GENERAL. If more than one Lessee is named in this Lease, the liability
of each shall be joint and several. In the event any provision of this Lease
should be unenforceable, then such provision shall be deemed deleted, however,
no other provision hereof shall be affected thereby.
21. FINANCE LEASE STATUS. Lessor and Lessee agree that if Article 2A -
Leases of the Uniform
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Commercial Code ("Code") governs the terms of this Lease, then this Lease will
be deemed a "finance lease". By executing this Lease, Lessee acknowledges that
(a) Lessor has advised Lessee of (i) the identity of the Supplier; (ii) that
Lessee may have rights under the "supply contract" as defined in the Code,
pursuant to which Lessor is purchasing the Equipment, and (iii) that Lessee may
contact the Supplier for a description of any such rights. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, LESSEE WAIVES ANY AND ALL RIGHTS AND REMEDIES
CONFERRED UPON A LESSEE BY THE CODE, INCLUDING SECTIONS 2A 508 THROUGH 522
THEREOF.
[remainder of page intentionally left blank]
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LESSOR: LESSEE:
FINOVA CAPITAL CORPORATION AQUIS COMMUNICATIONS, INC.
BY: /s/ A. Holland BY: /s/ [ILLEGIBLE]
------------------------------ -------------------------------
NAME: A. Holland NAME:
---------------------------- -----------------------------
TITLE: Director, Cont. Admn. TITLE:
--------------------------- ----------------------------
Taxpayer Identification No.:
ADDRESS: ADDRESS:
115 WEST CENTURY ROAD, P.O. BOX 907 1719A ROUTE 10
PARAMUS, NEW JERSEY 07653 PARSIPPANY, NEW JERSEY 07054
DATE ACCEPTED: 3-31-99 DATED:
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