UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________________
Commission File Number: 1-13002
AQUIS COMMUNICATIONS GROUP, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3281446
- ----------------------------------------- ------------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
1719A Route 10, Suite 300, Parsippany, NJ 07054
- ----------------------------------------- ------------------------------------
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-8000
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
As of June 30, 1999 there were 16,371,000 shares of the Registrant's Common
Stock outstanding.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
INDEX To Form 10-Q
Page
----
Part I Financial Information:
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 ................................................ 3
Condensed Consolidated Statements of Operations for the
Three and Six Month Periods Ended June 30, 1999 and 1998.............. 4
Condensed Consolidated Statements of Cash Flows for the
Six Month Periods Ended June 30, 1999 and 1998........................ 5
Notes to Condensed Consolidated Financial Statements.................. 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 12
Item 3 - Quantitative and Qualitative Disclosures
About Market Risks............................................ 17
Part II Other Information:
Item 2 - Changes in Securities........................................... 18
Item 4 - Submission of Matters to a Vote of Security Holders............. 18
Item 5 - Other Information............................................... 18
Item 6 - Exhibits and Reports on Form 8-K................................ 19
Signature................................................................ 20
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS: 1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash $ 657 $ --
Accounts receivable, net of allowance for doubtful accounts
of $667 at June 30, 1999 and $490 at December 31, 1998 5,117 2,061
Inventory 1,615 2,076
Prepaid expenses and other 2,077 1,012
-------- --------
Total current assets 9,466 5,149
Fixed assets, net 12,014 10,107
Intangible assets, net 21,530 16,749
Deferred charges and other assets 1,328 330
-------- --------
Total assets $ 44,338 $ 32,335
======== ========
LIABILITIES:
Current liabilities:
Accounts payable $ 4,108 $ 1,769
Accrued expenses 1,830 236
Deferred revenue 2,146 1,033
Customer deposits 564 577
Current maturities of capital lease 215 --
Notes payable to stockholders -- 520
-------- --------
Total current liabilities 8,863 4,135
Long term debt 24,860 --
Note payable -- 4,150
Payable to Bell Atlantic Corp. and affiliates -- 18,535
Capital lease obligations, net of current maturities 1,035 --
-------- --------
Total liabilities 34,758 26,820
-------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value, authorized - 29,000,000 shares, 16,371,000
and 8,892,000 shares issued and outstanding at June 30, 1999 and
December 31, 1998, respectively 164 89
Additional paid in capital 13,084 5,962
Accumulated deficit (3,428) (296)
Note receivable from stockholder (240) (240)
-------- --------
Total stockholders' equity 9,580 5,515
-------- --------
Total liabilities and stockholders' equity $ 44,338 $ 32,335
======== ========
</TABLE>
See notes to condensed consolidated financial statements. 3
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Predecessor Predecessor
Company Company
------------ ----------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Paging services $ 7,817 $ 6,026 $ 14,111 $ 11,528
Equipment sales 239 610 367 1,251
------------ ------------ ------------ ------------
Total revenues 8,056 6,636 14,478 12,779
------------ ------------ ------------ ------------
Operating expenses:
Paging services 2,070 1,156 3,541 2,194
Cost of equipment sales 220 594 478 1,207
Technical operations 1,287 775 1,975 1,525
Sales and marketing 805 946 1,637 1,929
General and administrative 1,708 1,617 3,066 2,969
Depreciation and amortization 2,897 1,069 4,870 2,052
Provision for doubtful accounts 214 225 469 442
------------ ------------ ------------ ------------
Total operating expenses 9,201 6,382 16,036 12,318
------------ ------------ ------------ ------------
Operating (loss) income (1,145) 254 (1,558) 461
Interest expense, net 645 -- 1,574 --
------------ ------------ ------------ ------------
(Loss) income before income taxes (1,790) 254 (3,132) 461
Provision for income taxes -- (167) -- (249)
------------ ------------ ------------ ------------
Net (loss) income $ (1,790) $ 87 $ (3,132) $ 212
============ ============ ============ ============
Net loss per common share:
- Basic and diluted $ (0.12) $ (0.26)
============ ============
Weighted average common shares
outstanding 15,213,000 12,087,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements. 4
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
Company
----------
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (3,132) $ 212
Adjustments to reconcile net (loss)
income to net cash provided by operating activities:
Depreciation and amortization 4,805 1,466
Deferred expenses 65 (278)
Provision for doubtful accounts 127 307
Changes in assets and liabilities, net of business acquired:
Accounts receivable (2,871) (503)
Due from affiliates, net (for trade) -- 214
Inventory 659 (171)
Prepaid expenses and other current assets 285 (113)
Accounts payable and accrued expenses 2,361 361
Deferred revenues and customer deposits 916 67
-------- --------
Net cash provided by operating activities 3,215 1,562
-------- --------
Cash flows from investing activities:
Business acquisitions (18,940) --
Capital expenditures (1,294) (2,273)
Acquisition deposits (1,275) --
Deferred business acquisition costs (554) --
Sale of fixed assets 263 573
-------- --------
Net cash used in investing activities (21,800) (1,700)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common stock -- 167
Issuance of long term debt 24,860 --
Repayment of notes payable to stockholders (520) --
Repayment of notes payable (4,150) --
Repayment of capital lease obligations (1,556) --
Refinancing of capital lease obligation 1,300 --
Deferred financing and other costs (692) --
-------- --------
Net cash provided by financing activities 19,242 167
-------- --------
Increase in cash 657 29
Cash, beginning of period -- 30
-------- --------
Cash, end of period $ 657 $ 59
======== ========
</TABLE>
See notes to condensed consolidated financial statements. 5
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except for share information)
1. Basis of Presentation:
On March 31, 1999, a wholly owned subsidiary of Paging Partners
Corporation ("Paging Partners"), merged with Aquis Communications, Inc.
("ACI") in a transaction accounted for as a reverse acquisition with ACI
as the accounting acquirer (see Note 2). At such time, Paging Partners
changed its name to Aquis Communications Group, Inc. (the "Company").
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its subsidiaries, and reflect the
March 31, 1999 merger with Paging Partners (see Note 2) and the
acquisition of the net assets of Bell Atlantic Paging, Inc. ("BAPCO" or
the "Predecessor Company") (see Note 3) on December 31, 1998. These
statements should be read in conjunction with the historical financial
statements, and notes thereto, of ACI and BAPCO included in the Paging
Partners Proxy Statement dated March 11, 1999. All material intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments considered necessary by management to present
fairly the consolidated financial position as of June 30, 1999, and the
consolidated results of operations and the consolidated cash flows for the
three and six month periods ended June 30, 1999 and 1998. The historical
financial statements prior to March 31, 1999, are those of ACI. ACI had no
operating activities prior to the acquisition of BAPCO on December 31,
1998. The statements of operations and of cash flows for the six month
period ended June 30, 1998 have been derived from the audited financial
statements of the Predecessor Company for such period. The Predecessor
Company financial statements include allocations of certain Bell Atlantic
Corporation ("Bell Atlantic") revenues and expenses. Management believes
that these allocations are reasonable. However, the revenues and expenses
allocated are not necessarily indicative of the costs that would have been
incurred if the Predecessor Company had performed or procured these
functions as a separate entity. All adjustments reflected in the
accompanying unaudited condensed consolidated financial statements are of
a normal recurring nature.
The results of operations for the respective interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. Merger and Recapitalization:
On November 6, 1998, ACI entered into a merger agreement with Paging
Partners and its wholly-owned subsidiary whereby each share of ACI common
stock was exchanged for 88.92076 shares of Paging Partners' common stock
(the "Merger"). The Merger was consummated on March 31, 1999, and has been
accounted for as a recapitalization of Paging Partners with ACI as the
acquirer (reverse acquisition) under the purchase method of accounting in
accordance with Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations." The aggregate purchase price of $6,071, which
includes transaction costs, has been allocated to the net assets acquired
based upon their estimated fair market values. The purchase price was
determined by using the average quoted stock price of Paging Partners a
few days before and after the date of the Merger. Intangible assets of
approximately $4,400 (principally FCC licenses and customer lists) are
being amortized over three to ten years on a straight-line basis. The
assets and
Continued
6
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
liabilities recorded in connection with the purchase price allocation are
based on preliminary estimates of fair value; actual adjustments will be
based on final analyses of fair values that are currently in progress.
Changes between preliminary and final purchase price allocations are not
expected to be material.
The following unaudited pro forma information presents a summary of the
combined results of operations of Paging Partners and the Predecessor
Company as if the Predecessor Company Acquisition (see Note 3) and the
Merger occurred on January 1, 1998.
Predecessor
Company Company
---------- ----------
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
-------- --------
Revenue $ 16,752 $ 17,770
Net loss $ (3,562) $ (3,729)
Net loss per common share $ (0.23)
The pro forma results are based on various assumptions and are not
necessarily indicative of what would have occurred had these transactions
been consummated on January 1, 1998.
3. Predecessor Company Acquisition:
On December 31, 1998, ACI acquired the net assets of BAPCO and the paging
frequencies and the paging network infrastructure owned by various Bell
Atlantic operating telephone companies for approximately $29,200,
including transaction costs. The acquisition was accounted for as a
purchase in accordance with APB Opinion No. 16. The aggregate purchase
price was allocated to the net assets acquired based on their estimated
fair market values.
Subsequent to the acquisition and during the quarter ended June 30, 1999,
Bell Atlantic and ACI completed negotiations and settled certain
post-closing disputes. These negotiations pertained to the reimbursement
to BAPCO and assumption by ACI of certain liabilities in excess of amounts
originally acknowledged by ACI, and resulted in ACI's assumption of
certain additional current liabilities. On June 30, 1999, the Company paid
the settlement amount in full and, in addition, exercised its negotiated
right to prepay the outstanding balance of the purchase price at a
significantly discounted amount. Funding for retirement of this debt was
provided through the credit facility described in note 6. The settlement
between the parties did not have a material effect on the Company's
financial position or the results of its operations or cash flows.
Continued
7
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
4. Mergers and Acquisitions:
SunStar Communications, Inc.:
On June 15, 1999, a wholly-owned subsidiary of the Company, entered into a
Stock Purchase Agreement (the "Agreement") with SunStar Communications,
Inc. ("SunStar"), an Arizona corporation and SunStar One, LLC., an Arizona
limited liability company. SunStar sells secure internet services over an
intelligent private network, provides dial-up internet access services to
corporate and individual subscribers and can provide enhanced security
standards for user authentication. SunStar currently provides access
services to more than 850 internet users. Pursuant to the Agreement,
SunStar Communications, Inc. became a wholly-owned subsidiary of the
Company. Total consideration paid was $275 cash and 1,150,000 shares of
the Company's common stock. The aggregate purchase price, including
transaction costs, has been allocated to the net assets acquired based on
their estimated fair market values. Intangible assets of approximately
$2,002 are being amortized on a straight-line basis over three to not more
than 10 years. Any adjustments, which are not expected to be material,
will be based on final analysis of fair values, which is currently in
progress. Neither the assets, revenues nor results of operations of
SunStar were material to those of the Company. However, taken as an
aggregate total, this purchase and the other pending acquisitions could be
material if a sufficient number of these transactions are completed.
Pursuant to the Agreement, the Company and SunStar One, LLC entered into a
Registration Rights Agreement under which the Company agreed to register
the shares, under the Securities Act of 1933, issued to SunStar One LLC by
December 31, 1999.
5. Business Developments:
Francis Communications:
On June 10, 1999, Aquis Communications, Inc., a wholly-owned subsidiary of
Aquis Communications Group, Inc., along with its parent, entered into an
Asset Purchase Agreement with Francis Communications Texas, Inc., a Texas
corporation, and Francis Communications I, Ltd., an El Paso based Texas
limited partnership. As of June 30, 1999, this partnership provided paging
services to approximately 24,000 paging units in the El Paso, Las Cruces
and Juarez, Mexico metropolitan areas. The transaction is expected to
close during the third quarter of 1999, includes conditions precedent to
the closing, and will be accounted for as a purchase. Total consideration
of approximately $4,000 cash and 100,000 shares of the Company's common
stock, will be allocated first, to the net tangible assets acquired based
on their approximate fair market values, then, any excess will be
allocated to FCC licenses, subscriber lists, goodwill and other intangible
assets. Francis' assets, revenues and results of operations are not
material in relation to those of ACI.
Intelispan, Inc.:
On June 21, 1999, the Company entered into a Memorandum of Understanding
to merge with Intelispan, Inc., a business based in Scottsdale, Arizona.
Intelispan provides secure virtual private global network access and
public key infrastructure ("PKI") services to its subscribers, and is
expected to become a wholly-owned subsidiary of the Company during the
third quarter. Intelispan's subscribers include businesses, government
agencies and individuals who need to conduct private and secure
communications and commercial transactions over a private IP network.
Revenues are earned on a time-metered basis,
Continued
8
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
and installation is provided to subscribers to allow rapid implementation
requiring minimal initial capital investments. Intelispan, through its
strategic relationship with a major communications backbone carrier,
offers points of presence in nearly 500 U.S. cities and in 64 of the
largest international business centers. It offers authentication,
certification and encryption capabilities through the country's second
largest encryption company. This acquisition requires stockholder and
financing approvals, and execution of a definitive merger agreement.
COMAV Corporation:
On July 1, 1999, the Company signed a letter of intent to acquire COMAV
Corporation, a northeastern facilities-based competitive local exchange
carrier and reseller of long distance telephone services. This acquisition
is also subject to stockholder approval, financing and execution of a
definitive agreement.
SourceOne Wireless, Inc. Management Agreement:
On August 2, 1999, the Company entered into an Asset Purchase Agreement
(the "Purchase Agreement") and Agreement Pending Purchase Closing (the
"Agreement") with SourceOne Wireless, Inc. and two of its affiliates
("SOWI"). SOWI filed voluntary petitions for relief under Chapter 11 with
the United States Bankruptcy Court in the Northern District of Illinois.
SOWI provides facilities-based one-way paging services to subscribers in
certain Midwestern States that are specified in this Agreement. The
Agreement provides that ACI will manage the day-to-day operations of
SOWI's business pending closing of the associated Purchase Agreement. This
closing is subject to various approvals, including that of the Bankruptcy
Court and the FCC. It is also subject to the absence of an acceptable
higher offer during an auction to be conducted by the Court in September,
1999. In the event that the Purchase Agreement cannot be closed, then ACI
will return control of these operations to SOWI and will receive a
$375,000 break-up fee. ACI's management fees are based on profits
generated from this operation, changes in balances due from subscribers
and certain other factors related to changes in working capital.
Other:
The Company has made various earnest money deposits totaling $1,275
related to pending acquisitions at June 30, 1999, and has included this
sum in prepaid and other current assets. The aggregate effect of the
pending business combinations could have a material effect on the
Company's results of operations and financial condition.
6. Long-Term Debt:
On October 23, 1998, ACI entered into a five-year term loan agreement with
FINOVA Capital Corporation ("FINOVA") which provides a $30,000 facility
comprising the FINOVA loan of $20,000, a $500 loan for the Merger funded
at the Merger date (the "Merger Loan"), an additional loan in an amount
not to exceed $1,500 to be received at the request of ACI (the "Subsequent
Loan"), and an acquisition line of credit in an amount of $8,000, plus the
amount of the Subsequent Loan in excess of the amount used to pay the
scheduled $1,200 payment of principal on the note issued in connection
with the acquisition of BAPCO. The FINOVA loan has a term of five years at
an interest rate based on Citibank, N.A.'s corporate base rate plus 175
basis points. ACI may also elect to have interest on a part of the FINOVA
loan based on a LIBOR rate plus 425 basis points. Repayments of principal
are scheduled to begin on July 1, 2000 and will be made quarterly. A final
balloon payment is scheduled for December 31, 2003. The FINOVA loan is
collateralized by all property owned by the Company and after-acquired
property of ACI and all issued and outstanding capital stock and warrants,
options and other rights to acquire capital stock of ACI.
Continued
9
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
On January 4, 1999, ACI received $20,000 from FINOVA and on March 31, 1999
received the Merger Loan of $500. Also, on June 30, 1999, the Company
borrowed an additional $4,360 under its acquisition line of credit and the
terms of the Subsequent Loan. Proceeds were used to retire all outstanding
debt to the sellers for the net assets acquired from the Bell Atlantic
operating companies. The loan agreement with FINOVA contains various
covenants that include restrictions on capital expenditures and compliance
with certain financial ratios.
In addition, the Company paid down and refinanced the capital lease
obligations due to Motorola which were assumed via the merger with Paging
Partners. Terms of the new obligation include a principal amount of
$1,300, a 60-month repayment schedule, an interest rate indexed to the
yield for five year Treasury Notes, and a security interest in the
underlying equipment.
7. Income Taxes:
The Company incurred operating losses for both book and tax purposes
during the periods presented for 1999. A valuation allowance has been
provided in the full amount of the tax benefits that may arise from future
possible utilization of these net operating losses ("NOLs"). NOLs
available to offset future Federal taxable income total approximately
$11.5 million and will expire between 2009 and 2014.
8. Net Loss per Common Share:
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share", which requires a dual presentation of basic and
diluted earnings per share ("EPS"). Basic EPS is based on the weighted
average number of shares outstanding during the periods presented. Diluted
EPS reflects the potential dilution that could occur if options, warrants,
convertible securities or other contracts requiring the issuance of common
stock were converted into common stock during the periods presented. The
Company has not presented diluted EPS because the effect would be
anti-dilutive.
9. Supplemental Cash Flow Data:
Businesses Acquired:
The Company has acquired two businesses as described in notes 2 and 4.
Consideration paid consisted primarily of non-cash assets, as follows:
Fair value of assets acquired $ 11,217
Liabilities assumed (3,262)
Exchange of common stock (7,197)
Accrued transaction costs (183)
--------
Cash paid 575
Less: cash acquired 170
--------
Net cash paid $ 405
========
Continued
10
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Dollars in thousands, except for share information)
The Company has paid cash for interest expenses during the six months
ended June 30, 1999 in the amount of $1,153 and has also paid other fees
to obtain its funding and for letters of credit in the amount of $298.
10. Subsequent Event:
A Special Meeting of the Shareholders was held on July 29, 1999. At this
meeting, an increase in the number of authorized shares of the Company's
common stock to 75,000,000 was approved.
Continued
11
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Organization and Basis of Presentation
On March 31, 1999 a wholly-owned subsidiary of Paging Partners Corporation
("Paging Partners") merged with Aquis Communications, Inc. ("ACI") in a
transaction accounted for as a reverse acquisition with ACI as the accounting
acquirer (see Note 2 to the condensed consolidated financial statements). At
such time, Paging Partners changed its name to Aquis Communications Group, Inc.
(the "Company"). ACI had no operating activities prior to the acquisition of the
Bell Atlantic paging business ("BAPCO" or the "Predecessor Company"), on
December 31, 1998. See Note 3 to the condensed consolidated financial
statements. The historical financial results of operations prior to March 31,
1999 are those of ACI. The financial statements for the six month period ended
June 30, 1998 have been derived from the audited financial statements of the
Predecessor Company for such period. See the columns denoted "ACI" and the
"Predecessor Company" representing the successor periods and predecessor
periods, respectively, in the statements of operations and of cash flows for the
six month periods ended June 30, 1999 and 1998, included in this report.
The results of operations of the Predecessor Company for the six month period
ended June 30, 1998 include certain revenues and expenses allocated by Bell
Atlantic Corporation and its affiliates ("Bell Atlantic"). The provision for
income taxes was allocated to the Predecessor Company as if it were a separate
taxpayer. Also, certain employee benefit costs were allocated based on staffing
levels. Accordingly, the results of operations and financial position of the
Predecessor Company may not be the same as would have occurred had the
Predecessor Company been an independent entity and operated by ACI management.
This discussion should be read in conjunction with the condensed consolidated
financial statements of the Company and the notes thereto.
General
The Company markets one-way paging service and equipment to customers directly
and through resellers. The Company also offers its customers both customer owned
and maintained equipment or lease options for equipment. In addition, with the
acquisition of SunStar Communications, Inc. (see footnote 4 to the condensed
consolidated financial statements), the Company began offering both secure and
general dial-up internet access services effective July 1, 1999.
During the six months ended June 30, 1999, the Company generated its revenue
primarily from fixed periodic fees for paging services that are not generally
dependent on usage. To a smaller extent, revenue is also earned from certain
usage-based services provided primarily to resellers and from sales of pagers.
Consequently, the ability to recover initial operating, selling and marketing
costs and to achieve profitability is dependent on the average duration of each
customer's subscription period. For as long as a subscriber continues to utilize
the service, operating results benefit from the recurring fixed fee payments
without the requirement of any incremental selling expenses. Conversely,
customer disconnections adversely affect operating results. Each month a small
percentage of existing customers have their service terminated for reasons
including failure to pay, dissatisfaction with service or coverage limitations,
and switching to competing service providers. The average of the monthly
disconnection rates (not weighted and excluding the effects from the Paging
Partners subscriber base) for the six month periods ended June 30, 1999 and
1998, were 2.9% and 2.6%, respectively. Including the stabilizing effects of the
Paging Partners base added April 1, the churn rate was 2.1% for the six months
in 1999.
Approximately 94% and 95% of ACI's service revenue was attributable to fixed
fees for airtime, coverage options and features for the six month and three
month periods ended June 30, 1999, respectively. The usage-dependent portion
increased slightly from first quarter levels as a result of the reseller base
acquired in the Paging Partners merger.
Continued
12
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Revenues
Paging services revenues of $7,817 in the three months ended June 30, 1999
increased by $1,791, or about 30%, over revenues of $6,026 in the three months
ended June 30, 1998. Similarly, service revenues for the six-month periods ended
June 30, 1999 and 1998 increased approximately $2,583, or more than 22%. The
increases in service revenues for both periods was attributable to the increase
in the number of subscribers, resulting from both internal growth and growth via
the March 31, 1999 Paging Partners merger. Partially offsetting these increases
were decreases in revenues from equipment sales of $371 and $884 during the
three and six month periods, respectively. The decreases were due to lower
per-unit sale prices attributable to certain promotions initiated by the
Company, and fewer units sold due to a smaller average sales force in the
current period and a reduction in billings to terminated customers for
unreturned units.
Cost of Paging Services
Cost of service consists principally of fees paid to third party carriers, and,
to a lesser extent, to message dispatch companies. Third party carriers are
utilized when a customer requires service outside of ACI's service area, and are
most commonly used to provide nationwide coverage. Increases in costs of such
services were incurred in the amounts of $914 and $1,347 during the three and
six month periods, respectively. The increases are attributable to customer
growth, and an increase in customer demand for services such as wide-area,
nationwide, alphanumeric, and message dispatch services. Management expects that
the merger with Paging Partners will significantly reduce ACI's use of third
party carriers with the exception of nationwide coverage and message dispatch
services.
Cost of Equipment Sales
The cost decrease of $374 during the current three month period was primarily
due to a decrease in the number of units sold and, to a lesser extent, lower
vendor prices. During the six month periods a decrease was also realized, in the
amount of $729, which is attributable to the same factors. The decrease in
comparative gross profit margins during the six month periods is primarily the
result of the Predecessor Company's policy of billing terminated customers for
unreturned units, rather than writing such units off, net of units actually
recovered.
Technical Operations
Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $1,287 and $1,975 in the three and six month periods
ended June 30, 1999, respectively, as compared to $775 and $1,525 in the
year-earlier periods. The elimination of the 1998 Bell Atlantic network
allocations was offset by external unsubsidized third party rates and costs for
transmitter and terminal site rents, telephone company access charges, and
personnel costs in the current year periods. In addition, incremental costs were
required to operate and maintain the Company's expanded network resulting from
the merger with Paging Partners on March 31, 1999.
Sales and Marketing
Selling and marketing include the cost to acquire and retain subscribers,
operating costs associated with the sales and marketing organizations, and other
advertising and marketing expenses. These costs decreased approximately 15%
during each of the two periods ended June 30, 1999 in comparison to the two
corresponding periods ended in 1998. These decreases resulted from a reduction
in salary, benefit and commission expense in 1999 as a result of a smaller sales
force and related lower commissionable sales volume and travel costs. These cost
savings were partially offset by an increase in print advertising expenses.
Continued
13
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
General and Administrative
General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. These costs declined
in both absolute dollars and as a percentage of total revenues when compared to
prior year levels. General and administrative expenses were 24% and 23% of total
revenues during the three and six month periods ended June 30, 1998, and
declined to 21% for both corresponding periods in 1999. However, comparison of
these expenses is not necessarily meaningful because the Predecessor Company
amounts were based on cost allocations, rather than actual costs, to Bell
Atlantic. Partially offsetting the year-to-year declines were increased
employment costs and facility charges in the current period.
Depreciation and Amortization
Depreciation and amortization in both current periods increased over those
recorded during corresponding periods in 1998. Bell Atlantic, the Predecessor
Company, recorded the cost of the use of the network and communications
operating assets through intercompany charges from the affiliated operating
telephone companies that owned the assets during 1998. In substance, the
Predecessor Company leased these assets while the Company, as owner and
operator, allocates their costs to operations through depreciation and
amortization charges. The increases in depreciation and amortization are also
attributable to the higher values allocated to the assets upon their acquisition
from the Bell Atlantic companies and through the merger with Paging Partners.
Pursuant to both acquisitions, tangible and intangible assets were valued at
their then-current fair market values, which was in excess of the historical
costs recorded previously.
Interest Expense
Interest expense in the current three and six month periods of $645 and $1,574,
respectively, includes interest on ACI's five year term loan with FINOVA Capital
Corporation ("FINOVA"), and additional fees and first-quarter charges of $300
related to letters of credit used in connection with the Company's mergers and
acquisitions. Operations of the Predecessor Company were financed by its parent
company, and as a result, the prior period results reflect no financing charges.
Provision for Income Taxes
The provision for income taxes decreased in the current periods as a result of
ACI's operating loss for book and tax purposes. During the prior period, the
income and expenses of the Predecessor Company were included in the consolidated
Federal and certain combined state income tax returns of its parent and the
prior year provisions for income taxes have been calculated on a separate return
basis herein. See also footnote 7 to the condensed consolidated financial
statements.
Liquidity and Capital Resources
The Company is currently financing its operations primarily through cash
generated by operating activities, although operations have historically
required substantial capital investment for the procurement of subscriber units.
During 1998, this investment was funded by BAPCO's ultimate parent, Bell
Atlantic. While the Company's sales plans include increased emphasis on COAM
(customer owned and maintained) service, rather than leased paging service,
there can be no assurance that the communications marketplace will allow the
Company to continue to avoid substantial future investments in paging units and
the related capital spending requirements while continuing to meet its growth
targets.
Continued
14
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
The Company has been financing its business acquisitions through the issuance of
its common stock and through a credit facility with FINOVA designed for this
purpose. The loan agreement with FINOVA provides 1) a $20,000 term loan which
was used for the acquisition of BAPCO, 2) a $500 loan funded at the BAPCO
closing date, 3) an additional loan, not to exceed $1,500 (the "Subsequent
Loan"), which was used primarily to pay all remaining outstanding debt to Bell
Atlantic and affiliates related to this acquisition, and 4) an acquisition line
of credit of $8,000 plus the amount of the Subsequent Loan which was not used
for the aforementioned principal payment. If the Company continues to make
acquisitions, additional sources of financing will be required.
Net cash provided by operating activities for the current and prior periods was
$3,215 and $1,562, respectively. The increased operating cash flow in the
current period was a result of improved operating results from a larger
subscriber base and improved inventory management.
Net cash used in investing activities for the current period consisted primarily
of $18,535 paid by ACI for the acquisition of the Predecessor Company and
additional payments totaling $405 for the acquisitions of Paging Partners and
SunStar Communications. See Notes 2, 3 and 4 to the condensed consolidated
financial statements. In addition, net cash paid in the amount of $1,294 in the
current period and $2,273 in the prior period were for the purchase of capital
assets, principally rental pagers. Finally, during the six months ended June 30,
1999, the Company invested $554 in the identification, investigation and
evaluation of various potential target companies, the acquisitions of which were
pending at that date, and had deposited $1,275 toward those acquisitions.
Net cash of $19,242 was provided by financing activities in the current period
and consisted primarily of $24,860 of financing received from FINOVA. This
funding was used to complete the BAPCO acquisition. In addition, the Motorola
capital lease obligation assumed in connection with the Paging Partners merger
was refinanced under the terms of a separate five-year capital lease provided by
FINOVA.
Bell Atlantic used a centralized cash management system to finance its
operations and the operations of its subsidiaries. During 1998, cash deposits
from BAPCO's business were transferred to Bell Atlantic on a daily basis and
Bell Atlantic funded the BAPCO disbursement bank accounts as required.
The Company uses its working capital to finance ongoing service operations, to
fund marketing and sales activities, and to fuel equipment requirements and
retention costs for subscriber growth and maintenance. The Company plans to
continue these efforts, as well as to invest in strategic value-oriented
business acquisitions. The Company expects that available cash, cash provided by
operations and its existing available credit facilities will be sufficient for
these purposes for the forseeable future.
Year 2000
Until recently, many computer programs were written using two digits as a
memory-saving measure rather than four digits to define the applicable year in
the twentieth century. Such software may recognize a date using "00" as the year
1900 rather than the year 2000. During 1998, BAPCO had begun the process of
defining, assessing and
Continued
15
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
converting various internal computer programs and systems to ensure that these
Information Technologies will be Year 2000 (Y2K) compliant. At December 31,
1998, ACI assumed all responsibility for BAPCO's previously initiated Y2K
efforts.
The Company has divided its Y2K efforts into two primary areas: its
administrative and network systems, and third party vendors.
The administrative and network systems consist of software and hardware systems
that were a combination of internally developed software and third party
software and hardware. ACI's approach has been to:
1. Create an inventory of items to be assessed, then to prioritize these by
their criticality to operations;
2. Assess their readiness through testing;
3. Plan and implement corrective actions; and
4. Develop contingency plans.
As of March 31, 1999, the Company had substantially completed the inventory and
prioritization of items. The Company substantially completed testing of back
office systems in the second quarter and has engaged third party consultants to
further evaluate remediation requirements for external networks, transmission
and switching systems. The Company expects that critical hardware and software
systems will either be replaced or be Y2K ready by December 31, 1999.
Contingency plans will be developed by September 30, 1999, to mitigate, to the
extent possible, the effects of any significant Year 2000 problem that is not
corrected.
To address the second phase of its Y2K preparations, the Company has initiated
communications with third party vendors to determine that the vendors'
operations and the products and services they provide are Y2K compliant. In the
event that these third parties are not Y2K compliant, the Company will seek
alternative sources of supplies or services. However, such failures remain a
possibility and could have an adverse impact on the Company's results of
operations or financial condition.
The total costs associated with required modifications to become Y2K compliant
are estimated to be $200 to $250. The total amount expended on Y2K remediation,
including expenditures by the Predecessor Company, through June 30, 1999
approximated $125, which related to the cost to repair software and related
hardware problems.
The above expectations are subject to uncertainties. For example, if the Company
is unsuccessful in identifying or fixing all Y2K problems in its critical
operations, or if the Company is affected by the inability of suppliers or major
customers to continue operations due to such a problem, the Company's results of
operations, liquidity, and financial condition could be materially impacted.
Seasonality
Pager usage is slightly higher during the spring and summer months, which is
reflected in higher incremental usage fees. Retail sales were subject to
seasonal fluctuations that affect retail sales generally. Otherwise, the results
were generally not significantly affected by seasonal factors.
Continued
16
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Forward-looking Statements
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. In addition, no assurance can be given that the
Company's operations will generate positive cash flows.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements made by the Company's management
that are based on current expectations, estimates and projections about the
industries in which the Company operates and management's beliefs and
assumptions. In addition, other written or oral statements which constitute
forward-looking statements may be made by or on behalf of the Company. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," or various of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Subsequent to the acquisition of BAPCO, ACI began to operate the paging
business, and its views and objectives of how to operate the business may differ
from those of BAPCO management.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 1999, the Company had approximately $25,000 of floating-rate debt
outstanding. The Company's management believes the interest rate risk
represented by this debt is not material in relation to the market
capitalization of the Company.
The Company has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of June 30, 1999, the
Company had no other significant material exposure to market risk.
Continued
17
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
PART II OTHER INFORMATION
Item 2 - Changes in Securities.
(Dollars in thousands)
Consideration paid for the acquisition of SunStar Communications, Inc. included
1,150,000 (one million one hundred fifty thousand) shares of common stock issued
to certain stockholders of SunStar. This issuance was made pursuant to the
exemption from registration under Section 4 (2) of the Securities Act on the
basis that it did not involve an offering to the public. The Company expects to
include these shares in a shelf registration in accordance with the Registration
Rights Agreement signed as part of this acquisition.
Item 4 - Submission of Matters to a Vote of Security Holders.
(a) A Special Meeting of Shareholders (the "Meeting") was held on July
29, 1999.
(b) Not applicable
(c) The proposals voted upon, and the votes cast, were as follows:
1. To approve an increase in the number of authorized shares of
the Company's common stock from 29,000,000 to 75,000,000.
FOR AGAINST ABSTAIN
--- ------- -------
13,090,046 349,284 9,400
2. To ratify the selection of PricewaterhouseCoopers, LLC as
independent public accountants and auditors for the 1999
fiscal year.
FOR AGAINST ABSTAIN
--- ------- -------
13,447,730 1,000 -0-
Item 5 - Other Information.
Reference is made to the Issuer's Report on Form 8-K filed with the Commission
on April 15, 1999. A hearing before a Listing Qualification Panel designated by
Nasdaq was held on April 29, 1999 with respect to the Issuer's request for
continued listing on the Nasdaq SmallCap Market. In a written notice dated July
21, 1999, the Issuer was notified of the Panel's decision to continue the
listing of the Company's securities on the Nasdaq SmallCap Market. This
notification is subject to review by the Nasdaq Listing and Hearing Review
Council within 45 days of its issuance.
Continued
18
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
PART II OTHER INFORMATION, Continued
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits Included Within:
(10.1) Settlement Agreement, dated as of June 9, 1999 by and among
Bell Atlantic-Delaware, Inc., Bell Atlantic-Maryland, Inc.,
Bell Atlantic-New Jersey, Inc., Bell Atlantic-Pennsylvania,
Inc., Bell Atlantic-Virginia, Inc., Bell
Atlantic-Washington, D.C., Inc., Bell Atlantic-West
Virginia, Inc., Bell Atlantic Paging, Inc. and Aquis
Communications, Inc.
(10.2) Stock Purchase Agreement dated June 15, 1999, by and among
Aquis Communications, Inc., SunStar Communications, Inc. and
SunStar One, LLC.
(10.3) Indemnity Escrow Agreement dated June 30, 1999 by and among
SunStar One, LLC, Aquis Communications, Inc. and Phillips
Nizer Benjamin Krim and Ballon, LLC.
(10.4) Registration Rights Agreement dated June 15, 1999 by and
between Aquis Communications, Inc. and SunStar One, LLC.
(10.5) Asset Purchase Agreement date June 10, 1999 by and among
Aquis Communications Group, Inc., Aquis Communications,
Inc., Francis Communications Texas, Inc. and Francis
Communications I, LTD.
(10.6) Pre-Closing Escrow Agreement dated June 10, 1999 by and
between Francis Communications I, LTD, Aquis Communications,
Inc. and Chase Bank of Texas, NA.
(10.7) Asset Purchase Agreement dated August 2, 1999 by and between
Aquis Communications, Inc. and SourceOne Wireless, Inc.,
SourceOne Wireless, LLC and SourceOne Wireless II, LLC.
(10.8) Agreement Pending Purchase Closing dated August 2, 1999 by
and among SourceOne Wireless, Inc., SourceOne Wireless, LLC,
SourceOne Wireless II, LLC and Aquis Communications, Inc.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Issuer filed a report on Form 8-K with respect to the business
combination of Paging Partners Corporation and Aquis Communications,
Inc. on April 15, 1999. The Issuer also filed a report on Form 8-K
with respect to the Settlement Agreement with Bell Atlantic and its
change in certifying accountant on June 11, 1999.
Continued
19
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
Signature Title Date
- --------- ----- ----
/s/ D. Brian Plunkett Chief Financial and Accounting Officer August 16, 1999
- ----------------------
D. Brian Plunkett
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement Agreement") is entered into
this 9th day of June, 1999, by and among AQUIS COMMUNICATIONS, INC. ("Aquis"),
and BELL ATLANTIC PAGING, INC. ("BAPCO") and BELL ATLANTIC - DELAWARE, INC.,
BELL ATLANTIC - MARYLAND, INC., BELL ATLANTIC - PENNSYLVANIA, INC., BELL
ATLANTIC -VIRGINIA, INC., BELL ATLANTIC - WASHINGTON, D.C., INC., BELL ATLANTIC
- - WEST VIRGINIA, INC., (hereinafter collectively the "OTCs", and together with
BAPCO, the "Sellers").
RECITALS
WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 2,
1998, as amended by Consent and Amendment No. 1 dated November 3, 1998 ("Asset
Purchase Agreement"), Aquis acquired certain of the paging assets of the Sellers
("the Acquisition") on December 31, 1998; and
WHEREAS, certain disputes have arisen among the Parties regarding
the Acquisition (the "Disputes"); and
WHEREAS, the Parties desire to resolve the Disputes in accordance
with the provisions of this Settlement Agreement,
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties agree to resolve
the Disputes as hereinafter set forth.
<PAGE>
Capitalized terms used herein but not otherwise defined shall have the meanings
ascribed to them in the Asset Purchase Agreement.
1. Resolution of Disputes. The Disputes are hereby resolved as
follows:
A. Sales Tax - Reference is made to the Transfer Tax Agreement (the
"Tax Agreement") dated as of December 31, 1998, among Aquis and the Sellers. The
parties agree that Aquis's obligations under Section 2 of the Tax Agreement have
been satisfied by: (1) the payment of $54,217.00 to BAPCO and the OTCs, and (2)
delivery by Aquis to BAPCO and the OTCs of its direct pay permit number from the
West Virginia State Tax Department (as described in more detail in paragraph 4
of the March 22, 1999 memorandum from Monte Engler to Susan Asch and Ray Martz).
Notwithstanding anything to the contrary in this Settlement Agreement or in the
Reseller Agreement, the Buyer's covenants in Section 9.2 of the Asset Purchase
Agreement and the indemnity provisions in Section 5 of the Tax Agreement shall
remain in full force and effect and, in the event that Aquis fails timely to
make such an indemnity payment after 5 days following notice of such payment
being due, the Sellers shall be permitted to withhold the compensation
contemplated in Section 7(a) of the Reseller Agreement and apply such withheld
payments against any such indemnification obligation, provided, however, that
such compensation shall resume after such indemnity obligation has been
satisfied.
B. Inventory Transfer - Aquis hereby agrees not to assert and waives
and releases the Sellers from the claim of
2
<PAGE>
improper transfer of inventory referenced in the Memorandum dated January 29,
1999 to Susan Asch from Monte Engler and Adam Kokas. The Sellers continue to
disagree with and deny Aquis' contention.
C. Accounts Payable - The parties hereto agree that the accounts
payable listed on Exhibit A attached hereto in the aggregate amount of
$1,409,207 (after certain agreed adjustments) are Assumed Liabilities and
constitute all of the liabilities and obligations of BAPCO reflected on the
Balance Sheet in the line item entitled "Trade Accounts Payable", and BAPCO
shall be responsible for any pre-Closing accounts payable not reflected on
Exhibit A. BAPCO acknowledges and agrees that Metrocall claims it is owed
approximately $40,000 for services rendered to BAPCO prior to the Closing Date
in addition to the amounts listed on Exhibit A and that such amount shall be
included in the definition of Retained Liabilities as defined in the Asset
Purchase Agreement. BAPCO hereby represents and warrants to Aquis that it has
made payments to third parties in an aggregate amount of $899,880 for such
payables, and Aquis hereby agrees to reimburse BAPCO therefor in accordance with
the provisions of paragraph 2 hereof. Aquis hereby represents and warrants to
BAPCO that it has made, or will promptly make, payments to third parties in an
aggregate amount of $509,327, representing all accounts payable listed on
Exhibit A that BAPCO represents it has not paid.
Aquis has paid $63,998 in sales commissions for sales that occurred
in the month of December 1998; Aquis agrees that such
3
<PAGE>
amount was an Assumed Liability and it will not seek reimbursement or
indemnification therefor.
D. Other Issues - Attached hereto as Exhibit B is a schedule
entitled Aquis Communications, Inc. "Post Close Issues" setting forth all
remaining post-closing issues not heretofore resolved between the parties. Such
issues are hereby resolved in accordance with Exhibit B and Aquis hereby agrees
to pay to the Sellers, in addition to the amount set forth in paragraph 1(C),
above, the sum of $211,465 in accordance with the provisions of paragraph 2 of
this Agreement.
2. Moneys Due to BAPCO. It is agreed that a reconciliation of the
resolution of Disputes set forth above results in a balance owed by Aquis to
BAPCO in the aggregate amount of $1,111,345 (the "Dispute Obligation"). The
Dispute Obligation plus accrued interest thereon, shall be paid by wire transfer
to BAPCO of immediately available funds not later than June 30, 1999. Interest
shall accrue on the Dispute Obligation from the date hereof at the Defined Rate.
In the event that Aquis fails timely to make such payment of the Dispute
Obligation, the Sellers shall be permitted to withhold the compensation
contemplated in Section 7(a) of the Reseller Agreement and to apply such
withheld payments against any such unpaid amount of the Dispute Obligation and
interest accrued thereon, provided, however, that such compensation shall resume
after such obligation has been satisfied.
4
<PAGE>
3. Additional Consideration. A. As further consideration for BAPCO
to enter into this Settlement Agreement, Aquis hereby authorizes First Union
National Bank (the "Escrow Agent") to release to BAPCO all moneys being held in
escrow pursuant to the Indemnity Escrow Agreement and, upon such release, the
Indemnity Escrow Agreement shall be deemed terminated and the Escrow Agent shall
be released from any and all further obligations pursuant to such agreement. The
Parties will execute such additional documentation as may be reasonably
requested by any of them or the Escrow Agent to promptly effect the release of
the Escrow Money (as defined in the Escrow Agreement).
B. As additional consideration for each of the parties to enter into
this Settlement Agreement, BAPCO hereby grants to Aquis, from the date hereof
through June 30, 1999 (the "Option Period"), the right (the "Option") to satisfy
the Promissory Note in full by payment of the sum of Three Million One Hundred
Fifty Thousand Dollars ($3,150,000) (the "Exercise Price") by wire transfer to
BAPCO of immediately available funds subject to the following terms and
conditions:
Exercise of Option - Aquis may exercise the Option by giving
BAPCO written notice thereof (the "Notice") on or before June 30, 1999. The
Notice shall specify the date (within the Option period) that the Exercise Price
will be paid.
Effect of Payment - Upon BAPCO's receipt of the Dispute
Obligation and the Exercise Price, the Note, including any accrued interest
thereon, shall be deemed fully paid and satisfied
5
<PAGE>
and the Promissory Note shall be promptly returned to Aquis. In addition, BAPCO
and the Sellers shall promptly execute and deliver to Aquis all appropriate
documentation evidencing the release of its liens on the assets of Aquis
including UCC-3 termination statements (which documentation shall be prepared by
Aquis or its representatives at Aquis' expense; Aquis shall be responsible for
any filing fees).
Termination of Option - The Option shall terminate upon the
earlier of (i) payment of the Exercise Price, and (ii) June 30, 1999, but such
termination shall not relieve any party from any other obligations set forth in
this Settlement Agreement. Notwithstanding anything to the contrary herein, it
is a condition to Aquis' right to exercise the Option that Aquis shall have paid
or, simultaneously with payment of the Exercise Price shall pay, the Dispute
Obligation in full.
4. Release of Indemnities; Amendment. The indemnification
obligations of Aquis in Section 7.3(i) of the Asset Purchase Agreement regarding
representations and warranties are hereby terminated and of no further force and
effect, with the exception of (a) Section 3.3.7 to the Asset Purchase Agreement
regarding the H-S-R Act, (b) Section 9.3 of the Asset Purchase Agreement
regarding broker's and finder's fees, and (c) any fraudulent representations,
warranties or other disclosures. The indemnification obligations of the Sellers
contained in Section 7.2(i) of the Asset Purchase Agreement regarding
representations and warranties are hereby terminated and of no further force and
6
<PAGE>
effect with the exception of any fraudulent representations, warranties or other
disclosures. Notwithstanding the immediately preceding sentence, the parties
hereto acknowledge and agree that this Settlement Agreement does not affect the
enforceability of any Ancillary Agreement, including Seller's indemnification
obligations with respect to any representations or warranties thereunder, except
as specifically stated herein.
5. Final Purchase Price and Prorations. The parties hereto confirm
that the final Purchase Price is $27,992,681. Aquis's $27,814 overpayment has
been offset against amounts owed to the Sellers by Aquis hereunder (see Exhibit
B). Following the payment of the Dispute Obligation hereunder, the obligations
of the parties under Section 9.1 of the Asset Purchase Agreement regarding
prorations shall have been satisfied.
6. Accounts Receivable - Affiliates. Pursuant to Section 1.1.3 of
the Asset Purchase Agreement, "Accounts Receivable - Affiliates" are Excluded
Assets. $301,000 of such receivables have been deposited into Aquis's accounts,
and BAPCO and Aquis have agreed that Aquis will remit such funds to BAPCO as
part of the Dispute Obligation payment hereunder (see Exhibit B). Approximately
$339,000 of "Accounts Receivable - Affiliate" remain outstanding. Aquis agrees
to remit to BAPCO any additional payments it receives that are "Accounts
Receivable - Affiliates" promptly following receipt from BAPCO of notice thereof
and
7
<PAGE>
reasonable evidence that such funds are "Accounts Receivable - Affiliates."
7. Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered or mailed in
accordance with the notice provisions of the Asset Purchase Agreement.
8. Counterparts. This Settlement Agreement may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
9. Successors. This Settlement Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective legal
representatives, heirs, successors and assigns.
10. Governing Law. This Settlement Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
reference to the choice of law doctrine of such State.
11. Competency. Each of the parties hereto confirms that it has
carefully read and fully understands the provisions of this Settlement
Agreement, has had sufficient time and opportunity
8
<PAGE>
to consult with an attorney prior to signing it, and is signing this Settlement
Agreement knowingly and voluntarily and without coercion.
12. Representations and Warranties. Each party hereto represents and
warrants that it is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and that it has the
requisite corporate power and authority to execute and deliver this Settlement
Agreement.
IN WITNESS WHEREOF, Aquis and the Sellers enter into this Settlement
Agreement as of the date first above written.
AQUIS COMMUNICATIONS, INC.
By: /s/ John X. Adiletta
----------------------------------
John X. Adiletta, President
BELL ATLANTIC PAGING, INC.
By: /s/ R. M. Balascio
----------------------------------
Robert M. Balascio
BELL ATLANTIC - DELAWARE, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
FURTHER SIGNATURE PAGE FOLLOWS
9
<PAGE>
BELL ATLANTIC MARYLAND, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
BELL ATLANTIC - PENNSYLVANIA, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
BELL ATLANTIC - VIRGINIA, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
BELL ATLANTIC-WASHINGTON, D.C., INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
BELL ATLANTIC - WEST VIRGINIA, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
BELL ATLANTIC - NEW JERSEY, INC.
By: /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall, Controller
10
STOCK PURCHASE AGREEMENT
By and Among
AQUIS COMMUNICATIONS, INC.
and
SUNSTAR COMMUNICATIONS, INC.
and
SUNSTAR ONE, L.L.C.
DATED AS OF JUNE 15, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions and Index of Defined Terms......................... 1
(a) Capitalized Terms........................................ 1
(b) Index of Defined Terms................................... 1
2. Sale of Stock.................................................. 6
(a) Purchase and Sale of Stock............................... 6
(b) Delivery of Possession and Instruments of Transfer....... 6
3. Closing........................................................ 6
4. Purchase Price and Payment/Adjustments......................... 7
5. Representations and Warranties of the Seller................... 7
(a) Organization, Good Standing, Power, Etc.................. 7
(b) Capital Stock............................................ 8
(c) Articles of Incorporation and By-Laws; Articles of
Organization and Operating Agreement........................... 8
(d) Subsidiaries, Divisions and Affiliates................... 8
(e) Equity Investments....................................... 9
(f) Authorization, Etc....................................... 9
(g) Effect of Agreement...................................... 9
(h) Restrictions............................................. 9
(i) Governmental and Other Consents.......................... 10
(j) Financial Statements............................... 10
(k) Absence of Certain Changes or Events..................... 11
(l) Title to Assets; Absence of Liens and
Encumbrances............................................. 11
(m) Property................................................. 12
(n) Equipment................................................ 13
(o) Insurance................................................ 13
(p) Agreements, Arrangements, Etc............................ 14
(q) Business Names; Patents, Trademarks,
Copyrights, Etc.......................................... 16
(r) Permits, Licenses, Etc................................... 17
(s) Compliance with Applicable Laws.......................... 17
(t) Litigation............................................... 17
(u) No Interest in Competitors............................... 18
(v) Customers, Suppliers, Distributors and Agents............ 18
(w) Books and Records........................................ 18
(x) Employee Benefit Plans................................... 18
(y) Powers of Attorney....................................... 19
(z) Sufficiency of Assets and Commitments.................... 19
(aa) Labor Disputes, Unfair Labor Practices................... 19
(bb) Past Due Obligations..................................... 20
(cc) Environmental Matters.................................... 20
(dd) Tax and Other Returns and Reports........................ 21
(ee) Recent Dividends and Other Distributions................. 21
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(ff) Inventory................................................ 22
(gg) Purchase and Sale Obligations............................ 22
(hh) Other Information........................................ 22
(ii) Accounts Receivable...................................... 22
(jj) Brokers and Finders...................................... 22
(kk) Personnel................................................ 22
(ll) Insider Interests........................................ 23
(mm) Bank Accounts............................................ 23
(nn) Documents Relating to Business........................... 23
(oo) Books and Records........................................ 23
(pp) Payments................................................. 24
(qq) Schedules................................................ 24
(rr) Predecessor Entity....................................... 24
6. Representations and Warranties of the Purchaser................ 24
(a) Organization and Good Standing........................... 25
(b) Noncontravention......................................... 25
(c) Authorization............................................ 25
(d) Conflicts................................................ 25
(e) Approvals................................................ 25
(f) ......................................................... 25
(g) Brokers and Finders...................................... 25
7. Conditions Precedent to the Purchaser's Obligation to Close.... 26
8. Conditions Precedent to the Seller's Obligation to Close....... 28
9. Access......................................................... 29
10. Affirmative Covenants of the Seller............................ 30
(a) Conduct of Business...................................... 30
(b) Maintenance of Property.................................. 30
(c) Insurance................................................ 30
(d) Performance of Obligations............................... 30
(e) Maintenance and Preservation of Business................. 30
(f) Compliance with Laws..................................... 30
(g) Notice of Certain Events................................. 30
(h) Satisfaction of Conditions............................... 31
(i) Good Standing............................................ 31
11. Negative Covenants of the Seller............................... 31
(a) Material Commitments..................................... 31
(b) Inconsistent Agreements.................................. 31
12. Affirmative Covenants of the Purchaser......................... 31
(a) Good Standing............................................ 31
(b) Satisfaction of Conditions............................... 31
(c) Maintenance and Preservation of Business................. 31
(d) Compliance with Laws..................................... 31
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13. Termination.................................................... 32
(a) Grounds for Termination.................................. 32
(b) Consequences of Termination.............................. 32
14. Deliveries..................................................... 32
(a) The Seller............................................... 32
(b) Purchaser.......................................... 33
(c) Purchaser................................................ 33
(d) Purchaser................................................ 33
(e) Further Assurances....................................... 33
15. Consent of Lender.............................................. 33
16. Expenses....................................................... 34
17. Nondisclosure of Confidential Information...................... 34
18. Survival of Representations and Warranties..................... 34
19. Indemnification................................................ 34
20. Conflict of Interest........................................... 36
21. Notices........................................................ 36
22. Miscellaneous.................................................. 37
(a) Severability............................................. 37
(b) Assignment............................................... 37
(c) Counterparts............................................. 37
(d) No Waiver................................................ 37
(e) Entire Agreement; Amendments............................. 37
(f) Governing Law............................................ 37
(g) Headings................................................. 37
(h) Public Announcements..................................... 38
(i) Arbitration.............................................. 38
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Schedules
5(h) Restrictions
5(i) Governmental and Other Consents
5(k) Changes in Business
5(l) Title to Assets; Liens and Encumbrances
5(m) Property
5(n) Equipment
5(o) Insurance
5(p) Commitments
5(q) Business Names; Patents, Trademarks and Copyrights
5(t) Litigation
5(u) Interest in Competitors
5(v) Customers, Suppliers, Distributors, and Agents
5(x) Employee Benefit Plans
5(y) Powers of Attorney
5(z) Sufficiency of Assets and Commitments
5(aa) Labor Disputes
5(bb) Past Due Obligations
5(cc) Environmental Matter
5(dd) Tax Matters
5(ee) Dividends and Distributions
5(ii) Accounts Receivable
5(kk) Personnel
5(ll) Insider Interest
5(mm) Bank Accounts
5(pp) Payments
Exhibits
A. Escrow Agreement
B. Registration Rights Agreement
C. Legal Opinion of Seller's Counsel
D. John Hobko Employment Agreement
E. Legal Opinion of Purchaser's Counsel
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 15th
day of June, 1999, by and among Aquis Communications, Inc., a Delaware
corporation (the "Purchaser"), SunStar Communications, Inc., an Arizona
corporation (the "Company") and SunStar One, L.L.C., an Arizona limited
liability company, the sole shareholder of the Company (the "Seller").
RECITALS:
The Seller is the record and beneficial owner of 1,000 shares of
common stock, $ .01 par value per share, of the Company, which is one hundred
percent (100%) of the issued and outstanding capital stock of the Company (the
"SunStar Shares");
The Purchaser desires to purchase from the Seller, and the Seller desires
to sell to the Purchaser, the SunStar Shares on the terms and conditions set
forth in this Agreement;
In consideration of the foregoing, the mutual covenants and
agreements of the parties hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions and Index of Defined Terms.
(a) Capitalized Terms. Capitalized terms used in this
Agreement and not otherwise defined shall, unless expressly stated otherwise,
have the meanings specified in this Section 1. The single shall include the
plural and the masculine shall include the feminine and neuter, and vice versa.
(b) Index of Defined Terms.
(i) "Accountants" has the meaning set forth in Section
7(i) of this Agreement.
(ii) "Accounts Receivable" means monies or other
consideration reflected on the books of the Company as of the date of Closing
that are due to the Company.
(iii) "Affiliate" means, as applied to any person, any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of that person or
<PAGE>
entity, whether through the ownership of voting securities, by contract, or
otherwise.
(iv) "Agreement" means this Stock Purchase Agreement.
(v) "Aquis Group" has the meaning set forth in Section
4(a)(ii) of this Agreement.
(vi) "Aquis Group Shares" has the meaning set forth in
Section 4(a)(ii) of this Agreement.
(vii) "Aquis Shares Delivery Date" means the later of
(i) the date which is 15 calendar days after Aquis files with the NASD the
"Nasdaq SmallCap Market Notification Form for Listing of Additional Shares"
relating to the Aquis Group Shares (the "NASDAQ Listing Application") and (ii)
the Closing Date.
(viii) "Assets" As used in this Agreement, the term
"Assets" shall mean all of the assets of the Company (as of the Closing),
including, without limitation, the following:
(1) the Business of the Company as a going concern, the goodwill
pertaining thereto and all of the Company's right, title and interest in
and to the name SunStar Communications, and all other trade names,
trademarks, servicemarks, logos or other identifying names used by the
Company or the Seller in the Business (collectively the "Trade Names"),
all as set forth in Schedule 5(q);
(2) all items of inventory owned by the Company including, without
limitation, all raw materials, work-in-progress and finished products of
the Company;
(3) all vehicles, machinery, equipment, furniture, fixtures,
computer and other office equipment and supplies of the Company, including
containers, packaging and shipping material, tools and spare parts and
other similar tangible personal property owned by the Company;
(4) all Rights;
(5) all books and records of the Company (including corporate and
tax records) including all in-house mailing lists, other customer and
supplier lists, trade correspondence, production and purchase records,
promotional literature, data storage tapes and computer disks, computer
software, order forms, accounts payable records (including invoices,
correspondence and all related documents), accounts receivable ledgers,
all documents relating to uncollected invoices, and all shipping records;
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<PAGE>
(6) all contracts, agreements (including, without limitation, the
confidentiality and non-disclosure agreements between the Company and each
of its employees) and purchase and sale orders for goods; all corporate
opportunities under discussion and related to the Business, including any
documentation related thereto;
(7) all trade receivables of the Company and all advance payments,
prepaid items, rights to offset and credits of all kinds of the Company;
(8) all tangible personal property owned by the Company which is not
specifically included in, or specifically excluded by, the foregoing
subsections (1) through (7);
(9) all real property owned or leased by the Company, together with
all fixtures attached thereto;
(10) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets, all
claims, causes of action, rights of recovery and rights of set-off of any
kind against any person or entity relating to the Assets or the Business;
and
(11) any and all other assets, properties and rights of the Company
including those reflected as such under Assets on the April 30, 1999
Balance Sheet (the "April Balance Sheet") included among the Financial
Statements, with such additions thereto and deletions therefrom as have
occurred or shall occur in the ordinary course of business between April
30, 1999 and the Closing.
(ix) "Balance Sheet" has the meaning set forth in
Section 5(j) of this Agreement.
(x) "Balance Sheet Date" has the meaning set forth in
Section 5(j) of this Agreement.
(xi) "Business" means the business heretofore and
currently being conducted by the Company and the Seller, which consists of
providing access to virtual private network services and acting as an internet
service provider. The Seller acknowledges that all representations, warranties,
covenants and agreements contained herein shall relate to the Business as
heretofore defined and to the Company's predecessors in interest with regard to
the Business.
(xii) "Closing" has the meaning set forth in Section 3
of this Agreement.
(xiii) "Closing Date" has the meaning set forth in
Section 3 of this Agreement.
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<PAGE>
(xiv) "Commitments" shall mean all agreements,
indentures, mortgages, plans, policies, arrangements, and other instruments,
including all amendments thereto (or where they are verbal, written summaries of
the material terms thereof), fixed or contingent, required to be disclosed on
Schedule 5(p).
(xv) "Employee Benefit Plans" has the meaning set forth
in Section 5(x) of this Agreement.
(xvi) "Environmental Claim" shall mean any written
demand, claim, governmental notice or threat of litigation or the actual
institution of any action, suit or proceeding which asserts that an
Environmental Condition constitutes a violation of any statute, ordinance,
regulation, or other governmental requirement relating to the emission,
discharge, or Release of any Hazardous Substance into the environment or the
generation, treatment, storage, transportation, or disposal of any Hazardous
Substance, prior to Closing Date in each case in contravention of any applicable
laws or regulations.
(xvii) "Environmental Condition" shall mean the presence
on any real property during the period from the date such real property was
first owned, leased or used by the Company or the Seller to the Closing Date, in
surface water, ground water, drinking water supply, land surface, subsurface
strata or ambient air of any Hazardous Substance arising out of or otherwise
related to the operations or other activities of the Company or the Seller,
conducted or undertaken prior to the Closing Date, and in each case in
contravention of any applicable laws or regulations.
(xviii) "Equipment" has the meaning set forth in Section
5(n) of this Agreement.
(xix) "Escrow Agreement" has the meaning set forth in
Section 4(a)(ii)(B) of this Agreement.
(xx) "Financial Statements" has the meaning set forth in
Section 5(j) of this Agreement.
(xxi) "Finova Consent" has the meaning set forth in
Section 15 of this Agreement.
(xxii) "Hazardous Substance" shall mean any substance
defined in the manner set forth in Section 101(14) of the U.S. Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, as
applicable on the Closing Date, and shall include any additional substances
designated under Section 102(a) thereof prior to the Closing Date.
(xxiii) "Knowledge of the Seller" in a representation or
warranty of the Seller means the actual knowledge of the members of the Seller
and the employees of the Seller and/or
4
<PAGE>
the Company who are familiar with the Business and the Assets or the matters
with respect to which such representation or warranty is made, but does not
include, except as specifically provided hereafter, constructive knowledge.
Notwithstanding the foregoing, such phrase requires that such individuals: (i)
undertake a reasonable examination of their and the Company's files and the
assets relating to the Business to ascertain whether such files or asset
examination reveal facts relevant to the representation or warranty in question,
and (ii) make a reasonable inquiry of the other employees or agents of the
Company who they reasonably believe may have knowledge relating to the facts
relevant to such representation or warranty.
(xxiv) "Leases" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xxv) "Lien" means any security interest, mortgage,
pledge, lien, claim, encumbrance or other third party claim.
(xxvi) "NASDAQ" means the National Association of
Securities Dealers Automated Quotation System.
(xxvii) "Person" shall mean a corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
government or a department or agency thereof, or any other entity, and, where
the context permits, an individual.
(xxviii) "Personal Property Leases" has the meaning set
forth in Section 5(m)(ii) of this Agreement.
(xxix) "Premises" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xxx) "Purchase Price" has the meaning set forth in
Section 4(a) of this Agreement.
(xxxi) "Purchaser" means Aquis IP Communications, Inc.,
a Delaware corporation.
(xxxii) "Registration Rights Agreement" has the meaning
set forth in Section 4(a)(ii) of this Agreement.
(xxxiii) "Rights" means all of the Company's and/or the
Seller's right, title and interest in and to the United States and foreign
rights with respect to copyrights, licenses, patents, trademarks, trademark
rights, trade names, service marks, service right marks, trade secrets, shop
rights, know-how, technical information (including, without limitation, all
software owned or utilized by the Company and/or the Seller in connection with
the Business), techniques, discoveries, designs, proprietary rights and
5
<PAGE>
non-public information and registrations, reissues and extensions thereof and
applications and licenses therefor, owned or used, or proposed to be used in the
Business.
(xxxiv) "Seller" means SunStar One, LLC, an Arizona
limited liability company, the sole shareholder of the Company.
(xxxv) "SunStar Shares" has the meaning set forth in the
Recitals of this Agreement.
(xxxvi) "TTI Obligation" means the amount of $232,534
owing to Touch Technology International Inc. ("TTI") as reflected on the books
of the Seller as of April 30, 1999.
2. Sale of Stock.
(a) Purchase and Sale of Stock. In exchange for the
consideration specified herein, and subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase and acquire from the Seller, and the
Seller agrees to sell, assign, transfer, convey and deliver to the Purchaser,
all right, title and interest in and to the SunStar Shares.
(b) Delivery of Possession and Instruments of Transfer. At the
Closing, the Seller shall deliver to the Purchaser possession of all of the
certificates representing the SunStar Shares, duly endorsed in blank or
accompanied by duly executed stock powers with signatures guaranteed or
notarized, and such other instruments of transfer reasonably requested by and
satisfactory to the Purchaser and its counsel for consummation of the
transactions contemplated under this Agreement and as are necessary to vest in
the Purchaser, title in and to the SunStar Shares, free and clear of any lien,
encumbrance, security agreement, equity, option, claim, charge or restriction,
other than restrictions imposed by federal or applicable state securities laws.
3. Closing. The closing of the purchase and sale provided for in
this Agreement shall take place at the offices of Phillips Nizer Benjamin Krim &
Ballon LLP, 666 Fifth Avenue, New York, New York, or such other place as the
parties may agree, on a date not more than five (5) business days after the date
upon which all of the conditions precedent to the closing stated in Sections 7
and 8 have been satisfied in full. (Such closing is hereinafter sometimes
referred to as the "Closing," and such time and date is hereinafter sometimes
referred to as the "Closing Date"). Notwithstanding the actual date of the
Closing, the parties agree that the purchase of the SunStar Shares shall be
effective as of June 15, 1999.
6
<PAGE>
4. Purchase Price and Payment/Adjustments.
Purchase Price. The purchase price is as follows ("Purchase
Price"):
(i) The sum of one thousand dollars ($1,000), payable at
the Closing;
(ii) The sum of two hundred seventy-four thousand
dollars ($274,000), payable on or prior to July 31, 1999 (the "Cash
Consideration Delivery Date") as follows:
(A) $232,534 to be paid to TTI in satisfaction of the
TTI Obligation; and
(B) $41,466 to be paid to the Seller, plus
(iii) 1,150,000 shares of the common capital stock of
the Purchaser's parent company, Aquis Communications Group, Inc. ("Aquis
Group"), a Delaware corporation, (the "Aquis Group Shares"), to be delivered as
follows:
(A) 950,000 of the Aquis Group Shares to be delivered on the Aquis
Shares Delivery Date to the Seller or its designee; and
(B) 200,000 of the Aquis Group Shares to be delivered on the Aquis
Shares Delivery Date to Phillips Nizer Benjamin Krim & Ballon LLP, as
escrow agent ("Escrow Agent"), such shares to be held and delivered
pursuant to an escrow agreement (the "Escrow Agreement") substantially in
the form annexed hereto as Exhibit A.
Aquis Group shall file with the Securities and Exchange Commission a
registration statement covering the Aquis Group Shares, as more fully described
in the Registration Rights Agreement to be entered into between Aquis Group and
the Seller on the Closing Date, which shall be substantially in the form of
Exhibit B hereto (the "Registration Rights Agreement").
5. Representations and Warranties of the Seller. As an
inducement for the Purchaser to enter into this Agreement and perform its
obligations hereunder, the Seller hereby represents and warrants to the
Purchaser as set forth below. Each of such representations and warranties are
correct and complete as of the date hereof and shall be correct and complete as
of the Closing, with the same effect as if said representations and warranties
had been made at and as of the Closing Date:
(a) Organization, Good Standing, Power, Etc. The Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of
7
<PAGE>
Arizona. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arizona. The Company is authorized
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of the Business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the Business.
(b) Capital Stock.
(i) The Company has authorized capital stock consisting solely
of 1,000 shares of common stock, $ .01 par value, all of which are issued
and outstanding, and all of which are duly authorized, validly issued,
fully paid, non-assessable, free of preemptive rights, and were issued in
compliance with all federal and applicable state securities laws. The
SunStar Shares constitute all of the issued and outstanding capital stock
of the Company. The Seller owns the SunStar Shares free and clear of all
liens, charges, encumbrances or claims of any kind whatsoever, except for
restrictions imposed by federal or applicable state securities laws.
(ii) There are no outstanding offers, options, warrants,
rights, calls, commitments, obligations (verbal or written), conversion
rights, plans or other agreements (conditional or unconditional) of any
character provided for, required or permitting the sale, purchase or
issuance of any shares of capital stock or any other securities of the
Company that are reserved for issuance or are outstanding.
(c) Articles of Incorporation and By-Laws; Articles of
Organization and Operating Agreement.
(i) Included in Schedule 5(c)(i) attached hereto are correct
and complete copies of the Articles of Incorporation and By-laws of the Company,
as amended to date. Such Articles of Incorporation and By-laws are in full force
and effect.
(ii) Included in Schedule 5(c)(ii) attached hereto are correct
and complete copies of the Articles of Organization and Operating Agreement of
the Seller, as amended to date. Such Articles of Organization and Operating
Agreement are in full force and effect.
(d) Subsidiaries, Divisions and Affiliates. The Company has no
subsidiaries or divisions. Except as set forth in Schedule 5(d), the Business
has been conducted solely by the Company and not through any Affiliate, joint
venture or other entity, person or under any other name.
8
<PAGE>
(e) Equity Investments. Except as set forth in Schedule 5(e),
the Company does not own or have any rights to any equity interest, directly or
indirectly, in any corporation, partnership, joint venture, firm or other
entity.
(f) Authorization, Etc. The Company has full power and
authority and has taken all action necessary to own, lease and operate the
Assets, to enter into this Agreement and to carry out the transactions
contemplated hereby. The Seller has full power and authority and has taken all
action necessary to enter into this Agreement and to carry out the transactions
contemplated hereby. The Seller and the Company have taken all action required
by law, by the Company's Articles of Incorporation and By-laws, or by the
Seller's Articles of Organization and Operating Agreement, or otherwise to be
taken by them to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Seller and is a legal, valid
and binding obligation of the Company and the Seller enforceable against each in
accordance with its terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
(g) Effect of Agreement. The execution, delivery and
performance of this Agreement by the Company and the Seller and the consummation
by the Company and the Seller of the transactions contemplated hereby, will not,
with or without the giving of notice and the lapse of time, or both, (i) violate
any provision of law, statute, rule, regulation or executive order to which the
Company, the Seller or the Business are subject; (ii) violate any judgment,
order, writ or decree of any court applicable to the Company, the Seller or the
Business; or (iii) result in the breach of or conflict with any term, covenant,
condition or provision of, or, constitute a default under, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the Assets or the SunStar Shares pursuant to any corporate charter,
by-law, commitment, contract or other agreement or instrument, including any of
the Commitments, to which the Company or the Seller is a party or by which any
of the Assets or the SunStar Shares are or may be bound or affected or from
which the Business derives benefits.
(h) Restrictions. Except as set forth on Schedule 5(h),
neither the Company nor the Seller is a party to any contract, commitment or
agreement, nor are any of them or the Assets or the SunStar Shares subject to,
or bound or affected by, any provision of the charter documents of the Company
or the Seller, or any order, judgment, decree, law, statute, ordinance,
9
<PAGE>
rule, regulation or other restriction of any kind or character, which would,
individually or in the aggregate, materially adversely affect the Business, the
SunStar Shares or any of the Assets.
(i) Governmental and Other Consents. Except as set forth on
Schedule 5(i), (i) no notice to, consent, authorization or approval of, or
exemption by, any governmental or public body or authority is required in
connection with the execution, delivery and performance by the Company or the
Seller of this Agreement or any of the instruments or agreements herein referred
to, or the taking of any action herein contemplated; and (ii) no notice to,
consent, authorization or approval of, any Person under any agreement,
arrangement or commitment of any nature which the Company or the Seller is party
to or which the SunStar Shares or the Assets are bound by or subject to, or from
which the Company receives or is entitled to receive a benefit, is required in
connection with the execution, delivery and performance by the Company or the
Seller of this Agreement or any of the instruments or agreements herein referred
to, or the taking of any action herein contemplated.
(j) Financial Statements. The Seller has heretofore furnished
the Purchaser with (i) audited financial statements of the Seller, including
statements of income and retained earnings for the fiscal years then ended, for
the years from the commencement of the Business through the fiscal year ended
October 31, 1998 and (ii) unaudited financial statements of the Seller for the
period from November 1, 1998 through April 30, 1999 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied, and said
Financial Statements fairly and accurately present the results of operations of
the Seller for the periods covered thereby and the financial condition of the
Seller as of the dates indicated thereon, and comply with the books and records
of the Seller. All items that could reasonably have a material adverse effect on
the willingness of a prospective purchaser to acquire the SunStar Shares have
been disclosed in the Financial Statements or in the Schedules to this
Agreement. There are no liabilities, obligations or claims of any nature of or
against the Seller or the Company (whether threatened, accrued, contingent,
absolute, unliquidated, asserted or otherwise, whether due or to become due)
which were not disclosed or reflected fully on the Balance Sheets, and there are
no such liabilities, obligations or claims of or against the Seller or the
Company, other than those disclosed or reflected in the Financial Statements.
Since the date of the last balance sheet (the "Balance Sheet") contained in the
Financial Statements ("Balance Sheet Date"), the Seller and the Company have
operated in the ordinary course of business and has, since the Balance Sheet
Date, and will, through the Closing Date, continue to operate only in the
ordinary course of business on the same basis as it has heretofore. Since the
Balance Sheet Date, there has been no materially adverse change
10
<PAGE>
in the financial condition of the Seller or the Company, and the Seller knows of
no such pending change.
(k) Absence of Certain Changes or Events. Except as set forth
on Schedule 5(k), since April 30, 1999, neither the Seller nor the Company has:
(i) suffered any adverse change in, or the occurrence of any events which,
individually or in the aggregate, has or have had, or might reasonably be
expected to have, a material adverse effect on the financial condition or
results of operations of the Seller or the Company; (ii) incurred damage to or
destruction of any material Asset or Assets individually or in the aggregate
having a replacement cost in excess of $10,000, whether or not covered by
insurance; (iii) incurred any obligation or liability (fixed or contingent) not
in the ordinary course of business; (iv) made or entered into contracts or
commitments to make any capital expenditures in excess of $10,000; (v)
mortgaged, pledged or subjected to lien or any other encumbrance any of the
Assets; (vi) sold, transferred or leased any material Asset or Assets
individually or in the aggregate having a replacement cost in excess of $10,000,
or canceled or compromised any debt or material claims, except in each case, in
the ordinary course of business; (vii) sold, assigned, transferred or granted
any rights under or with respect to any licenses, agreements, patents, software,
inventions, trademarks, trade names, copyrights or formulae or with respect to
know-how or any other intangible asset including, but not limited to, the
Rights; (viii) amended or terminated any of the contracts, agreements, leases or
arrangements which otherwise would have been set forth on Schedule 5(p) hereto;
(ix) waived or released any other rights of material value; (x) declared or paid
any dividend on its capital stock, or set apart any money for distribution to or
for its shareholders; (xi) redeemed any portion of its capital stock; (xii)
entered into, or amended the terms of, any employment or consulting agreement
not terminable on more than 30-days notice without liability to the Seller or
the Company; (xiii) incurred any indebtedness for borrowed money or guaranteed
any such indebtedness of another entity or individual, or entered into any other
arrangement having the economic effect of any of the foregoing; or (xiv) entered
into any transactions not in the ordinary course of business which would,
individually or in the aggregate, materially adversely affect the Assets or the
Business.
(l) Title to Assets; Absence of Liens and Encumbrances. Except
as set forth on Schedule 5(l), the Company has good title to, and owns outright,
the Assets, free and clear of all mortgages, claims, liens, charges,
encumbrances, security interests, restrictions on use or transfer or other
defects as to title other than those disclosed in the Balance Sheet. The leases
and other agreements or instruments under which the Company holds, leases or is
entitled to the use of any real or personal property included in the Assets are
in full force and effect and all rentals, royalties or other payments due and
payable thereunder
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prior to the date hereof have been duly paid. The Company enjoys peaceable and
undisturbed possession under all such leases, and the changes in ownership of
the capital stock of the Company and of the Assets will not adversely affect
such leases, other agreements and instruments. All Assets are in conformance
with all applicable zoning and other laws, ordinances, rules and regulations;
and no notice of violation of any law, ordinance, rule or regulation thereunder
has been received by the Company or the Seller.
(m) Property.
(i) The Company does not own real property.
(ii) Schedule 5(m) contains a complete and correct list
and description of all of the Company's leases (whether oral or written) with
respect to real property (the "Leases"), including a description of all
buildings, structures, improvements, transmitters, terminals and other equipment
located at each of the premises underlying such Leases (collectively, the
"Premises"), and all licensing arrangements and leases of personal property
relating to the Business ("Personal Property Leases"), to which the Company is a
party (either as lessor, lessee, licensor or licensee). The Seller has
heretofore furnished to the Purchaser true and complete copies of all Leases and
Personal Property Leases. All buildings, structures, appurtenances and material
items of machinery, equipment and other material tangible assets used by the
Company in the conduct of the Business are in good operating condition and
repair, reasonable wear and tear excepted, are usable in the ordinary course of
business, are adequate and suitable for the uses to which they are being put and
conform in all material respects to all applicable statutes, laws, regulations,
ordinances, codes, rules, judgments, orders, decrees, agreements or governmental
restrictions relating to their construction, use and operation. The Assets are
sufficient to operate and conduct the Business as presently conducted. All such
leases and licensing agreements are valid and effective in accordance with their
respective terms and there are no existing defaults or events of default or
events which with notice or lapse of time or both would constitute defaults or
which would interfere with the enjoyment by the Company or any assignee of the
benefits of such instrument or their use and enjoyment of the real or personal
property. Except as set forth on Schedule 5(m), no consents are required in
order to transfer any of the Leases, Personal Property Leases or licenses to the
Purchaser.
(iii) Except as set forth on Schedule 5(m), all
activities and operations conducted by the Seller and the Company on the
Premises, and all structures, improvements and fixtures by the Seller or the
Company on the Premises, conform to any and all applicable federal, state and
local laws, ordinances and regulations, including, without limitation, zoning
and building ordinances and health, environmental and safety laws, ordinances
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and regulations, and the Premises are zoned for the various purposes for which
the Premises are currently being used.
(iv) Except as set forth on Schedule 5(m), to the
knowledge of the Seller, there is no condition resulting from the activities of
the Business which would adversely affect or impair the use of any of the
Premises for the purposes for which the Company is currently using the same or
which could result in the imposition of liability on the Purchaser.
(v) To the knowledge of the Seller, there are no
existing, pending or threatened condemnations or violations of other
governmental regulations giving rise to pending or threatened governmental or
administrative actions that will materially adversely affect or impair the use
of any of the Premises for the purposes to which the Company is currently using
the same.
(n) Equipment. Set forth on Schedule 5(n) is a correct and
complete list as of May 31, 1999 of all items of equipment used in the Business
(the "Equipment"), indicating for each piece of Equipment whether it is owned or
leased. Except as set forth on Schedule 5(n), none of the Equipment has been
disposed of since May 31, 1999. Except as noted on Schedule 5(n), all of the
Equipment and all other equipment used in the conduct of the Business (i) is in
good working condition, with no material defects, and generally has been
suitable for the uses for which it was designed or has been employed in the
Business and (ii) conforms in all material respects with any laws, ordinances,
regulations, orders or other similar governmental requirements relating to its
use, as the same are currently in effect.
(o) Insurance. There is now and there will be as of the
Closing, in full force and effect with a reputable insurance company fire and
extended insurance coverage with respect to all material tangible Assets in
reasonable commercial amounts. On Schedule 5(o) is set forth a correct and
complete list of (i) all currently effective insurance policies and bonds
covering the Assets or the Business, and their respective annual premiums (as of
the last renewal or purchase of new insurance), and (ii) since the inception of
the Business, (A) all accidents, casualties or damage occurring on or to the
Assets or relating to the Business which resulted in claims individually in
excess of $5,000, and (B) claims for product liability, damages, contribution or
indemnification and settlements (including pending settlement negotiations)
resulting therefrom which individually are in excess of $5,000. Except as set
forth on Schedule 5(o), as of the date hereof there are no disputes with
underwriters of any such policies or bonds, and all premiums due and payable
have been paid. There are no pending or, to the knowledge of the Seller,
threatened terminations or premium increases with respect to any of such
policies or bonds and there is no condition or circumstance known to the Seller
applicable to the Business, other than the sale of the SunStar Shares pursuant
to
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this Agreement, which may result in such termination or increase. The Business
is in compliance with all material conditions contained in such policies or
bonds, except for noncompliance which, individually or in the aggregate, would
not have a material adverse effect on the Business, the SunStar Shares or the
Assets.
(p) Agreements, Arrangements, Etc.
(i) Except as set forth on Schedule 5(p), neither the Company
nor the Seller is a party to, nor are the Company, the Assets or the
SunStar Shares subject to or bound by, any:
(A) lease agreement (whether as lessor or lessee), where
the obligation of the Company exceeds $5,000;
(B) license agreement, assignment or contract (whether
as licensor or licensee, assignor or assignee) relating to software,
trademarks, trade names, patents, or copyrights (or applications
therefor), unpatented designs or processes, formulae, know-how or
technical assistance, or other proprietary rights;
(C) employment or other contract or agreement with an
employee or independent contractor which (1) may not be terminated
without liability to the Company upon notice to the employee or
independent contractor of not more than 30 days, or (2) provides
payments (contingent or otherwise) of more than $5,000 per year
(including all salary, bonuses and commissions);
(D) agreement, contract or order with any buying agent,
supplier or other individual or entity who assists, provides or is
otherwise involved in the acquisition, supplying or providing Assets
or other goods to the Business;
(E) non-competition, secrecy or con- fidentiality
agreements;
(F) agreement or other arrangement for the sale of goods
or services to any third party (including the government or any
other governmental authority);
(G) agreement with any labor union;
(H) agreement, contract with any distributor, dealer,
leasing company, sales agent or representative, other than contracts
or orders for the purchase, sale or license of goods made in the
usual and ordinary course of business at an aggregate price per
contract or more than
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$5,000 and a term of more than six months under any such contract or
order;
(I) agreement, contract or order with any manufacturer,
leasing company, supplier or customer (including those agreements
which allow discounts or allowances or extended payment terms), of
more than $5,000;
(J) agreement with any distributor or brokerage company,
leasing company, management company or any other individual or
entity who assists, places, brokers or otherwise is involved with
the marketing or distribution of the products of the Business to its
customers;
(K) joint venture or partnership agreement with any
other person or entity;
(L) agreement guaranteeing, indemnifying or otherwise
becoming liable for the obligations or liabilities of another;
(M) agreement with any banks or other persons, for the
borrowing or lending of money or payment or repayment of draws on
letters of credit or currency swap or exchange agreements (other
than purchase money security interests which may, under the terms of
invoices from its suppliers, be granted to suppliers with respect to
goods so purchased);
(N) agreement with any bank, finance company or similar
organization which acquires from the Company receivables or
contracts for sales on credit;
(O) agreement granting any person a lien, security
interest or mortgage on any of the Assets, including, without
limitation, any factoring or agreement for the assignment of
receivables or inventory;
(P) agreement for the incurrence of any capital
expenditure in excess of $5,000;
(Q) advertising, publication or printing agreement;
(R) agreement which restricts the Company from doing
business anywhere in the world;
(S) agreement or statute or regulation giving any party
the right to renegotiate or require a reduction
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in prices or the repayment of any amount previously paid; or
(T) other agreement or contract, not included in or
expressly excluded from the terms of the foregoing clauses (A)
through (S), materially affecting the Assets, the SunStar Shares or
the Business, except contracts or purchase orders for the purchase
or sale of goods or services made in the usual and ordinary course
of business.
Correct and complete copies of all items required to be shown on
Schedule 5(p) have been separately delivered to the Purchaser prior to the date
hereof.
(ii) Each of the Commitments is valid, in full force and
effect and enforceable in accordance with its terms.
(iii) Except as set forth on Schedule 5(p), the Company has
fulfilled, or has taken all action reasonably necessary to enable the Company to
fulfill when due, all of its obligations under the Commitments, except where the
failure to do so would not, individually or in the aggregate, have a material
adverse affect on the Business or the Assets. Furthermore, there has not
occurred any default or any event which, with the lapse of time or the election
of any person other than the Company, will become a default under any of the
Commitments, except for such defaults, if any, which (A) have not resulted and
will not result in any material loss to or liability of the Company or any of
its successors or assigns or (B) have been indicated on Schedule 5(p). The
Company is not in arrears in any material respect with respect to the
performance or satisfaction of the terms or conditions to be performed or
satisfied by it under any of the Commitments and to the knowledge of the Seller,
no waiver or variance has been granted by any of the parties hereto.
(iv) Except as set forth on Schedule 5(p), none of the
Commitments requires the consent of the other parties thereto as a result of the
transactions contemplated hereby and, with respect to any of the Commitments
which do require the consent of the other parties thereto as a result of the
transactions contemplated by this Agreement, the Seller will provide the
Purchaser with copies of material consents between the date hereof and the
Closing.
(q) Business Names; Patents, Trademarks, Copyrights, Etc. Schedule
5(q) sets forth any Trade Names used by the Company or the Seller as the
predecessor in interest to the Company used by the Business and all of the
business addresses of the Business since the commencement of the Business.
Schedule 5(q) also sets forth (i) the registered and beneficial owner and the
expiration date, to the extent applicable, for each of the Rights owned, used
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or proposed to be used by the Company and (ii) the product, service, or products
or services of the Company which make use of, or are sold, licensed or made
under, each such Right. All of the Rights are included in the Assets and
constitute all Rights necessary for the conduct of the Business, as the Business
was being conducted immediately prior to the date hereof. Except as set forth on
Schedule 5(q), neither the Seller nor the Company has sold, assigned,
transferred, licensed, sub-licensed or conveyed the Rights, or any of them, or
any interest in the Rights, or any of them, to any person, and the Company has
the entire right or right, title and interest (free and clear of all security
interests, liens and encumbrances of every nature) in and to the Rights owned by
or used in the conduct of the Business as currently being conducted; neither has
the validity of such items been, nor is the validity of such items, nor the use
thereof by the Company, the subject of any pending or, to the knowledge of the
Seller, threatened opposition, interference, cancellation, nullification,
conflict, concurrent use, litigation or other proceeding. The conduct of the
Business as currently operated, and the use of the Assets does not and will not
conflict with, or infringe, legally enforceable rights of third parties. There
is no infringement of any proprietary right owned or licensed by the Company.
(r) Permits, Licenses, Etc. The Company has all permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities required to permit them to carry on the Business as
currently conducted.
(s) Compliance with Applicable Laws. To the knowledge of the Seller,
the Seller and/or the Company have complied in all material respects with all
laws, regulations and orders affecting the Business and its operations.
(t) Litigation. Except as set forth on Schedule 5(t), there is no
claim, action, suit, proceeding, arbitration, reparation, investigation or
hearing or notice of hearing, pending or, to the knowledge of the Seller,
threatened, before any court or governmental, administrative or other competent
authority or private arbitration tribunal against or relating to or affecting
(directly or indirectly, including by way of indemnification), the Business or
the Assets, or the transactions contemplated by this Agreement; nor are any
facts known to the Seller which could reasonably give rise to any such claim,
action, suit, proceeding, arbitration, investigation or hearing, which may have
any material adverse affect, individually or in the aggregate, upon the
Business, the value of the Assets or the transactions contemplated by this
Agreement. Neither the Seller nor the Company has waived any statute of
limitations or other affirmative defense with respect to any of the aforesaid
matters. There is no continuing order, injunction or decree of any court,
arbitrator or governmental, administrative or other competent authority to which
the Seller or the Company is a party, or to which the Assets or
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Business is subject. Neither the Seller nor the Company nor any current officer,
director, or employee of the Seller or the Company has been permanently or
temporarily enjoined or barred by order, judgment or decree of any court or
other tribunal or any agency or other body from engaging in or continuing any
conduct or practice in connection with the Business.
(u) No Interest in Competitors. Except as set forth on Schedule
5(u), no officer, director or shareholder of the Company or any Affiliate of any
of the foregoing, or any member of the Seller, directly or indirectly, owns more
than a two percent (2%) interest in or controls or is an employee, officer or
director of or participant in (but only to the extent such a participation
exceeds two percent (2%), or consultant to any corporation, partnership, limited
partnership, joint venture, association or other entity which is a competitor,
or current supplier or customer of the Business or has any type of business or
professional relationship with the Business.
(v) Customers, Suppliers, Distributors and Agents. Except as set
forth on Schedule 5(v), the Seller has no knowledge or reason to believe that
any customer, client, distributor, supplier or any other person or entity with
material business dealings with the Company, will or may cease to continue such
relationship, or will or may substantially reduce the extent of such
relationship, at any time prior to or after the Closing Date. Except for public
information, the Seller has no knowledge of (i) any other existing or
contemplated material and adverse modification or change in the business
relationship of the Company with, or (ii) any existing condition or state of
facts which has affected adversely, will adversely affect (in a material
manner), or has a reasonable likelihood of adversely affecting the business
relationship of the Company with its customers, clients, suppliers or other
persons or entities with material business dealings with the Company or which
has prevented or will prevent the business from being carried on under its new
ownership after the Closing in essentially the same manner as it is currently
carried on. Schedule 5(v) sets forth (i) the ten largest (in dollar value)
purchasers of services from the Company and (ii) the ten largest (in dollar
value) providers of goods and/or services to the Company.
(w) Books and Records. The books of account and other financial and
corporate records of the Company are in all material respects complete, correct
and up to date, with all necessary signatures, and are in all material respects
accurately reflected in the Financial Statements.
(x) Employee Benefit Plans. Except as described in Schedule 5(x),
the Company does not have any hospitalization, health insurance, pension,
retirement, profit sharing, stock option or similar plans (the "Employee
Benefits Plans"). For each such
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employee pension plan, multi-employer plan or welfare plan as those terms are
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and for each Employee Benefit Plan with respect to which the
Company is a "party in interest" as defined in Section 3 of ERISA, or a
"disqualified person" as defined in Section 4975 of the Code, the Seller has
delivered to the Purchaser complete and accurate copies of (i) all Employee
Benefit Plans and all amendments thereto; (ii) the trust instrument or insurance
contract, if any, forming a part of the plans, and all amendments thereto; (iii)
the most recent and preceding year's Internal Revenue Service Form 5500 and all
schedules thereto; (iv) the most recent Internal Revenue Service determination
letter, or if no letter has been issued, any pending application to the Internal
Revenue Service for a determination letter regarding qualified status; (v) any
bond required by Section 412 of ERISA; and (vi) the summary plan description.
The Company has complied in all material respects with all of the rules and
regulations governing each of the Employee Benefit Plans maintained for the
benefit of its employees, including, without limitation, rules and regulations
promulgated pursuant to ERISA and the Internal Revenue Code, by the Department
of Treasury, Department of Labor, and the Pension Benefit Plans Guaranty
Corporation, and each of the Employee Benefit Plans now operated has since its
inception been operated in accordance with its provisions and is in compliance
with such rules and regulations. Neither the Company nor any Employee Benefit
Plans maintained by the Company or any fiduciaries thereof have engaged in any
prohibited transaction, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, nor have any of them committed any breach of fiduciary
responsibility with respect to any of the Employee Benefit Plans.
(y) Powers of Attorney. Except as set forth on Schedule 5(y), no
person has any power of attorney to act on behalf of the Company or the Seller
in connection with any of the Company's properties or business affairs other
than such powers to so act as normally pertain to the officers of the Company.
(z) Sufficiency of Assets and Commitments. Except as set forth in
Schedule 5(z), the Assets constitute all of the property and Rights necessary
for the continuation of the Business on a basis consistent with past operations.
(aa) Labor Disputes, Unfair Labor Practices. Except as set forth on
Schedule 5(aa), neither the Seller nor the Company has engaged in any labor
practice which would have a material adverse effect on the Assets or the
Business. There is no pending or threatened (i) unfair labor practice complaint,
charge, labor dispute, strike, slowdown, walkout or work stoppage before the
National Labor Relations Board or any other authority or (ii) grievance or
arbitration proceeding arising out of or under a collective bargaining agreement
involving employees of the Business. There have been no strikes, labor disputes,
slow-downs,
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walkouts, or work stoppages involving employees of the Business. Union
representation of employees exists only as set forth on Schedule 5(aa). The
Company has not received notice from any of its employees of such employee's
intent to terminate his or her employment or bring any action for any reason
related to the transactions contemplated by this Agreement or for any other
reason.
(bb) Past Due Obligations. Except as set forth on Schedule 5(bb), no
past due obligations over $5,000 have given rise or shall give rise within five
(5) days after the Closing Date to any additional liability to the Purchaser on
account of their being past due.
(cc) Environmental Matters. Except as set forth on Schedule 5(cc),
(i) the Company is in compliance with all environmental laws, regulations,
permits and orders applicable to it, and with all laws, regulations, permits and
orders governing or relating to asbestos removal and abatement; (ii) the Company
has not transported, stored, treated or disposed, or arranged for any third
parties to transport, store, treat or dispose, of any Hazardous Substances to or
at any location other than a site lawfully permitted to receive such Hazardous
Substances for such purposes, or had performed or arranged for any method or
procedure for such transportation, storage, treatment or disposal in
contravention of any laws or regulations nor has the Company disposed of, or
arranged for any third parties to dispose of, Hazardous Substances upon property
owned or leased by it in contravention of any applicable laws or regulations;
(iii) there has not occurred, nor is there presently occurring, a Release of any
Hazardous Substance by the Company on, into or beneath the surface of any parcel
of real property in which the Company has an ownership interest or any leasehold
interest in contravention of any applicable laws or regulations; (iv) the
Company has not transported or disposed of, or allowed or arranged for any third
parties to transport or dispose of, any Hazardous Substance to or at a site
which, pursuant to the U.S. Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), has been placed on the
National Priorities List or its Iowa equivalent; (v) the Company has not
received notice and has no actual knowledge of any facts which could give rise
to substantive notice, that the Company is a potentially responsible party for a
federal or state environmental cleanup site or for corrective action under
CERCLA or notice of any other Environmental Claim; (vi) the Company has not
undertaken (or been requested to undertake) any response or remedial actions or
cleanup actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity; and (vii)
there are no laws, regulations, ordinances, licenses, permits or orders relating
to environmental matters requiring any work, repairs, construction or capital
expenditures with respect to the Assets.
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(dd) Tax and Other Returns and Reports.
(i) The Seller has timely filed or will file all Tax Returns and
information returns required to be filed and has paid all Taxes due and payable
in connection with the Business for all periods ending on or before the date
hereof. Adequate provision has been made in the books and records of the Company
and in the Financial Statements for all Taxes whether or not due and payable and
whether or not disputed. Schedule 5(dd) lists the date or dates through which
any governmental entity has examined any Tax Return of the Seller or the
Company. All required Tax Returns or extensions, including amendments to date,
have been prepared in good faith without willful misrepresentation and are
complete and accurate in all material respects. Except as set forth in Schedule
5(dd), no governmental entity has examined or is in the process of examining any
Tax Returns or extensions of the Seller or the Company. Except as set forth on
Schedule 5(dd), no governmental entity has proposed (tentatively or
definitively), asserted or assessed or threatened to propose or assert, any
deficiency, assessment, lien, or other claim for Taxes and there would be no
basis for any such delinquency, assessment, lien or claim. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any Taxes or deficiency against the Seller or
the Company in connection with the Business or with respect to any Tax Return
filed or to be filed by the Seller or the Company in connection with the
Business.
(ii) Certain Tax Definitions. For purposes of this Agreement, the
term "Taxes" means all taxes, including without limitation all Federal, state,
local, foreign and other income, franchise, sales, use, property, payroll,
withholding, environmental, alterative or add-on minimum and other taxes,
assessments, charges, duties, fees, levies or other governmental charges in the
nature of tax, and all estimated taxes, deficiency assessments, additions to
tax, penalties, and interest, and any contractual or other obligation to
indemnify or reimburse any person with respect to any such assessment. For
purposes of this Agreement, the term "Tax Return" shall mean any report,
statement, return, declaration of estimated tax or other information required to
be supplied by or on behalf of the Company to a taxing authority in connection
with Taxes, or with respect to grants of tax exemption, including any
consolidated, combined, unitary, joint or other return filed by any person that
properly includes the income, deductions or other tax information concerning the
Company.
(ee) Recent Dividends and Other Distributions. Except as set forth
on Schedule 5(ee), there has been no dividend or other distribution of assets or
securities whether consisting of money, property or any other thing of value,
declared, issued or paid to or for the benefit of the Seller or the Company
subsequent to the date of the most recent Financial Statements.
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(ff) Inventory. All of the Company's inventory consists of items of
a quality usable, marketable or saleable in the normal course of the Business.
(gg) Purchase and Sale Obligations. All purchases, sales and orders
and all other commitments for purchases, sales and orders made by or on behalf
of the Company have been made in the usual and ordinary course of its business
in accordance with normal practices. On the Closing Date, the Company shall
deliver to the Purchaser a schedule of all such uncompleted purchase and sale
orders and other commitments with respect to any of the Company's obligations as
of a date not earlier than ten (10) days prior to the Closing.
(hh) Other Information. None of the representations and warranties
contained in this Agreement (including the Annexes and Schedules hereto) or any
ancillary document or any certificate or instrument delivered or to be delivered
by or on behalf of the Company or the Seller in connection with the transactions
contemplated hereby, does or will contain any untrue statement of a material
fact or omit a material fact necessary to make the information contained herein
or therein not misleading.
(ii) Accounts Receivable. All Accounts Receivable arose from bona
fide transactions made in the ordinary course of business and represent services
rendered in the ordinary course of business. All such Accounts Receivable are
fairly presented, and all the Accounts Receivable are the result of arms-length
transactions with third parties. The collectibility of the Accounts Receivable
will not be impaired by any statute of limitations, right of set-off,
counterclaim or defense. Set forth on Schedule 5(ii) are computer printouts
containing detailed listings of Accounts Receivable as of the dates specified
therein (which shall be updated through the Closing Date) and which reflect the
periods of time that such accounts have been outstanding as of the dates of such
listings.
(jj) Brokers and Finders. Neither the Seller nor the Company, or any
of their respective officers, directors, members or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement other than Deerfield Partners L.P. whose fee shall be paid entirely by
the Purchaser. The Seller agrees to indemnify and hold the Purchaser harmless
from any liability, loss, cost, claim and/or demand that any other broker or
finder may have in connection with this transaction as a result of actions taken
by the Company or the Seller.
(kk) Personnel. Schedule 5(kk) sets forth a true and complete list
of:
(i) the wage rates for non-salaried and nonexecutive salaried
employees of the Company by classification, the date of
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the last increase in compensation and scheduled salary review dates;
(ii) the Company's employees, which list shall contain the following
information with respect to each such employee (A) whether such employee is
union or non-union; (B) the position, age, current base rate, total 1997 and
1998 compensation, time of service, and geographical work location; and (C) with
respect to employee salespersons, the details of his or her compensation
arrangement, including assigned customers, territory and commission rates; and
(iii) all non-employee salespersons of the Company and as to each
salesperson, the details of his or her compensation arrangement with the Company
including assigned customers, territory and commission rates.
(ll) Insider Interests. Except as set forth in Schedule 5(ll),
neither the Seller, any member or officer of the Seller nor any officer or
director of the Company is presently a party to any transaction with the Company
including, without limitation, any contract, agreement or arrangement (i)
providing for the furnishing of services; (ii) providing for rental, real or
personal property; or (iii) otherwise requiring payments to any such person,
trust, corporation or entity to which such person has any interest including in
any property, real or personal, tangible, including without limitation,
inventions, patents, trademarks or trade names, used in or pertaining to the
Business.
(mm) Bank Accounts. Schedule 5(mm) sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes, lock
boxes or accounts of any nature.
(nn) Documents Relating to Business. The Seller has furnished or
made available to the Purchaser every material agreement, instrument, letter,
pleading, consent, waiver, notice, note and every document of whatever nature
relating to the Business, and to the knowledge of the Seller, there is no other
document or instrument of any kind that the Company has failed to furnish that
would or might affect the truth, accuracy or completeness of the representations
and warranties contained herein. No representation or warranty by the Seller in
this Agreement or any Exhibit, Schedule or related agreement contains or will
contain any untrue statement of a material fact nor omits or will omit to state
a material fact necessary to make the statements contained therein not
misleading.
(oo) Books and Records. To the knowledge of the Seller, the
records of the Seller and the Company relating to one Business are complete and
accurate in all material respects. The financial books and records of the Seller
and the Company relating
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to one Business have been maintained consistently in accordance with sound
business practices and are accurate and complete in all material respects.
(pp) Payments.
(i) Except as set forth on Schedule 5(pp), neither the
Seller nor the Company, nor any of their respective employees or agents, or any
other person acting on behalf of the Seller, the Company or the Business, has,
directly or indirectly, within the past five years given or agreed to give any
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office or other person who is or may be in a position to help
or hinder the Business to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or, (y) which if not given in the past,
might have had a materially adverse effect on the assets, business or operations
of the Business as reflected in the Financial Statements or (z) if not continued
in the future, might adversely affect the assets, business, operations or
prospects of the Business.
(ii) Neither the Seller nor the Company has obtained,
directly or indirectly, any property as a result of activities, or used any
property to conduct activities, which activities may constitute or result in a
violation of any federal, state or local law, rule or regulation, the penalty
for which could be forfeiture of such property.
(qq) Schedules. Each of the Schedules described in this
Agreement is dated the date of this Agreement, identified specifically as a
schedule to a particular Section and is certified by the Seller as being true
and complete. Any information disclosed in any Schedule described in this
Agreement shall be deemed disclosed for purposes of all other such Schedules to
which such information is relevant.
(rr) Predecessor Entity. The Assets, which were previously
owned by the Seller, were transferred from the Seller to the Company for reasons
unrelated to the transactions contemplated by this Agreement and deemed
reasonable by the managers of the Seller.
6. Representations and Warranties of the Purchaser.
As an inducement for the Seller to enter into this Agreement
and perform its obligations hereunder, the Purchaser hereby represents and
warrants to the Seller as set forth below. Each of such representations and
warranties are correct and
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complete as of the date hereof and shall be correct and complete as of the
Closing, with the same effect as if said representations and warranties had been
made at and as of the Closing Date:
(a) Organization and Good Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing under of the
laws of the State of Delaware.
(b) Noncontravention. The Purchaser is not a party to or
subject to any contract or agreement or any judgment, order, writ, injunction or
decree of any court or governmental body which will prevent its performance of
its obligations under this Agreement.
(c) Authorization. The execution and delivery of this
Agreement and the other agreements, certificates and documents contemplated
hereby or referred to herein have been duly authorized by its directors as
required under the laws of the State of Delaware, and no other corporate action
is required for the approval of this Agreement or such other agreements,
certificates and documents executed and delivered by the Purchaser, all of which
are valid and binding upon the Purchaser in accordance with their respective
terms.
(d) Conflicts. Neither the execution nor delivery of this
Agreement, nor the performance of the Purchaser in consummating the transactions
contemplated by this Agreement will conflict with or result in a violation or
breach of, or default under, any terms or provisions of the corporate charter or
bylaws of the Purchaser or of any terms or provisions of any agreement or
instrument to which the Purchaser is a party or by which it is bound.
(e) Approvals. No consent, approval or authorization of or
declaration or filing with any governmental authority is required in connection
with the execution or delivery of this Agreement by the Purchaser or the
consummation by the Purchaser of the transactions contemplated hereby.
(f) Pursuant to the terms of the Registration Rights
Agreement, within 180 days from the Closing Date, Aquis Group shall file a
registration statement on Form S-3 or any successor thereto (or other form of
registration statement if Form S-3 is not available) for public sale of the
Aquis Group Shares (the "Shelf Registration Statement"), and thereafter shall
use its reasonable efforts to have the Shelf Registration Statement declared
effective by the Securities and Exchange Commission.
(g) Brokers and Finders. Neither the Purchaser nor any of its
officers, directors, or employees, has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions
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contemplated by this Agreement other than Deerfield Partners L.P. whose fee
shall be paid entirely by the Purchaser. The Purchaser agrees to indemnify and
hold the Seller harmless from any liability, loss, cost, claim and/or demand
that any other broker or finder may have in connection with this transaction as
a result of actions taken by the Purchaser.
7. Conditions Precedent to the Purchaser's Obligation to Close. (i)
All obligations of the Purchaser to close under this Agreement are subject to
the fulfillment of each of the following conditions, prior to or at the Closing:
(a) The representations and warranties made by the Seller
contained herein shall be true and correct at and as of the time of the Closing,
with the same effect as though such representations and warranties were made at
and as of such time, except in respects not materially adverse to the Company.
As used herein, the phrase "in respects not materially adverse to the Company"
shall mean in respects not materially adverse to the overall financial
condition, business or prospects of the Business.
(b) The Seller and the Company, on or before the Closing,
shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with at or before the
Closing.
(c) No order, ruling or regulation (general or specific) of
any governmental authority shall have been issued or promulgated, and no
judicial or administrative action shall have been taken and shall have not been
rescinded, canceled or reversed, which action has the purpose or would have the
effect of prohibiting the transactions herein contemplated or the effect of
interfering with or materially affecting the right or ability of any party to
this Agreement to consummate any of the transactions contemplated hereby.
(d) [Intentionally left blank]
(e) The Seller shall have delivered to the Purchaser a
certificate, dated the Closing Date and signed by an appropriate officer of the
Seller, certifying (i) as to the fulfillment of the conditions set forth in
subsections (a), (b) and (c) of this Section 7 and (ii) that he is not aware of
any material omissions or facts that would materially alter any of the Financial
Statements, nor is he aware of any facts or factors that are reasonably likely
to occur, or if known to other parties, that could have a material adverse
effect on the financial condition, business, operations, assets, liabilities,
management or prospects of the Business.
(f) The Purchaser shall have been furnished with an opinion,
dated the Closing Date, of Snell & Wilmer, L.L.P., counsel
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to the Seller, in substantially the form of Exhibit C attached hereto.
(g) All consents and approvals and waivers of third parties,
including those set forth on Schedule 5(i), and consents, permits and approvals
of all regulatory agencies or other authorities having jurisdiction over the
transactions, contemplated by this Agreement, shall have been procured and
delivered to the Purchaser, and all other requirements prescribed by law shall
have been satisfied.
(h) No suit, action or other proceeding shall be pending or
directly threatened by any federal or state governmental agency having
jurisdiction or authority over either the Seller, the Company or the Purchaser
in which it is sought to restrain or prohibit consummation of the transactions
contemplated by this Agreement.
(i) The Purchaser shall not have been advised by the
Purchaser's accountants (the "Accountants"), at or prior to the Closing Date,
that, based upon a review (but not an audit) of the affairs of the Business
through the Closing Date, there has come to their attention facts or
circumstances causing them to believe that the Seller's and the Company's
representations and warranties relating to the Assets, the Financial Statements,
and the financial condition of the Business are not materially true and correct
as of the Closing Date. Any such advice shall be in writing and shall specify in
detail the particulars as to what facts or circumstances have caused the
Accountants to believe that any such representations or warranties are not
materially true and correct or that any such condition has not been fulfilled.
The Seller shall be given a reasonable opportunity (not to exceed five business
days after delivery to it of the advice) to explain or remedy any alleged
misrepresentation or breach of warranty. If the Closing thereafter occurs, it
shall be deemed to have occurred as of the originally scheduled Closing Date. In
preparing such advice the Accountants may rely upon written statements of the
Seller and the Company and need not audit the financial condition of the
Company.
(j) There shall not have been commenced, threatened or
received any proceeding, or notice thereof, which results or could result in the
citation of the Seller or the Business for violation of zoning ordinances in
connection with the use of the principal office of the Business or requiring the
cessation of such use.
(k) There shall have been no material adverse changes in the
financial condition, Business, operations, Assets, liabilities or management of
the Company.
(l) The Seller shall have delivered all consents, approvals
and waivers required under any contracts, licenses,
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leases (including the Leases) or other agreements material to the Business or
shall have executed and delivered assignments of all such instruments.
(m) The Purchaser shall have received a certificate of the
office of the Secretary of State of Arizona and the Arizona State taxing
authority, dated within 10 days before the Closing Date, certifying that the
records of such state regarding the Company reflect neither a certificate of
dissolution, a court order declaring dissolution, a merger or consolidation
which terminated its existence, nor suspension of its powers, rights and
privileges, and that in accordance with the records of such state, the Company
is authorized to exercise all of its powers, rights and privileges in such
state.
(n) The Seller shall have delivered to the Purchaser the
certificates representing the SunStar Shares, duly executed for transfer or
accompanied by duly executed stock powers.
(o) An employment agreement between the Company and John
Hobko, substantially in the form of Exhibit D hereto, shall have been executed
between the Purchaser and Mr. Hobko.
(p) Confidentiality and non-disclosure agreements between each
of the Company's employees and the Company shall have been executed by each such
employee and the Company.
(q) The Seller and the Company shall have delivered such other
documents, opinions and certificates as are reasonably requested by counsel for
the Purchaser.
(r) The Finova Consent (as defined in Section 15 hereof) shall
have been obtained.
(ii) In the event Purchaser agrees to close the transactions
contemplated by this Agreement without Seller having obtained certain required
consents and approvals, including those relating to the First USA Merchant
Agreement, the Learning Company Distribution Agreement, the UniDial Agent
Agreement and the Planet Direct Internet Service Provider Agreement, the Seller
agrees to use its best efforts to obtain such consents promptly after the
Closing and to indemnify Purchaser and hold it harmless from any damage or loss
resulting from Seller's failure to obtain such consents prior to the Closing
(the "Consent Indemnification").
8. Conditions Precedent to the Seller's Obligation to Close. All
obligations of the Seller to close under this Agreement are subject to the
fulfillment of each of the following conditions prior to or at the Closing:
(a) The representations and warranties made by the Purchaser
contained herein shall be true and correct at and as of
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the time of the Closing, with the same effect as though such representations and
warranties were made at and as of such time, except in respects not materially
adverse to the Purchaser. As used herein, the phrase "in respects not materially
adverse to the Purchaser" shall mean in respects not materially adverse to the
overall financial condition or business of the Purchaser.
(b) The Purchaser, on or before the Closing, shall have
performed and complied with all terms, covenants and conditions required by this
Agreement to be performed or complied with at or before the Closing.
(c) The Purchaser shall have delivered to the Seller a
certificate, dated the Closing Date and signed by an appropriate officer of the
Purchaser, certifying as to the fulfillment of the conditions set forth in
Subsections (a) and (b) of this Section 8.
(d) The Seller shall have been furnished with an opinion,
dated the Closing Date, of Phillips Nizer Benjamin Krim & Ballon LLP, counsel to
the Purchaser, in substantially the form of Exhibit E hereto.
(e) No order, ruling or regulation (general or specific) of
any governmental authority shall have been issued or promulgated, and no
judicial or administrative action shall have been taken and shall have not been
rescinded, canceled or reversed, which action has the purpose or would have the
effect of prohibiting the transactions herein contemplated or the effect of
interfering with or materially affecting the right or ability of any party to
this Agreement to consummate any of the transactions contemplated hereby.
(f) All consents and approvals, and consents and approvals of
all regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement, shall have been procured, and all
other requirements prescribed by law shall have been satisfied.
(g) No suit, action or other proceeding shall be pending or
directly threatened by any federal or state governmental agency having
jurisdiction or authority over either the Seller or the Purchaser in which it is
sought to restrain or prohibit consummation of the transactions contemplated by
this Agreement.
9. Access.
(a) Prior to the Closing, the Seller and/or the Company will
give to the Purchaser and Purchaser's counsel, accountant or other
representatives full access (during normal business hours) to all properties,
documents, contracts, books, records and other data of the Business; provided,
however, that all
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information received by the Purchaser, Purchaser's counsel, accountants or other
representatives shall be held wholly confidential by each of them and that in
taking advantage of such access, none of them shall interfere with the operation
of the Business, and, provided further, that if the transaction contemplated
hereby shall not be consummated, all data of every kind and nature and all
copies of documents taken by any of said persons shall upon request be returned
to the Seller and not otherwise utilized by the Purchaser.
(b) From and after the Closing, the Seller will give to the
Purchaser, Purchaser's counsel, accountants or other representatives full access
(during normal business hours) to all books and records of the Seller relating
to the Business with respect to the period ending on the Closing Date.
10. Affirmative Covenants of the Seller. Except as otherwise
consented to by the Purchaser, the Seller covenants that, throughout the period
commencing on the date hereof and ending on the Closing Date, the Company will:
(a) Conduct of Business. Conduct the Business only in the ordinary
course, consistent with prior practice;
(b) Maintenance of Property. Maintain and keep the material
properties, machinery and equipment of the Business in as good repair and
condition in all material respects as at present, except for depreciation due to
ordinary wear and tear;
(c) Insurance. Maintain in full force and effect insurance at least
as great as the amounts and comparable in scope of coverage to that now
maintained by the Business as described on Schedule 5(o) hereto;
(d) Performance of Obligations. Consistent with past business
practices, perform all material obligations under material contracts, leases and
documents relating to or affecting the material assets, properties and business
of the Business;
(e) Maintenance and Preservation of Business. Consistent with its
past practices, use his best efforts to maintain and preserve the Business;
(f) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities;
(g) Notice of Certain Events. By written notice to the Purchaser,
notify the Purchaser of the commencement of any litigation against the Company
or the Business involving an amount exceeding $5,000 in each instance or of the
existence of adverse
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business conditions threatening the continued, normal business operations of the
Business;
(h) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement and grant
Purchaser reasonable access to the Business and the Premises to permit
familiarization therewith; and
(i) Good Standing. Maintain the Company's existence as a corporation
validly existing and in good standing under the laws of the States of Arizona
and Florida.
11. Negative Covenants of the Seller. The Seller covenants that,
throughout the period commencing on the date hereof and ending on the Closing
Date, unless the Purchaser shall have otherwise consented in writing, the
Company will not:
(a) Material Commitments. Enter into or institute any material
Commitment or any material employment contract or other agreement not in the
normal course of the Business or, except as required by applicable law or
regulation, renew, amend or modify any such contract or agreement now in
existence; and
(b) Inconsistent Agreements. Enter into any agreement,
understanding or commitment, written or oral, with any other person which is in
any material respect inconsistent with the obligations of the Company or the
Seller arising under this Agreement.
12. Affirmative Covenants of the Purchaser. (i) Except as otherwise
consented to by the Seller, the Purchaser covenants that, throughout the period
commencing on the date hereof and ending on the Closing Date, it will:
(a) Good Standing. Maintain its existence as a corporation validly
existing and in good standing under the laws of the State of Delaware;
(b) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement;
(c) Maintenance and Preservation of Business. Use its best efforts
to maintain and preserve its business; and
(d) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal
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or state governmental authorities, except in respects not materially adverse to
its financial condition or business.
(ii) The Purchaser covenants that it shall file the NASDAQ
Listing Application with the NASD on or before June 30, 1999.
13. Termination.
(a) Grounds for Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of the Seller and the Purchaser;
(ii) by the nonbreaching party hereto, if (A) the other
party shall have (1) misstated any representation or been in breach of any
warranty contained herein and such misrepresentation or warranty has not been
cured within 10 days after notice from the non-breaching party, or (2) been in
breach of any covenant, undertaking or restriction contained herein and such
breach has not been cured within 10 days after notice from the non-breaching
party, or (b) a condition to Closing applicable to it hereunder has not been
satisfied by the Closing Date (or such earlier date as specified herein) and has
not been waived in writing by such party; or
(iii) by Seller or Purchaser if the Finova Consent has
not been obtained as provided in Section 15 hereof.
(b) Consequences of Termination. In the event of the
termination and abandonment hereof pursuant to the provisions of this Section
13, this Agreement shall become void and have no effect, without any liability
on the part of any of the partners, directors, officers or stockholders of the
terminating party, except for liability of any party then in breach, which shall
not be affected by such termination.
14. Deliveries.
(a) The Seller. At the Closing, the Seller shall deliver to
the Purchaser the following, duly executed by the Seller (unless otherwise
indicated):
(i) an officer's certificate of the Seller, as required
under Section 7(e) hereof;
(ii) the opinion required under Section 7(f) hereof;
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(iii) original stock certificates for the SunStar
Shares;
(iv) the pay-off letter concerning the TTI Obligation;
(v) executed employment agreement between the Purchaser
and John Hobko; and
(vi) executed confidentiality and nondisclosure
agreements between the Company and each of its employees.
(b) Purchaser. At the Closing, the Purchaser shall deliver to
the Seller the following, duly authorized and executed by the Purchaser:
(i) an officer's certificate of the Purchaser, as
required under Section 8(c) hereof;
(ii) $1,000 of the cash consideration as set forth in
Section 4(a)(ii) hereof;
(iii) the Registration Rights Agreement; and
(iv) the opinion required under Section 8(d) hereof.
(c) Purchaser. On the Aquis Shares Delivery Date, the
Purchaser shall deliver to the Seller original stock certificates for the Aquis
Group Shares in accordance with Section 4(ii) hereof, bearing the appropriate
legend.
(d) Purchaser. On the Cash Consideration Delivery Date, the
Purchaser shall deliver the remainder of the cash consideration as set forth in
Section 4(a)(ii) hereof.
(e) Further Assurances. At any time and from time to time
after the Closing, at the request of any party and without further
consideration, the other party will execute and deliver such other instruments
of sale, transfer, conveyance, assignment and confirmation and take such action
as the requesting party may reasonably deem necessary or desirable in order to
more effectively transfer, convey and assign the properties transferred
hereunder and to effectuate the terms hereof, including, without limitation, a
name change certificate to be executed by the Seller for filing with the
Secretary of State of Arizona.
15. Consent of Lender. The Seller and the Purchaser hereby
acknowledge and agree that this Agreement and the transactions contemplated
hereunder are subject to and contingent upon the written consent of FINOVA
Capital Corporation ("FINOVA Consent"), the senior lender under a credit
facility with
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Purchaser. Following execution of this Agreement by the parties, should
Purchaser be unable to obtain FINOVA Consent for any reason within sixty (60)
days from the date hereof, this Agreement may be terminated by Seller or
Purchaser pursuant to the terms of Section 13.
16. Expenses. The Purchaser and the Seller will each pay their
respective counsel, accountants and other expenses incurred in connection with
the negotiation and consummation of the transactions contemplated herein.
17. Nondisclosure of Confidential Information. The Purchaser, the
Company and the Seller each agree that if for any reason whatsoever the
transactions contemplated by this Agreement shall not be consummated, all
information disclosed to the other parties pursuant to Section 9 or otherwise
shall remain confidential and each party shall not use or furnish or divulge the
same to any other person.
18. Survival of Representations and Warranties.
(a) All representations, covenants and warranties made by the
Seller and the Purchaser under this Agreement in connection with the
transactions contemplated hereby or in any Exhibit, Schedule, certificate, list
or other instrument delivered pursuant hereto shall survive the Closing for a
period of one (1) year.
(b) Notwithstanding any right of the Purchaser to fully
investigate the affairs of the Company relating to the Business and
notwithstanding any knowledge of facts determined or determinable by the
Purchaser pursuant to such investigation or right of investigation, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Seller and the Company contained in this
Agreement or in any document delivered or to be delivered pursuant to this
Agreement by the Seller or any of the Seller's representatives or the Company
(including, but not limited to, any accountant or attorney representing the
Seller or the Company), in connection with the transactions contemplated by this
Agreement. Each warranty, representation, agreement and covenant contained
herein is independent of all warranties, representations, agreements and
covenants contained herein or in any Exhibit, Schedule, certificate, list or
other instrument or documents (whether or not covering identical or related
subject matter) and must be independently and separately complied with and
satisfied.
19. Indemnification.
(a) The Seller hereby indemnifies the Purchaser and agrees to
hold the Purchaser harmless from and against any and all damages, losses, costs
and expenses (including reasonable counsel
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fees and expenses in connection with the contest of any claim) paid or incurred
by the Purchaser and arising out of the Consent Indemnification or any and all
inaccurate representations or breaches of covenant or warranty made by the
Seller under this Agreement in connection with the transactions contemplated
hereby or in any Exhibit, Schedule, certificate, list or other instrument
delivered pursuant hereto.
The Purchaser hereby indemnifies the Seller and agrees to hold the
Seller harmless from and against any and all damages, losses, costs and expenses
(including counsel fees and expenses in connection with the contest of any
claim) paid or incurred by the Seller and arising out of any and all inaccurate
representations or breach of covenant or warranty made by the Purchaser under
this Agreement in connection with the transactions contemplated hereby or in any
Exhibit, Schedule, certificate, list or other instrument delivered pursuant
hereto. The Purchaser shall have the right (but not the obligation) in enforcing
this Section 19(a) first to obtain reimbursement in satisfaction of any of the
Seller's obligations from the Aquis Group Shares held in escrow pursuant to the
Escrow Agreement, in accordance with the terms of such Escrow Agreement.
(b) Promptly after receipt by an indemnified party of notice
of the commencement of any action asserting a claim based upon any cause
enumerated herein, the indemnified party shall, if it claims the benefits of
indemnification pursuant to Section 19(a) with respect to such action, notify
the indemnifying party of the commencement thereof. Upon receipt of such notice,
the indemnifying party shall have the option of either assuming the defense of
such action (and the cost thereof) with counsel reasonably satisfactory to both
the indemnified and the indemnifying parties or participating in the defense of
such action at the sole expense, however, of the indemnifying party. In the
event of the indemnifying party's assumption of the defense of such action,
counsel selected by the indemnified party may at the election of the indemnified
party participate in any such defense, at the sole expense, however, of the
indemnified party. No settlement or compromise to be paid by the indemnifying
party shall be entered into without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(c) The indemnity provided in Section 19(a) shall be limited
in time, in that no party may assert a claim in respect of such indemnity at any
time after one (1) year after the Closing Date.
(d) Notwithstanding anything herein to the contrary, (i) no
party shall assert a claim for indemnity pursuant to Section 19(a) unless the
aggregate of all such claims by such indemnified party against such indemnifying
party shall exceed $30,000, in which event the indemnifying party's obligation
shall apply to all indemnified losses and (ii) the total amount for which
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the Seller shall be liable shall not exceed the Purchase Price. For purposes of
this Section 19, the value per share of Aquis Group Shares included in the
Purchase Price shall equal the closing bid price of the common stock of Aquis
Group on the Closing Date.
20. Conflict of Interest. Each of the parties recognizes that John
Frieling, a member of the Seller, is a director and a shareholder of the
Purchaser and, as such, is fully informed of the business and management
decisions of both parties. Notwithstanding the foregoing, in entering into this
Agreement, neither party has relied upon representations made by John Frieling
and each party has relied solely upon its own due diligence and the
representations contained in this Agreement.
21. Notices. All notices and communications shall be in writing and
delivered as follows (or to such other address as any party may furnish to the
other in writing in accordance with the terms of this Section):
If to the Purchaser:
Aquis Communications, Inc.
1719A Route 10
Suite 300
Parsipanny, New Jersey 07054
Attention: John X. Adiletta, President
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 5th Avenue
New York, New York 10103
Attn: Monte Engler, Esq.
If to the Company or the Seller:
SunStar Communications, Inc.
5201 West Kennedy Blvd.
Suite 915
Tampa, Florida 33609
Attn: John Hobko, President
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004
Attn: Quinn Williams, Esq.
Any notices and communications pursuant to this Agreement, shall be sent by
hand, by registered or certified first-class mail, postage prepaid, or by such
other form of delivery as shall provide the
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sender with documentary evidence of delivery, and shall be deemed to be
delivered when sent.
22. Miscellaneous.
(a) Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement
shall not be affected thereby, and each term and provision of the Agreement
shall be valid and enforced to the fullest extent permitted by law.
(b) Assignment. Neither the Purchaser nor the Seller may
assign this Agreement or any rights hereunder prior to the Closing without the
prior written consent of the other party; provided, however, that the Purchaser
may assign this Agreement or any of its rights hereunder to Aquis Group or any
subsidiary thereof. After the Closing, the terms, provisions, covenants and
conditions of this Agreement shall bind and benefit the parties hereto and their
respective heirs, successors, personal representatives and assigns.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which, when so executed and delivered, shall be an
original instrument, but such counterparts, together, shall constitute a single
agreement.
(d) No Waiver. No waiver of any breach or default under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any party hereto may, at or before the Closing, waive any conditions to its
obligations hereunder which are not fulfilled.
(e) Entire Agreement; Amendments. This Agreement, including
the Exhibits and Schedules referred to herein which are a part hereof, contains
the entire understanding of the parties hereto with respect to the subject
matter contained herein and may be amended only by a written instrument executed
by the Seller and the Purchaser or their respective successors or assigns. There
are no restrictions, promises, warranties, covenants or undertakings other than
those expressly set forth herein.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the choice of law doctrine of such state.
(g) Headings. Headings are inserted for convenience and do not
form part of the Agreement.
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(h) Public Announcements. No party shall issue a press
release, make publicly available any document or make any public announcement
concerning this Agreement, the terms hereof or the transactions contemplated
hereby without obtaining the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed, except to the extent that
such party, or a publicly held parent company of such party, is required to
issue such a press release, to make available such a document or to make such a
public statement under the rules of a stock exchange (or the NASD) on which such
party's or such party's parent company's securities are listed, or pursuant to
any applicable law or regulation, in which case such party shall provide prompt
notice of such disclosure to the other party.
(i) Arbitration. In the event that there shall be a dispute
among the parties arising out of or relating to this Agreement, including,
without limitation, the indemnities provided in Article 19, or the breach
thereof, the parties agree that such dispute shall be resolved by final and
binding arbitration before one arbitrator if such dispute involves an amount of
less than $150,000 and if such dispute involves an amount equal to or in excess
of $150,000 then before a panel of three arbitrators, in either case, in New
York, New York administered by the American Arbitration Association ("AAA"), in
accordance with AAA's commercial rules of practice then in effect or such other
procedures as the parties may agree to prior to the Closing. Any award issued as
a result of such arbitration shall be final and binding between the parties
thereto, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. The arbitrator shall have the
authority in his or her discretion to award to the prevailing party the fees and
expenses of such arbitration (including reasonable attorneys' fees) or any
action to enforce an arbitration award.
[SIGNATURE PAGE FOLLOWS]
38
<PAGE>
IN WITNESS WHEREOF, the Purchaser, the Company and the Seller sign
this Agreement as of the day and year first above written.
AQUIS COMMUNICATIONS, INC.
By: /s/ JOHN X. ADILETTA
---------------------------------
John X. Adiletta, President
SUNSTAR COMMUNICATIONS, INC.
By: /s/ GARY M. BURTON
---------------------------------
Name: Gary M. Burton
---------------------------------
Title: PRESIDENT
---------------------------------
SUNSTAR ONE, L.L.C.
By: /s/ GARY M. BURTON
---------------------------------
Name: Gary M. Burton
---------------------------------
Title: MANAGER
---------------------------------
39
INDEMNITY ESCROW AGREEMENT
INDEMNITY ESCROW AGREEMENT (the "Escrow Agreement") dated as of the
30th day of June, 1999, by and among SunStar One, L.L.C., an Arizona limited
liability company (the "Seller"), Aquis Communications, Inc., a Delaware
corporation (the "Purchaser"), and Phillips Nizer Benjamin Krim & Ballon LLP
(the "Escrow Agent").
R E C I T A L S :
A. Pursuant to the terms and provisions of that certain Stock Purchase
Agreement (the "Purchase Agreement"), dated as of June 15, 1999 by and among the
Seller, the Purchaser and SunStar Communications, Inc., an Arizona corporation
and a wholly-owned subsidiary of the Seller ("SunStar Inc."), the Seller has
agreed to sell to the Purchaser and the Purchaser has agreed to purchase from
the Seller all of the capital stock of SunStar Inc.
B. The Purchase Agreement provides that on the Aquis Shares Delivery Date
(as defined in the Purchase Agreement), the Purchaser shall deposit with the
Escrow Agent 200,000 shares of the common stock, $.01 par value per share, of
the Purchaser's parent company, Aquis Communications Group, Inc., a Delaware
corporation (the "Escrowed Shares"), constituting a portion of the consideration
payable from the Purchaser to the Seller under the Purchase Agreement, to be
held by the Escrow Agent pursuant to the terms and conditions hereof.
C. The Seller, the Purchaser and the Escrow Agent now wish to enter into
this Escrow Agreement providing for the appointment of an escrow agent to hold
the Escrowed Shares and to set forth the terms and conditions under which the
Escrowed Shares shall be disbursed.
NOW THEREFORE, for good and valid consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
1. Appointment of the Escrow Agent. The Purchaser and the Company
hereby jointly appoint the Escrow Agent as the escrow agent under this Escrow
Agreement and the Escrow Agent hereby accepts such appointment and agrees to
hold the Escrowed Shares pending their disposition in accordance with the terms
hereof and to perform its other duties hereunder.
2. Disposition of Escrowed Shares. The Escrow Agent shall disburse
the Escrowed Shares pursuant to the mutual written directions of the Purchaser
and the Seller, or, in the absence of such directions, pursuant to Sections 3
and 4 hereof.
<PAGE>
3. Delivery of Escrowed Shares by the Escrow Agent.
(a) On the date which is 365 days after the closing date of
the Purchase Agreement (the "Escrow Termination Date"), the Escrow Agent shall
deliver to the Seller that portion of the Escrowed Shares which has neither been
disbursed prior to that date nor is subject to a pending Claim (as defined in
Section 3(b)).
(b) If the Escrow Agent receives from the Purchaser prior to
the Escrow Termination Date a Claim Notice (as defined in Section 4(a)) stating
that the Purchaser is entitled, pursuant to Section 19 of the Purchase
Agreement, to be indemnified by the Company from the Escrowed Shares (a
"Claim"), the Escrow Agent shall disburse or retain Escrowed Shares in the
amount of the Claim pursuant to Section 4.
4. Claims Procedures.
(a) If, prior to the Escrow Termination Date, the Purchaser
determines to assert a Claim, then the Purchaser shall give the Escrow Agent
written notice of the Claim, specifying in reasonable detail the basis therefor
and the amount and calculation thereof in accordance with the provisions of the
Purchase Agreement (a "Claim Notice"). The Escrow Agent shall deliver a copy of
such Claim to the Seller within five days after its receipt thereof. If the
Seller does not deliver to the Purchaser and the Escrow Agent written notice of
its objection to the Claim within ten (10) business days after receipt of the
Claim Notice relating thereto, the Escrow Agent shall, out of the Escrowed
Shares, promptly pay such amount to the Purchaser. If the Seller shall timely
deliver to the Purchaser and the Escrow Agent such written notice of objection,
then the Escrow Agent shall not make any payment to the Purchaser with respect
to such Claim until: (i) he has received written instructions signed by the
Purchaser and the Seller which refer to such Claim and direct the payment to the
Purchaser from the Escrowed Shares; or (ii) it has received a copy of a
judgment, decree or order of a court, or copy of an arbitration award,
adjudicating the dispute with respect to such Claim, whereupon the Escrow Agent
shall distribute from the Escrowed Shares to the Purchaser the amount of any
award to the Purchaser (not to exceed the amount of the Claim) specified therein
and, if the Escrow Termination Date shall have occurred prior to such date,
shall distribute from the Escrowed Shares to the Seller the amount, if any, by
which the amount of the Claim exceeds the amount of such award, if any.
(b) For the purposes of this Agreement, the value per share of
the Escrowed Shares shall equal the closing bid price of the common stock of
Aquis Communications Group, Inc. on the date hereof.
(c) If there is a dispute between the Seller and the Purchaser
with regard to the payment of a Claim from the Escrowed Shares, the reasonable
legal fees, expenses and other costs incurred by the Escrow Agent in connection
with the adjudication of such dispute and such fees, expenses and costs incurred
by the party awarded the majority of the disputed amount of the Escrowed Shares
shall be paid by the other party. If the Purchaser is the party entitled to have
its legal fees, expenses and other costs paid by the Seller, it shall be
entitled to have the amount of such legal fees, expenses and other costs
distributed to it out of the Escrowed Shares.
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<PAGE>
5. Resignation and Removal of the Escrow Agent. The Escrow Agent may
resign from the performance of its duties hereunder at any time by giving not
less than ten (10) business days' prior written notice to the Seller and the
Purchaser or may be removed, with or without cause, by the Seller and the
Purchaser jointly giving not less than ten (10) business days' prior written
notice to the Escrow Agent. Such resignation or removal shall take effect upon
the appointment of a successor Escrow Agent as provided below. Upon any such
notice of resignation or removal, the Purchaser shall appoint a successor Escrow
Agent hereunder, subject to reasonable approval by the Seller. Upon the
acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Escrow Agreement, but shall not be
discharged from any liability for actions taken as Escrow Agent hereunder prior
to such succession. After any retiring Escrow Agent's resignation or removal,
the provisions of this Escrow Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Escrow Agent under this
Escrow Agreement. The retiring Escrow Agent shall transmit all records
pertaining to the Escrowed Shares and shall deliver the Escrowed Shares to the
successor Escrow Agent, after making copies of such records as the retiring
Escrow Agent deems advisable and after deduction and payment to the retiring
Escrow Agent of all fees and expenses (including court costs and reasonable
attorneys' fees) payable to, incurred by, or expected to be incurred by the
retiring Escrow Agent in connection with the performance of its duties and the
exercise of its rights hereunder.
6. Liability of the Escrow Agent; Indemnification.
(a) The Escrow Agent shall have no liability or obligation
with respect to the Escrowed Shares except for the Escrow Agent's willful
misconduct or gross negligence. The Escrow Agent's sole responsibility shall be
for the safekeeping and disbursement of the Escrowed Shares in accordance with
the terms of this Escrow Agreement. The Escrow Agent shall have no implied
duties or obligations and shall not be charged with knowledge or notice of any
fact or circumstance not specifically set forth herein. The Escrow Agent may
rely upon any instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any information
contained therein, which the Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by the person or parties purporting to
sign the same and to conform to the provisions of this Escrow Agreement. In no
event shall the Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. The Escrow Agent shall not be obligated to
take any legal action or commence any proceeding in connection with the Escrowed
Shares. This Escrow Agreement or the Purchase Agreement, or to appear in,
prosecute or defend any such legal action or proceeding. The Escrow Agent may
consult legal counsel selected by them in the event of any dispute or question
as to the construction of any of the provisions hereof or of any other agreement
related hereto or of its duties hereunder, or relating to any dispute involving
any party hereto, and shall incur no liability and shall be fully indemnified
from any liability whatsoever in acting in accordance with the opinion or
instruction of such counsel. The Seller and the Purchaser, jointly and
severally, shall promptly pay, upon demand, the reasonable fees and expenses of
any such counsel.
-3-
<PAGE>
(b) The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by any court with respect to the
Escrowed Shares, without determination by the Escrow Agent of such court's
jurisdiction in the matter. If any portion of the Escrowed Shares is at any time
attached, garnished or levied under any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by any court affecting such property or any part
thereof, then and in any such event, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon it
without the need for appeal or other action; and if the Escrow Agent complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other person or entity by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
(c) From and at all times after the date of this Escrow
Agreement, the Purchaser and the Seller, jointly and severally, shall, to the
fullest extent permitted by law and to the extent provided herein, indemnify and
hold harmless the Escrow Agent and each partner, employee, agent and affiliate
of the Escrow Agent (collectively, the "Indemnified Parties") against any and
all actions, claims (whether or not valid), losses, damages, liabilities, costs
and expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys' fees, costs and expenses) incurred by or asserted against
any of the Indemnified Parties from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any way relating
to any claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation the Purchaser or the
Seller, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Escrow Agreement or any transactions contemplated herein, whether or not
any such Indemnified Party is a party to any such action, proceeding, suit or
the target of any such inquiry or investigation; provided, however, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability finally determined by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnified
Party or the Escrow Agent. If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall promptly
notify the Purchaser and the Seller in writing, and the Purchaser and the Seller
shall assume the defense thereof, including the employment of counsel and the
payment of all reasonable expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel (who may be selected by
such Indemnified Party in its sole discretion) in any such action and to
participate in the defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party, except that the Seller and/or the
Purchaser shall be required to pay such fees and expenses if (i) the Seller
and/or the Purchaser agree to pay such fees and expenses, or (ii) the Seller
and/or the Purchaser shall fail to assume the defense of such action or
proceeding or shall fail to employ counsel reasonably satisfactory to the
Indemnified Party in any such action or proceeding, (iii) the Seller or the
Purchaser is the plaintiff in any such action or proceeding or (iv) the named or
potential parties to any such action or proceeding (including any potentially
impleaded parties) include both
-4-
<PAGE>
Indemnified Party and the Seller and/or the Purchaser, and Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Seller or Purchaser. The Seller and Purchaser shall be jointly and severally
liable to pay reasonable fees and expenses of counsel pursuant to the preceding
sentence, except that any obligation to pay under clause (i) shall apply only to
the party so agreeing. All such fees and expenses payable by the Seller and/or
the Purchaser pursuant to the foregoing sentence shall be paid from time to time
as incurred, both in advance of and after the final disposition of such action
or claim. All of the foregoing losses, damages, costs and expenses of the
Indemnified Parties shall be payable by the Seller and the Purchaser, jointly
and severally, upon demand by such Indemnified Party. The obligations of the
Purchaser and the Seller under this Section 8(c) shall survive any termination
of this Escrow Agreement, and the resignation or removal of Escrow Agent shall
be independent of any obligation of the Escrow Agent. The parties hereto agree
that neither the payment by the Seller or the Purchaser of any claim by the
Escrow Agent for indemnification hereunder nor the disbursement of any amounts
to the Escrow Agent from the Escrowed Shares in respect of a claim by the Escrow
Agent for indemnification shall impair, limit, modify, or affect, as between the
Purchaser and the Seller, the respective rights and obligations of the
Purchaser, on the one hand, and the Seller, on the other hand, under the
Purchase Agreement.
7. Arbitration. In the event that there shall be a dispute among the
parties arising out of or relating to this Agreement, or the breach thereof, the
parties agree that such dispute shall be resolved by final and binding
arbitration before one arbitrator in New York, New York administered by the
American Arbitration Association ("AAA"), in accordance with AAA's commercial
rules of practice then in effect. Any award issued as a result of such
arbitration shall be final and binding between the parties thereto, and shall be
enforceable by any court having jurisdiction over the party against whom
enforcement is sought. The arbitrator shall have the authority in his or her
discretion to award to the prevailing party the fees and expenses of such
arbitration (including reasonable attorneys' fees) or any action to enforce an
arbitration award.
8. Notices. All notices and instructions ("Notices") provided for or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally (including delivery by an express delivery service or by facsimile
transmission) or mailed, by certified or registered mail, return receipt
requested, with postage prepaid, and addressed to the parties as follows:
(a) If to the Seller:
SunStar One L.L.C.
5201 West Kennedy Blvd.
Suite 915
Tampa, Florida 33609
Attn:
Telephone:
Fax:
-5-
<PAGE>
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004
Attn: Quinn Williams, Esq.
Telephone: (602) 382-0600
Fax: (602) 382-6070
(b) If to the Purchaser, addressed to:
Aquis Communications, Inc.
1719A Route 10, Suite 300
Parsippany, New Jersey 07054
Attention: John X. Adiletta
Telephone : (973) 560-8001
Fax: (973) 560-8060
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Monte Engler, Esq.
Telephone: (212) 977-9700
Fax: (212) 262-5152
(c) If to the Escrow Agent:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Monte Engler, Esq.
Telephone: (212) 977-9700
Fax: (212) 262-5152
Any such Notice shall be effective upon receipt. Any party may change its
address and facsimile number for the purpose of notice by giving notice in
accordance with the provisions of this Section 8.
9. Entire Agreement and Modification. This Escrow Agreement
constitutes the entire agreement among the parties hereto with respect to the
matters contemplated herein and supersedes all prior agreements and
understandings with respect thereto. Any amendment, modification, or waiver of
this Escrow Agreement shall not be effective unless in writing. Neither the
failure nor any delay on the part of any party to exercise
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<PAGE>
any right, remedy, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or of any other
right, remedy, power, or privilege with respect to any occurrence be construed
as a waiver of any right, remedy, power, or privilege with respect to any other
occurrence.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
11. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall be deemed to constitute but one and the same
agreement.
12. Further Assurances. Each of the parties hereto shall execute
such further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Escrow Agreement.
13. Binding Effect. This Escrow Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, executors, and administrators. If any provision of this Escrow
Agreement shall be or become illegal or unenforceable in whole or in part for
any reason whatsoever, the remaining provisions shall nevertheless be deemed
valid, binding and subsisting.
14. Definitions. Capitalized terms used in this Escrow Agreement but
not otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, this Indemnity Escrow Agreement has been
executed as of the date and year first above written.
PHILLIPS NIZER BENJAMIN KRIM
& BALLON LLP
By: /s/ Monte Engler
-----------------------------------
a partner
AQUIS COMMUNICATIONS, INC.
By: /s/ John X. Adiletta
-----------------------------------
Name:
I.R.S. Tax I.D. No.__________
SUNSTAR ONE, L.L.C.
By: /s/ JOHN HOBKO
-----------------------------------
Name:
I.R.S. Tax I.D. No. _________
-8-
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made as of this 30th day
of June, 1999 by and between Aquis Communications Group, Inc., a Delaware
corporation (the "Company"), and SunStar One, L.L.C., an Arizona limited
liability company (the "Seller).
RECITALS
WHEREAS, as of June 15, 1999, Aquis Communications, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Aquis"), the Seller
and SunStar Communications, Inc., an Arizona corporation and a wholly-owned
subsidiary of the Seller ("SunStar Inc."), entered into a Stock Purchase
Agreement (the "Purchase Agreement") providing for, among other things, the sale
of all of the capital stock of SunStar Inc. to Aquis.
WHEREAS, pursuant to the Purchase Agreement, a portion of the Purchase
Price to be paid to Seller consists of 1,150,000 shares of the Company's common
stock, par value $.01 per share (the "Shares"), 950,000 to be delivered to the
Seller and 200,000 to be delivered to the Escrow Agent.
WHEREAS, it is a condition precedent to the closing of the Purchase
Agreement that the Company and the Seller execute and deliver this Agreement in
order to provide the Seller with certain registration rights with respect to the
Shares;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged herein contained, the parties hereto
agree as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Closing Date" shall have the same meaning herein as in the Purchase
Agreement.
"Commission" shall mean the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Escrow Agent" shall have the same meaning herein as in the Purchase
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall from time to time be in effect.
<PAGE>
"Holder" shall mean the Seller and any holder of the Registrable
Securities who becomes so in accordance with the provisions of Section 4(d)
hereof.
"Majority Holders" shall mean the Holders who hold at least fifty
percent (50%) of the then outstanding Registrable Securities.
"Purchase Price" shall have the same meaning herein as in the
Purchase Agreement.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean the Shares and any common stock
issued in respect of the Shares upon any stock split, reverse stock split, stock
dividend, merger, consolidation, recapitalization or similar event. Such
securities shall cease to be Registrable Securities when (i) a registration
statement registering such securities shall have become effective under the
Securities Act and such securities have been sold pursuant thereto, (ii) such
securities shall have been sold under Rule 144 (or successor provision) under
the Securities Act, (iii) such securities shall have been otherwise transferred
and new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company or (iv) such securities shall have
ceased to be outstanding.
"Registration Expenses" shall mean all reasonable expenses incurred
by the Company in compliance with Section 3 hereof, including, without
limitation, all registration and filing fees, printing expenses, reasonable fees
and disbursements of counsel for the Company, and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Restricted Securities" shall mean the Registrable Securities,
excluding Registrable Securities which have been (a) registered under the
Securities Act pursuant to an effective registration statement filed thereunder
and disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall from time to time be in effect.
"Selling Expenses" shall mean all selling commissions applicable to
the sale of Registrable Securities, and all fees and disbursements of counsel
for any Holder.
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<PAGE>
2. Restrictive Legend. Each certificate representing the Registrable
Securities shall be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable state
securities laws):
The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, nor the laws of any state.
Accordingly, these securities may not be offered, sold, transferred,
pledged or hypothecated in the absence of registration, or the
availability, in the opinion of counsel for the issuer, of an exemption
from registration under the Securities Act of 1933, as amended, or the
laws of any state. Therefore, the stock transfer agent will effect
transfer of this Certificate only in accordance with the above
instructions.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend if, with such request, the
Company shall have received an opinion of counsel satisfactory to the Company to
the effect that the securities represented by such certificate have been
registered under the Securities Act or may be sold publicly without registration
under the Securities Act.
3. Registration Rights.
3.1 Shelf Registration. Within six (6) months from the Closing Date, the
Company shall file a registration statement on Form S-3 or any successor thereto
(or other form of registration statement if Form S-3 is not available) for
public sale of Registrable Securities (the "Shelf Registration Statement"), and
thereafter shall use its reasonable efforts to have the Shelf Registration
Statement declared effective by the Commission. The Company shall use its
reasonable efforts to keep the Shelf Registration Statement continuously
effective (subject to Section 4 below) for a period of two (2) years or until
the selling Holders shall have completed the distribution described in the Shelf
Registration Statement, whichever occurs first. The Holder agrees that the
Company may include in the Shelf Registration Statement any and all shares that
may be offered for resale by other selling security holders to whom the Company
has granted registration rights. The Company shall not be obligated to file (or
amend and update) more than one registration statement hereunder.
3.2 Expenses of Registration. The Company shall bear all Registration
Expenses and the selling Holders shall bear all Selling Expenses (in proportion,
as nearly as practicable, to the securities of each Holder being registered)
incurred in connection with any registration, qualification or compliance
pursuant to the provisions of Section 3.
3.3 Registration Procedures. In the case of a registration statement to be
effected by the Company pursuant to this Agreement, the Company will:
(i) Prepare and file with the Commission such amendments and
supplements (including post-effective amendments and supplements) to such
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<PAGE>
registration statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of securities covered by such registration statement;
(ii) Furnish a copy of the prospectus and other documents
incident thereto, including any amendment of or supplement thereto, as a selling
Holder from time to time may reasonably request in order to facilitate the sale
or other disposition of the Registrable Securities owned by it;
(iii) Notify each selling Holder, at its last known addresses
as set forth in the Company's books and records, of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing;
(iv) Use reasonable efforts to cause all such Registrable
Securities to be listed on each, if any, securities exchange on which similar
securities issued by the Company are then listed, and, if not so listed, to be
listed on the NASDAQ Stock Market National Market System or the NASDAQ SmallCap
Market, if the Shares are then so qualified;
(v) Use its reasonable efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
blue sky laws of up to three jurisdictions as are requested by Holder, except
that the Company shall not for any such purpose be required to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified or to file therein any general consent to service of process.
4. Restrictions on Holders. Notwithstanding Section 3:
(a) Company Offerings. If the Company shall register its securities
under the Securities Act for sale to the public and the underwriter of such
offering (or, if none, the Company's financial advisor) shall advise the Company
that the availability of the Holders' registered Registrable Securities for
public sale pursuant to the Shelf Registration Statement would, in the opinion
of such underwriter or advisor, interfere with the successful marketing
(including pricing) of the securities proposed to be registered by the Company,
then
(i) the Company shall promptly give to each Holder written
notice of the Company's intended offering (which notice shall disclose whether
such offering involves an underwriting and shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such securities
under the applicable blue sky or other state securities laws);
(ii) the Holders shall not sell, transfer, pledge, hypothecate
or otherwise dispose of their Registrable Securities without the prior written
consent of the
-4-
<PAGE>
Company for a period designated by the Company, which period shall not begin
more than fifteen (15) days prior to and not last more than 120 days after the
effective date of the registration statement relating to the Company's
securities; and
(b) Amendments or Supplements; Filing Delay. If, after the Shelf
Registration Statement (or any other registration statement effected pursuant to
this Agreement) becomes effective, the Company advises the Holders in writing
that the Company considers it necessary or appropriate for such registration
statement to be amended or supplemented in order for sales thereunder to be made
in compliance with the Commission's applicable rules and regulations, the
Holders shall suspend any further sale, transfer, pledge, hypothecation or other
disposition of their Registrable Securities until the Company advises them that
such registration statement has been amended or supplemented and declared
effective. Notwithstanding the provisions of Section 3, the Company may delay
filing the registration statement or any amendment or supplement to the
registration statement, and may cause its effectiveness to be delayed, if the
Company advises the Holders in its written notice that the Company has
determined in good faith that the filing of such amendment or supplement (or the
declaration of its effectiveness) might (i) interfere with or affect the
negotiation or completion of any transaction that is being contemplated by the
Company (whether or not a final decision has been made to undertake such a
transaction) at the time the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in the best
interest of the Company and the Company's stockholders.
(c) Transfer. Prior to any proposed transfer of any Registrable
Securities (other than under the circumstances described in Section 3 hereof),
the Holder thereof shall give written notice to the Company of its intention to
effect such transfer. Each such notice shall describe the manner of the proposed
transfer and, if requested by the Company, shall be accompanied by an opinion of
counsel satisfactory to the Company to the effect that the proposed transfer may
be effected without registration under the Securities Act and any applicable
state securities laws, whereupon the holder of such stock shall be entitled to
transfer such stock in accordance with the terms of its notice; provided,
however, that no such opinion of counsel shall be required for a transfer to one
or more partners or retired partners of the transferor (in the case of a
transferor that is a partnership), a beneficiary of the transferor (in the case
of a transferor that is a trust), or to a stockholder or an affiliated
corporation of the transferor (in the case of a transferor that is a trust), or
to a stockholder or an affiliated corporation of the transferor (in the case of
a transferor that is a trust), or to a stockholder or an affiliated corporation
of the transferor (in the case of a transferor that is a corporation). Each
certificate for Registrable Securities transferred as above provided shall bear
the legend set forth in Section 2 except that such certificate shall not bear
such legend if (i) such transfer is in accordance with the provisions of Rule
144 (or any other rule permitting public sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 4(c)
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<PAGE>
shall not apply to securities that are not required to bear the legend
prescribed by Section 2 in accordance with the provisions of that Section.
5. Representations, Warranties and Covenants of the Company
The Company represents and warrants to, and covenants with, the
Seller, as follows:
5.1 Registration. The Registrable Securities have been duly authorized
and, when issued in accordance with the provisions of this Agreement and the
Company's Certificate of Incorporation, as amended (the "Charter"), will be duly
and validly issued, fully paid and non-assessable.
5.2 Capitalization. At March 31, 1999, the Company had a total authorized
capitalization of 30,000,000 shares of capital stock, consisting of 29,000,000
shares of Common Stock, $.01 par value per share, and 1,000,000 shares of
Preferred Stock, $.01 par value per share. At March 31, 1999 there were
approximately 18,518,880 shares of Common Stock and no shares of Preferred Stock
of the Company issued and outstanding. All of the outstanding shares of capital
stock of the Company have been duly and validly issued, and are fully paid and
non-assessable.
5.3 No Violation. The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby will not (i) violate any provision of the Charter or bylaws of the
Company, (ii) violate, conflict with or result in the breach of any of the terms
of, result in a material modification of the effect of, otherwise give any
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both will constitute) a default under any instrument, option, lien,
right, security interest, contract or other agreement to which the Company is a
party or to which it or any of its respective assets or properties may be bound
or subject; (iii) violate any order, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory body by which the Company or
the properties or business of the Company is bound; or (iv) violate or cause any
revocation of or limitation on any license, permit, order or approval of any
federal, state or local governmental or regulatory body. All consents or
approvals of any other persons or entities necessary for the consummation by the
Company of the transactions contemplated hereby have been obtained or will be
obtained on or prior to the closing of the Purchase Agreement.
5.4 Exchange Act Registration; NASDAQ Quotation. The Shares are currently
registered under Section 12(b) of the Exchange Act and eligible for quotation on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"). The Company has filed with the Commission all reports required to be
filed by it under Section 13 or 15(d) of the Exchange Act during the
twelve-month period preceding the date hereof. It is the Company's intention to
maintain the registration of the Common Stock under the Exchange Act and to
maintain the eligibility of the Shares for quotation on NASDAQ or on another
national securities exchange or over-the-counter market.
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<PAGE>
6. Representations, Warranties and Covenants of Holder
The Holder represents and warrants to, and covenants with, the Company, as
follows:
(a) The Holder is acquiring the Shares for investment for its own
account, and it will not make any sale, transfer or other disposition thereof in
violation of the Securities Act, the General Rules and Regulations (the "Rules
and Regulations") of the Commission promulgated thereunder, or any other
applicable securities laws.
(b) The Holder has been advised that the Shares have not been
registered under the Securities Act in reliance upon the exemptions from the
registration provisions of the Securities Act provided by Section 4(2) thereof.
It has also been advised that under current law the Shares may not be sold,
transferred or otherwise disposed of (and it hereby agrees that the Shares will
not be sold, transferred or otherwise disposed of) unless (i) the Shares have
been registered under the Securities Act or (ii) subject to Paragraph 4(c)
above, prior thereto, there is delivered to the Company (a) a written opinion in
form and substance reasonably satisfactory to the Company, or its counsel or
counsel for the Holder acceptable to the Company, or (b) a copy of a letter from
the staff of the Commission, to the effect that the proposed transaction may be
effected without compliance with the registration provisions of the Securities
Act including, without limitation, by virtue of compliance with Rule 144 of the
Rules and Regulations ("Rule 144").
(c) The Holder has carefully read this Agreement and has had the
opportunity to discuss with its legal counsel any requirements and other
applicable restrictions (legal and contractual) set forth herein, in the
Securities Act, or in the Rules and Regulations, with respect to the sale,
transfer or other disposition of the Shares.
(d) The Holder understands that unless a sale, transfer or other
disposition by it of the Shares has been registered under the Securities Act or
is made in conformity with the provisions of Rule 144, the Company reserves the
right to require the Holder's transferee to enter into an agreement with respect
to such Shares substantially similar hereto, to put an appropriate legend on the
stock certificates issued to such transferee, and to issue stop transfer
instructions to its transfer agent with respect thereto.
7. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, with respect to
which registration, qualification or compliance has been effected pursuant to
Section 3, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the
-7-
<PAGE>
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, for any legal and any other expenses as
they are reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on information furnished to (or
material information withheld from) the Company by such Holder or any grossly
negligent or fraudulent action or inaction of such Holder.
(b) Each Holder will indemnify the Company, each of its directors
and officers and each underwriter, if any, of the Company's securities covered
by any registration statement filed pursuant to this Agreement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act, each other Holder and each of their officers, directors and partners, and
each person controlling such Holder, against all claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse the Company and such Holders, directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent that such untrue statement (or alleged untrue statement), omission (or
alleged omission) or violation arises out of or is based upon information
furnished to (or material information withheld from) the Company by such Holder
or any grossly negligent or fraudulent action or inaction of such Holder.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice in writing to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
7. No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any
-8-
<PAGE>
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 7 is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the shareholders offering securities in the
offering (the "Selling Shareholders") on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and the Selling Shareholders on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Selling Shareholders and the parties' relevant intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Selling Shareholders agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were based
solely upon the number of entities from whom contribution was requested or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7(d). The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section 7(d) shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim, subject to
the provisions of Section 7(d) hereof. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its reasonable efforts to (i) make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act and
(ii) file with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act.
-9-
<PAGE>
10. Transfer or Assignment of Registration Rights. The rights to cause the
Company to register securities granted to the Holders by the Company under
Section 3 may be transferred or assigned only in connection with the death or
disability or liquidation or dissolution of a Holder, or as part of a bona fide
gift or if at least 75% of the Shares originally held by a Holder are
transferred, sold or otherwise disposed of to a third party (except that, in the
case of such transfer, sale or other disposition, the rights set forth in
Section 3 may be assigned on one (1) occasion only), provided that the Company
is given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the Registrable Securities with respect to which such
registration rights are being transferred or assigned, and provided further that
the transferee or assignee of such rights assumes the obligations of the Holders
under this Agreement and the provisions of Section 4(d) are complied with.
11. Entire Agreement; Amendment; Waiver. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. No amendment, alteration or modification of this Agreement shall be
valid unless in each instance such amendment, alteration or modification is
expressed in a written instrument executed by the Company and the Majority
Holders. No waiver of any provision of this Agreement shall be valid unless it
is expressed in a written instrument duly executed by the party or parties
making such waiver. The failure of any party to insist, in any one or more
instances, on performance of any of the terms and conditions of this Agreement
shall not be construed as a waiver or relinquishment of any rights granted
hereunder or of the future performance of any such term, covenant or condition
but the obligation of any party with respect thereto shall continue in full
force and effect.
12. Specific Performance. The parties hereby declare that it is impossible
to measure in money the damages which will accrue to a party hereto by reason of
a failure to perform any of the obligations under this Agreement. Therefore, all
parties hereto shall have the right to specific performance of the obligations
of the other parties under this Agreement, and if any party hereto shall
institute an action or proceeding to enforce the provisions hereof, any person
(including the Company) against whom such action or proceeding is brought hereby
waives the claim or defense therein that such party has an adequate remedy at
law, and such person shall not urge in any such action or proceeding the claim
or defense that such remedy at law exists.
13. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, return receipt requested, transmitted by facsimile or delivered either
by hand, by messenger or by nationally recognized overnight courier, addressed:
(a) if to the holders of the Registrable Securities, at the
addresses set forth below or at such other address as they shall have
furnished to the Company in writing:
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<PAGE>
SunStar One, L.L.C.
5201 West Kennedy Blvd.
Suite 915
Tampa, Florida 33609
Attn: ____________________________
and
(b) if to the Company, to the following address, or at such other
address as the Company shall have furnished to the holders of the
Registrable Securities and each such other holder in writing,
Aquis Communications Group, Inc.
1719 A Route 10
Parsippany, New Jersey 07054
Attn: John X. Adiletta, President
Fax: (973) 560-8060
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Monte Engler, Esq.
Fax: (212) 262-5152
Alternatively, to such other address as a party hereto supplies to each other
party in writing.
14. Successors and Assigns. Subject to Section 10, all the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective transferees, successors and assigns of the
parties hereto, whether so expressed or not.
15. Governing Law. This Agreement is to be governed by and interpreted
under the laws of the State of Delaware without giving effect to the principles
of conflicts of laws thereof.
16. Titles and Subtitles. The titles of the sections of this Agreement are
for the convenience of reference only and are not to be considered in construing
this Agreement.
17. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not be deemed to affect the validity or enforceability of
any other provision of this Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ JOHN X. ADILETTA
---------------------------------
Name: John x. Adiletta
Title: President
SUNSTAR ONE, L.L.C.
By: /s/ John Hobko
----------------------------------
Name:
Title:
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ASSET PURCHASE AGREEMENT
By and Among
AQUIS COMMUNICATIONS, INC.,
AQUIS COMMUNICATIONS GROUP, INC.
FRANCIS COMMUNICATIONS TEXAS, INC.
and
FRANCIS COMMUNICATIONS I, LTD
DATED AS OF JUNE 10, 1999
<PAGE>
TABLE OF CONTENTS
1. Definitions and Index of Defined Terms.................................1
(a) Capitalized Terms................................................1
(b) Index of Defined Terms...........................................1
2. Acquisition of Assets; Assumption of Liabilities.......................6
(a) Sale and Purchase of Assets......................................6
(b) Excluded Assets..................................................7
(c) Assumption of Certain Liabilities................................8
3. Closing................................................................8
4. Purchase Price and Payment/Adjustments.................................8
(a) Purchase Price...................................................8
(b) Allocation of Purchase Price.....................................9
(c) Purchase Price Adjustments.......................................9
(d) Pre-Closing Escrow...............................................9
5. Representations and Warranties of Seller.............................10
(a) Power and Authority.............................................10
(b) Noncontravention................................................10
(c) Governmental Approvals..........................................10
(d) Formation, Good Standing and Qualifications.....................10
(e) Equipment and Telecommunications Transmission Services..........11
(f) Telephone Number Inventory......................................11
(g) Financial Statements............................................12
(h) Assets..........................................................12
(i) Business Names and Business Addresses...........................13
(j) Liabilities.....................................................13
(k) Taxes...........................................................13
(l) Inventory.......................................................14
(m) Property........................................................14
(n) Material Contracts..............................................15
(o) Compliance With Laws; Litigation................................15
(p) Accounts Receivable.............................................16
(q) Licenses; Service Area..........................................16
(r) Benefit Plans...................................................17
(s) Employees.......................................................17
(t) Insurance.......................................................17
(u) Account Information.............................................17
i
<PAGE>
(v) Consents and Approvals..........................................17
(w) Changes in the Business.........................................18
(x) Documents Relating to Business..................................18
(y) Books and Records...............................................18
(z) Payments........................................................19
(aa) Schedules.......................................................19
(bb) Active Units....................................................19
(cc) Environmental Matters...........................................19
(dd) Contracts.......................................................20
(ee) Billing Software................................................20
6. Representations and Warranties of Purchaser and Group.................20
(a) Organization and Good Standing..................................20
(b) Forestallments..................................................20
(c) Authorization...................................................20
(d) Noncontravention................................................21
(e) Consents and Approvals..........................................21
7. Conditions Precedent to Purchaser's Obligation to Close...............21
8. Conditions Precedent to Seller's Obligation to Close..................23
9. Access; FCC Approvals.................................................24
(a) Access..........................................................24
(b) FCC Approvals...................................................25
10. Affirmative Covenants of Seller.......................................25
(a) Conduct of Business.............................................25
(b) Maintenance of Property.........................................25
(c) Insurance.......................................................25
(d) Performance of Obligations......................................25
(e) Maintenance and Preservation of Business........................25
(f) Compliance with Laws............................................25
(g) Notice of Certain Events........................................26
(h) Licenses........................................................26
(i) Satisfaction of Condition.......................................26
(j) Good Standing...................................................26
11. Negative Covenants of Seller..........................................26
(a) Material Contracts..............................................26
(b) Inconsistent Agreements.........................................26
12. Affirmative Covenants of Purchaser....................................26
ii
<PAGE>
(a) Good Standing...................................................26
(b) Satisfaction of Conditions......................................26
(c) Maintenance and Preservation of Business........................26
(d) Compliance with Laws............................................27
13. Termination...........................................................27
(a) Grounds for Termination.........................................27
(b) Consequences of Termination.....................................27
14. Deliveries at Closing.................................................28
(a) Seller..........................................................28
(b) Purchaser.......................................................29
(c) Further Assurances..............................................29
15. Brokers...............................................................29
16. Consent of Lender.....................................................30
17. Expenses..............................................................30
18. Nondisclosure of Confidential Information.............................30
19. Survival of Representations and Warranties............................30
20. Indemnification.......................................................31
21. Employees.............................................................32
22. Accounts Receivable...................................................32
23. Bulk Sales Compliance.................................................32
24. Risk of Loss..........................................................32
25. Names.................................................................32
26. Notices...............................................................33
27. Miscellaneous.........................................................33
(a) Severability....................................................33
(b) Assignment......................................................33
(c) Counterparts....................................................34
(d) No Waiver.......................................................34
iii
<PAGE>
(e) Entire Agreement; Amendments....................................34
(f) Governing Law, Venue............................................34
(g) Headings........................................................34
(h) No Solicitation.................................................35
(i) Public Announcements............................................35
iv
<PAGE>
Schedules
2(a)(i) - Radio Paging Licenses (see Schedule 5(q)(i))
2(a)(ii) - Machinery
2(a)(iv) - Furniture, Fixtures and Computer Equipment
2(a)(vii) - Customer List
2(c)(iii) - Customer Deposits
2(c)(iv) - Deferred Revenues
2(c)(v) - Assumed Contractual Obligations
4(b) - Purchase Price Allocation
5(d) - Limited Partnership Agreement and Partnership Certificate
5(e)(i) - Equipment and Spare Parts
5(e)(ii) - Telecommunications Transmission Services
5(f) - Telephone Number
5(g)(i) - Financial Statements
5(g)(ii) - GAAP Compilation Statements
5(h)(i) - Condition of Assets
5(h)(ii) - Liens Affecting Assets
5(i) - Intellectual Property
5(k)(iii) - Audits
5(m)(ii) - Leases
5(m)(iii) - Nonconforming Uses
5(m)(iv) - Existing Conditions
5(n) - Material Contracts
5(o)(i) - Compliance
5(o)(ii) - Litigation, Etc.
5(o)(iii) - Defaults
5(p) - Accounts Receivable
5(q)(i) - FCC Licenses
5(q)(ii) - Service Area
5(r) - Benefit Plans
5(s) - Employees and Compensation
5(t) - Insurance
5(u) - Account Information
5(v) - Consents and Approvals
5(w) - Changes
5(z) - Payments
5(dd) - Violations
<PAGE>
List of Exhibits
"A" - Closing Escrow Agreement
"B" - Registration Rights Agreement
"C" - Pre-Closing Escrow Agreement
"D" - Contract
"E" - Opinion Letter from Scott, Hulse, Marshall, Feuille, Finger &
Thurmond, P.C. and Lukas Nace Gutierrez and Sachs Chartered
"F" - Opinion Letter from Phillips Nizer Benjamin Krim &Ballon LLP
"G" - Assignment and Assumption Agreement
"H" - Bill of Sale
"I" - Non-Competition, Confidentiality and Nondisclosure Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of this 10th day of
June, 1999, by and between Aquis Communications, Inc., a Delaware corporation
("Purchaser"), Aquis Communications Group, Inc., a Delaware corporation
("Group"), Francis Communications Texas, Inc., a Texas corporation ("Seller GP")
and Francis Communications I, Ltd., a Texas limited partnership ("Seller").
R E C I T A L S:
This Agreement sets forth the terms and conditions upon which Seller will
sell, convey, transfer, assign and deliver to Purchaser, and upon which
Purchaser will purchase and acquire from Seller, the Assets (defined below).
In consideration of the foregoing, the mutual covenants and agreements of
the parties hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Definitions and Index of Defined Terms.
(a) Capitalized Terms. Capitalized terms used in this Agreement and
not otherwise defined shall, unless expressly stated otherwise, have the
meanings specified in this Section 1. The single shall include the plural and
the masculine shall include the feminine and neuter, and vice versa.
(b) Index of Defined Terms.
(i) "Accountants" has the meaning set forth in Section 7(i) of
this Agreement.
(ii) "Accounts Receivable" means monies or other consideration
reflected on the books of Seller as of the date of Closing that are due to
Seller.
(iii) "Action" has the meaning set forth in Section 5(o)(i) of
this Agreement.
(iv) "Active Unit" means a paging unit in the hands of a
subscriber of the Business, whether such subscriber is a reseller or direct
customer as of the Closing Date, for which: (a) there are no receivables which
have been outstanding in excess of sixty (60) days, and (b) at least one full
payment for such unit has been made prior to the Closing Date, and (c) no oral
or written notice of termination has been given to Seller as of the Closing
Date.
<PAGE>
(v) "Agreement" means this Asset Purchase Agreement.
(vi) "Aquis Group" has the meaning set forth in Section
4(a)(ii) of this Agreement.
(vii) "Assets" has the meaning set forth in Section 2(a) of
this Agreement.
(viii) "Assignment and Assumption Agreement" has the meaning
set forth in Section 14(a)(i) of this Agreement.
(vix) "Assumed Liabilities" has the meaning set forth in
Section 2(c) of this Agreement.
(x) "Average Gross Revenue" has the meaning set forth in
Section 4(c)(i) of this Agreement.
(xi) "Balance Sheet" has the meaning set forth in Section
5(g)(i) of this Agreement.
(xii) "Balance Sheet Date" has the meaning set forth in
Section 5(g)(i) of this Agreement.
(xiii) "Billing Software" has the meaning set forth in Section
5(ee) of this Agreement.
(xiv) "Bulk Acts" has the meaning set forth in Section 23 of
this Agreement.
(xv) "Business" means the radio paging business conducted by
Seller and the Predecessor Entity in the El Paso, Texas and surrounding areas,
together with all of the assets in the categories reflected on Seller's Balance
Sheet. Seller acknowledges that all representations, warranties, covenants and
agreements contained herein shall relate to the Business as heretofore defined.
(xvi) "Closing" has the meaning set forth in Section 3 of this
Agreement.
(xvii) "Closing Date" has the meaning set forth in Section 3
of this Agreement.
(xviii) "Closing Escrow Agreement" has the meaning set forth
in Section 4(a)(i)(2) of this Agreement.
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(xix) "Contracts" has the meaning set forth in Section 5(dd)
of this Agreement.
(xx) "Customer Deposits" has the meaning set forth in Section
2(c)(iii) of this Agreement.
(xxi) "Customer List" has the meaning set forth in Section
2(a)(vii) of this Agreement.
(xxii) "Deferred Revenue" means revenues billed or received by
Seller for services not yet provided.
(xxiii) "Equipment" has the meaning set forth in Section
2(a)(iii) of this Agreement.
(xxiv) "Escrow Agent" has the meaning set forth in Section
4(a)(i)(2) of this Agreement.
(xxv) "Excluded Assets" has the meaning set forth in Section
2(b) of this Agreement.
(xxvi) "FCC" has the meaning set forth in Section 5(c) of this
Agreement.
(xxvii) "FCC Licenses" has the meaning set forth in Section
2(a)(i) of this Agreement.
(xxviii) "Fill-in Transmitters" has the meaning set forth in
Section 5(q)(i) of this Agreement.
(xxix) "Final Order" means an order of the FCC approving the
assignment of the FCC licenses to Purchaser which is no longer subject to
reconsideration, appeal or review, whether judicial or administrative.
(xxx) "Financial Statements" has the meaning set forth in
Section 5(g)(i) of this Agreement.
(xxxi) "FINOVA Consent" has the meaning set forth in Section
16 of this Agreement.
(xxxii) "GAAP" means generally accepted accounting principles.
(xxxiii) "Group" means Aquis Communications Group, Inc.
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(xxxiv) "Hazardous Materials" had the meaning set forth in
Section 5(cc) of this Agreement.
(xxxv) "Intellectual Property" has the meaning set forth in
Section 5(i) of this Agreement.
(xxxvi) "Inventory" means the pager products or PCS mobile
handsets which have been selected by Purchaser in connection with a physical
inventory performed immediately prior to the Closing and which have an aggregate
value of $50,000 (based off of Seller's cost).
(xxxvii) "Leases" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(xxxviii) "License Transfer" has the meaning set forth in
Section 5(q)(iii) of this Agreement.
(xxxix) "Liens" has the meaning set forth in Section 2(a) of
this Agreement.
(xl) "Limited Partnership Agreement" has the meaning set forth
in Section 5(b) of this Agreement.
(xli) "Material Contracts" has the meaning set forth in
Section 5(n) of this Agreement.
(xlii) "Partners" means the record and beneficial owners of
all of the issued and outstanding partnership interests of Seller, and includes
both general partners and limited partners of Seller.
(xliii) "Partnership Certificate" has the meaning set forth in
Section 5(b) of this Agreement.
(xliv) "Personal Property Leases" has the meaning set forth in
Section 5(m)(ii) of this Agreement.
(xlv) "Petroleum Materials" has the meaning set forth in
Section 5(cc) of this Agreement.
(xlvi) "Pre-Closing Escrow Agreement" has the meaning set
forth in Section 4(d) of this Agreement.
(xlvii) "Pre-Closing Escrow Deposit" has the meaning set forth
in Section 4(d) of this Agreement.
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(xliii) "Predecessor Entity" means Francis Communications
Corporation, a Texas corporation, the predecessor in interest to Seller.
(xlix) "Premises" has the meaning set forth in Section
5(m)(ii) of this Agreement.
(l) "Purchaser Broker Agreement" has the meaning set forth in
Section 15 of this Agreement.
(li) "Purchase Price" has the meaning set forth in Section
4(a) of this Agreement.
(lii) "Purchaser" means Aquis Communications, Inc., a Delaware
corporation.
(liii) "Real Property" has the meaning set forth in Section
5(cc) of this Agreement.
(liv) "Registration Rights Agreement" has the meaning set
forth in Section 4(a)(ii) of this Agreement.
(lv) "Retained Liabilities" has the meaning set forth in
Section 2(c)(v) of this Agreement.
(lvi) "Seller" means Francis Communications I, Ltd., a Texas
limited partnership.
(lvii) "Seller Broker Agreement" has the meaning set forth in
Section 15 of this Agreement.
(lviii) "Seller GP" means Francis Communications Texas, Inc.
(lix) "Seller's Knowledge" in a representation or warranty of
Seller means the actual knowledge of L. Frederick Francis, Ellis E. Gerrish and
the employees of Seller who are familiar with the Business and the Assets or the
matters with respect to which such representation or warranty is made, but does
not include, except as specifically provided hereafter, constructive knowledge.
Notwithstanding the foregoing, such phrase requires that such individuals: (i)
undertake a reasonable examination of their and Seller's files and the assets
relating to the Business to ascertain whether such files or asset examination
reveal facts relevant to the representation or warranty in question, and (ii)
make a reasonable inquiry of the other employees or agents of Seller whom they
reasonably believe may have knowledge relating to the facts relevant to such
representation or warranty.
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(lx) "Shares" has the meaning set forth in Section 4(a)(ii) of
this Agreement.
(lxi) "Spare Parts" has the meaning set forth in Section
2(a)(iii) of this Agreement.
(lxii) "Superfund" or "Superlien" has the meaning set forth in
Section 5(cc) of this Agreement.
(lxiii) "Telephone Number Inventory" has the meaning set forth
in Section 5(f)(ii) of this Agreement.
(lxiv) "Transmitter Facilities" has the meaning set forth in
Section 5(q)(i) of this Agreement.
(lxv) "Trade Names" has the meaning set forth in Section
2(a)(x) of this Agreement.
(lxvi) "Valid Accounts Receivable" means Accounts Receivable
due upon an Active Unit.
(lxvii) "Year 2000 Compliant" has the meaning set forth in
Section 5(e)(i) of this Agreement.
2. Acquisition of Assets; Assumption of Liabilities.
(a) Sale and Purchase of Assets. In exchange for the consideration
specified herein, and on the terms and subject to the conditions and based upon
the representations, warranties and agreements of the parties hereinafter set
forth, Purchaser hereby agrees to purchase from Seller, and Seller hereby agrees
to grant, sell, convey, assign and deliver to Purchaser, all of the property and
assets (the "Assets") of Seller, other than the Excluded Assets. The Assets
shall include, without limitation, the following:
(i) all radio paging licenses issued by the FCC ("FCC
Licenses"), and all files relating to the FCC Licenses and correspondence with
the FCC, as set forth on Schedule 2(a)(i);
(ii) all machinery, including but not limited to the machinery
listed on Schedule 2(a)(ii);
(iii) all paging transmission equipment (the"Equipment"),
spare parts and maintenance manuals for the Equipment ("Spare Parts"), any and
all rights of Seller under
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warranties covering such Equipment and parts, and all contracts for maintenance
or servicing of the Equipment;
(iv) furniture, fixtures, computer and other office equipment
and supplies located on any Premises, including, without limitation, the
computer hardware listed on Schedule 2(a)(iv);
(v) the Telephone Number Inventory and office telephone and
other utility services of the Business;
(vi) all Accounts Receivable;
(vii) the customer lists listed on Schedule 2(a)(vii)
("Customer List"), which Seller represents and warrants are the only customer
lists relating to the Business, and all other books and records relating to the
Business, other than the Excluded Assets (to the extent they so relate);
(viii) all the Leases and Personal Property Leases;
(ix) the Inventory;
(x) all trade names, trademarks, service marks or other
identifying names used by Seller or the Predecessor Entity in the Business, and
all goodwill related thereto (collectively, the "Trade Names");
(xi) the Billing Software;
(xii) goodwill of Seller;
(xiii) all other assets, properties and rights of Seller used
in or pertaining to the Business, other than the Excluded Assets.
All of the Assets will be acquired by Purchaser free and clear of
all security interests, mortgages, pledges, liens, claims, encumbrances and any
other third party rights (collectively,"Liens") except as otherwise set forth in
this Agreement.
(b) Excluded Assets. Notwithstanding the foregoing, Assets shall not
include any of the following (the "Excluded Assets"):
(i) The corporate seals, certificates of incorporation, minute
books, stock books, tax returns, books of account, certificates of limited
partnership, limited partnership agreement or other records having to do with
the organization of Seller, Seller's general partner or the Predecessor Entity
or their operations prior to the Closing Date;
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(ii) The rights which accrue or will accrue to Seller under
this Agreement; and
(iii) All cash on hand.
(c) Assumption of Certain Liabilities. In addition to the
consideration provided for in Section 4, at the Closing Purchaser shall assume
the following obligations and liabilities of Seller (collectively, "Assumed
Liabilities"):
(i) the Leases;
(ii) a pro rata portion of the cost of Seller's Yellow Pages
advertisement relating to the Business;
(iii) customer deposits ("Customer Deposits") as set forth in
Schedule 2(c)(iii);
(iv) Deferred Revenue as set forth in Schedule 2(c)(iv); and
(v) the postage meter rental agreement, software maintenance
agreement, and other contractual obligations of Seller, if any, all as set forth
in Schedule 2(c)(v). Except to the extent expressly assumed by Purchaser
hereunder, Purchaser shall not assume or otherwise be responsible for or bound
by any liabilities or obligations of Seller of any kind or nature, known or
unknown, actual or contingent, matured or unmatured, liquidated or unliquidated,
or otherwise arising out of occurrences on or through the Closing Date
including, but not limited to, any obligation to retain any employee of the
Business or any obligation or liability arising out of Seller's employment or
termination of any employee (collectively, the "Retained Liabilities").
3. Closing. The closing of the purchase and sale provided for in this
Agreement shall take place at the offices of Scott, Hulse, Marshall, Feuille,
Finger & Thurmond, P.C., 1100 Chase Tower, 201 E. Main, El Paso, Texas 79901, or
such other place as the parties may agree, on the last day of the month
following the date upon which all of the conditions precedent to the closing
stated in Sections 7 and 8 have been satisfied in full, provided, that if such
date is not at least ten (10) days from the date of satisfaction of such
conditions, then the closing shall take place on either (i) the last day of the
month following the month in which all such conditions precedent are satisfied,
or (ii) such earlier date during such following month as may be determined by
Purchaser. (Such closing is hereinafter sometimes referred to as the "Closing,"
and such time and date is hereinafter sometimes referred to as the "Closing
Date"). The purchase of the Assets shall be effective as of the Closing Date.
4. Purchase Price and Payment/Adjustments.
(a) Purchase Price. The purchase price is as follows ("Purchase
Price"):
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(i) The sum of $4,000,000, payable as follows, subject to any
adjustments as set forth herein:
(1) $3,600,000 at the Closing, subject to adjustments in
accordance with Section 4(c), by certified or bank check or by wire transfer
payable to Seller.
(2) $400,000 by certified or bank check or by wire
transfer payable to Chase Bank of Texas, N.A. ("Escrow Agent"), such funds to be
held and disbursed pursuant to a closing escrow agreement ("Closing Escrow
Agreement") substantially in the form annexed hereto as Exhibit "A," with such
changes as may be reasonably required by the Escrow Agent and mutually agreeable
to Seller and Purchaser.
(ii) In addition to the cash consideration set forth above,
Purchaser shall deliver to Seller 100,000 shares of the common capital stock of
Aquis Communications Group, Inc., a Delaware corporation ("Aquis Group") at
Closing (the "Shares"), which number shall be adjusted proportionately to
reflect any changes in Aquis Group's capitalization from and after the date
hereof, including, without limitation, changes in capitalization by reason of a
reverse stock split. Within forty-five (45) days after the Closing, Purchaser
shall file with the Securities and Exchange Commission a registration statement
covering the Shares, as more fully described in the Registration Rights
Agreement to be entered into between the parties on the Closing Date, which
shall be substantially in the form of Exhibit "B" hereto (the "Registration
Rights Agreement").
(b) Allocation of Purchase Price. The Purchase Price allocation for
each component of the Assets is as set forth on Schedule 4(b) to this Agreement.
(c) Purchase Price Adjustments.
(i) In the event that during the three (3) full calendar month
period immediately preceding the Closing Date Seller's average monthly gross
revenue (which shall be computed in accordance with the GAAP accrual basis) from
subscribers ("Average Gross Revenue") shall be less than $160,000, there shall
be deducted from the Purchase Price, and from the payment due pursuant to
Section 4(a)(i)(l), an amount equal to twenty-five (25) times the amount by
which $160,000 exceeds Seller's actual Average Gross Revenue during said three
(3) month period.
(ii) In the event that the total dollar value of the Deferred
Revenue plus Customer Deposits assumed by Purchaser at Closing exceeds the total
dollar value of the Valid Accounts Receivable at Closing, there shall be a
dollar for dollar reduction in the Purchase Price and from the payment due
pursuant to Section 4(a)(i)(l), for each dollar of excess.
(d) Pre-Closing Escrow. Upon execution of this Agreement, Purchaser
has deposited with Escrow Agent the sum of $100,000 by certified or bank check
or by wire transfer payable to Escrow Agent. Said amount (the "Pre-Closing
Escrow Deposit") shall be held by Escrow Agent in accordance with the terms of
the pre-closing escrow agreement ("Pre-Closing Escrow
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Agreement")substantially in the form annexed hereto as Exhibit "C." As set forth
in the Pre-Closing Escrow Agreement, in the event that the transaction
contemplated herein is not consummated due solely to a breach by Purchaser of
any of its warranties, representations or covenants contained herein, or if
Purchaser does not obtain the FINOVA Consent as provided in Section 16 hereof,
then the Pre-Closing Escrow Deposit shall be paid by Escrow Agent to Seller and
retained by Seller in order to partially compensate Seller for the costs and
expenses incurred by Seller in negotiating this Agreement. In the event that the
transaction contemplated herein is closed, the parties agree to direct the
Escrow Agent at Closing to terminate the Pre-Closing Escrow Agreement and
deliver the Pre-Closing Escrow Deposit to Purchaser at Closing, or as otherwise
directed by Purchaser.
5. Representations and Warranties of Seller. As an inducement for
Purchaser to enter into this Agreement and perform its obligations hereunder,
Seller and the Seller GP hereby represent and warrant to Purchaser as set forth
below. Each of such representations and warranties are correct and complete as
of the date hereof and shall be correct and complete as of the Closing, with the
same effect as if said representations and warranties had been made at and as of
the Closing Date.
(a) Power and Authority. Seller has full, lawful power to own all of
the Assets and to carry on the activities of the Business as presently conducted
and to own, hold and operate the properties that it owns and holds. The
execution and delivery of this Agreement and the other agreements, certificates
and documents executed pursuant hereto by Seller and the Seller GP have been
authorized by Seller and the Seller GP, respectively, and such agreements,
certificates and documents are valid and binding upon Seller and Seller GP,
respectively, in accordance with their respective terms.
(b) Noncontravention. Neither the execution and delivery of this
Agreement by Seller or the Seller GP, nor the performance of Seller in
consummating the transactions contemplated by this Agreement will (i) conflict
with or result in a violation or breach of, or default or termination under, any
terms or provisions of Seller's limited partnership agreement ("Limited
Partnership Agreement"), certificate of limited partnership ("Partnership
Certificate") other partnership governance documents or the Seller GP's
organizational documents or any other agreement or instrument to which Seller or
the Seller GP is a party or by which Seller or the Seller GP or the Business is
bound, or (ii) result in the imposition of any Lien upon any of the Assets.
(c) Governmental Approvals. Except for the approval of the Federal
Communications Commission (the "FCC"), no consent, approval or authorization of
or declaration or filing with any governmental authority is required in
connection with the execution or delivery of this Agreement by Seller, the sale
of the Assets and operation of the Business as currently operated by Seller, the
transfer of the Assets, including the FCC Licenses, to Seller from the
Predecessor Entity, or the consummation by Seller of the transactions
contemplated hereby.
(d) Formation, Good Standing and Qualifications. Seller is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Texas and is licensed to do business and in good standing under the
law of the State of New Mexico. Seller GP is a corporation duly formed, validly
existing and in good standing under the laws of the State of
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Texas. Neither Seller nor the Business is licensed or qualified to do business
in any states other than Texas and New Mexico, and neither the character of
Seller's properties nor the nature of the Business make it necessary for Seller
or the Business to be licensed or qualified to do business in any other state.
Included in Schedule 5(d) attached hereto are correct and complete copies of the
Limited Partnership Agreement and Partnership Certificate, each as amended to
date. Such Limited Partnership Agreement and Partnership Certificate are in full
force and effect.
(e) Equipment and Telecommunications Transmission Services.
(i) Schedule 5(e)(i) sets forth all of the Equipment and Spare
Parts (and their location) used in or pertaining to the Business, including all
of the terminals, transmitters, link receivers and antennas used by Seller to
provide paging service in support of the Business. Seller has good and valid
title to the Equipment and the Spare Parts for such Equipment, free and clear of
all Liens (other than liens reflected in Schedule 5(h)(ii), which shall be
released at Closing). The Equipment and the Spare Parts are Year 2000 compliant.
For purposes of this Agreement "Year 2000 Compliant" means, with respect to
Seller's information technology, that the information technology is designed to
be used prior to, during, and after the calendar Year 2000 A.D.,and the
information technology used during each such time period will accurately
receive, provide and process date/time data (including, but not limited to,
calculating, comparing and sequencing from, into and between the twentieth and
twenty-first centuries, including the years 1999 and 2000, and leap year
calculations) and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
information technology, used in combination with the information technology
being acquired, properly exchanges date-time data with it.
(ii) Schedule 5(e)(ii) sets forth a list of all of the
telecommunications transmission services provided in support of the Business,
including services to (A) connect paging terminals to transmitters; (B) connect
transmitters to monitoring locations for the performance of status monitoring,
control and trouble-shooting functions; and (C) program numbers into the paging
terminals and perform remote monitoring, adjustments, and trouble-shooting with
respect to the paging terminals.
(f) Telephone Number Inventory. Schedule 5(f) sets forth:
(i) the telephone numbers that have been assigned to or
associated with individual paging units used by customers as part of the
Business; and
(ii) the telephone numbers available for assignment to or
association with individual paging units as part of the Business. All such
telephone numbers (the "Telephone Number Inventory") have been activated in the
paging control terminals included in the Equipment.
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(g) Financial Statements.
(i) Attached hereto as Schedule 5(g)(i) are unaudited
financial statements of the Business, including statements of income and
retained earnings for the fiscal years ending December 31, 1998 and 1997 and for
the three (3) months ending March 31, 1999 (the "Financial Statements"). The
Financial Statements have been prepared on the same basis as Seller reports its
income for federal income tax purposes, consistently applied, and said Financial
Statements fairly and accurately present the results of operations of the
Business for the periods covered thereby and the financial condition of the
Business as of the dates indicated thereon, and comply with the books and
records of the Business. Since the date of the last balance sheet (the "Balance
Sheet") contained in the Financial Statements ("Balance Sheet Date"), the
Business has operated in the ordinary course of business and has, since the
Balance Sheet Date, and will, through the Closing Date, continue to operate only
in the ordinary course of business on the same basis as it has heretofore. Since
the Balance Sheet Date, there has been no materially adverse change in the
financial condition of the Business, and Seller knows of no such pending change;
(ii) Attached hereto as Schedule 5(g)(ii) are the compilation
financial statements which were delivered to Purchasers' accountants (Price
Waterhouse Coopers) which include a statement of operations for the year ended
December 31, 1998 and a balance sheet at December 31, 1998. Such financial
statements were compiled in accordance with GAAP.
(iii) Seller is in possession of the information necessary for
Purchaser's accountants to conduct an audit of the Seller (and the Predecessor
Entity) for the fiscal year 1998 (if determined by Purchaser's accountants to
conduct such an audit), and Seller will maintain such information for a period
of two (2) years following the Closing Date and provide such information to
Purchaser (or its accountants), upon request during such period of time.
(h) Assets.
(i) Except as set forth on Schedule 5(h)(i)hereto, to Seller's
Knowledge, the physical Assets are in good operating condition, reasonable wear
and tear excepted, and are free from any defects which could have a material
adverse effect on the Assets or the operations of the Business, are in
conformity with the manufacturer's specifications (including the ability to
perform the functions for which it was designed), and are in compliance with FCC
regulations. Except for the Excluded Assets, the Assets constitute all of the
properties, assets and rights that have been used in the conduct of the Business
and which are necessary to the operation of the Business. Except for the
Excluded Assets, the Assets are all of the assets and properties previously
owned and held by the Predecessor Entity relating to the Business. There are no
assets of Seller not included in the Assets which are material to the operation
of the Business and the absence of which would have a material adverse effect on
Purchaser's ability to conduct the Business in the same manner that it has been
previously conducted. Except as disclosed on Schedule 5(h)(i), the Assets are
now and will be at the Closing Date located at Seller's places of business and
will not be removed therefrom unless
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Seller shall have received Purchaser's written consent to such action, which
consent is in Purchaser's sole and absolute discretion.
(ii) Except as set forth on Schedule 5(h)(ii),Seller has good
and marketable title to all the Assets free and clear of any Liens.
(i) Business Names and Business Addresses. Schedule 5(i) sets forth
any Trade Names used by Seller or the Predecessor Entity over the past five (5)
years and all of the business address(es) of Seller or the Predecessor Entity
for the past five (5) years. Schedule 5(i) also sets forth any copyright,
patents, or intellectual property owned by Seller or used by Seller in
connection with the Business (collectively with the Trade Names, the
"Intellectual Property"). Seller has not registered or attempted to register the
Intellectual Property, but is not aware of any other party using the
Intellectual Property. Seller has not received any notice of adverse claims,
invalidity or infringement of any rights of others with respect to the
Intellectual Property and none of the Intellectual Property is the subject of
any pending or threatened claim, litigation or lien. To Seller's Knowledge,
Seller's use of the Intellectual Property did not and does not infringe upon, or
otherwise violate the rights of any third party.
(j) Liabilities. Except for leases, contracts and other contractual
obligations not required to be reflected under GAAP, there are no liabilities,
obligations or claims of any nature of or against Seller, the Predecessor Entity
or the Business (whether threatened, accrued, contingent, absolute,
unliquidated, asserted or otherwise, whether due or to become due) which were
not disclosed or reflected fully on the Balance Sheets, and there are no such
liabilities, obligations or claims of or against Seller, the Predecessor Entity
or the Business, other than those disclosed or reflected in the Financial
Statements.
(k) Taxes.
(i) All taxes, including, without limitation, income,
accumulated earnings, property, sales, use, franchise, added value, employees'
income, withholding and social security taxes, imposed by the United States, or
by any state, municipality, subdivision or instrumentality of the United States
or of any foreign country, or by any other taxing authority, which are due or
payable by Seller, the Predecessor Entity or the Business, and all interest and
penalties thereon, have been paid in full, and all tax returns and reports
required to be filed in connection therewith have been accurately prepared and
duly and timely filed and all deposits required by law to be made by Seller, the
Predecessor Entity or the Business with respect to employees' withholding taxes
have been duly made.
(ii) Neither Seller nor the Predecessor Entity has been
delinquent in the payment of any foreign or domestic tax, assessment or
governmental charge, fee or deposit and there is no tax deficiency or claim
outstanding, proposed or assessed against Seller, the Predecessor Entity or the
Business.
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(iii) Except as set forth on Schedule 5(k)(iii) hereof, no
audit has been conducted of the tax returns relating to the Business during the
last ten (10) year period.
(iv) After the Closing, Purchaser will incur no liability or
expense by virtue of taxes relating to the Business for the period between the
Balance Sheet Date and the Closing Date.
(l) Inventory. All of Seller's inventories, including the Inventory,
consist of items of a quality usable, marketable and saleable in the normal
course of the Business.
(m) Property.
(i) Seller does not own fee title to any real property.
(ii) Schedule 5(m)(ii) contains a complete and correct list
and description of all of Seller's leases (whether oral or written) with respect
to real property (the "Leases"), including a description of all buildings,
structures, improvements, transmitters, terminals and other equipment located at
each of the premises underlying such Leases (collectively, the "Premises"), and
all licensing arrangements and leases of personal property relating to the
Business ("Personal Property Leases"), to which Seller is a party (either as
lessor, lessee, licensor or licensee). All such leases and licensing agreements
are valid and effective in accordance with their respective terms and there are
no existing defaults or events of default or events which with notice or lapse
of time or both would constitute defaults or which would interfere with the
enjoyment by Seller or any assignee of the benefits of such instrument or their
use and enjoyment of the real or personal property. Except as set forth on
Schedule 5(m)(ii), no consents are required in order to transfer any of the
Leases, Personal Property Leases or licenses to Purchaser.
(iii) Except as set forth on Schedule 5(m)(iii), all
activities and operations conducted by Seller on the Premises, and all
structures, improvements and fixtures by Seller on the Premises, conform to any
and all applicable federal, state and local laws, ordinances and regulations,
including, without limitation, zoning and building ordinances and health,
environmental and safety laws, ordinances and regulations, and the Premises are
zoned for the various purposes for which the Premises are currently being used.
(iv) Except as set forth on Schedule 5(m)(iv), to Seller's
Knowledge, there is no condition resulting from the activities of the Business
which would adversely affect or impair the use of any of the Premises for the
purposes for which Seller is currently using the same or which could result in
the imposition of liability on Purchaser.
(v) To Seller's Knowledge, there are no existing, pending or
threatened condemnations, or violations of other governmental regulations giving
rise to pending or threatened governmental or administrative actions that will
materially adversely affect or impair the use of any of the Premises for the
purposes to which Seller is currently using the same.
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(n) Material Contracts. Schedule 5(n) contains a list of all
material contracts and documents to which Seller is a party, true and complete
copies of which have been delivered to Purchaser, or in the case of contracts
with Seller's subscribers, made available to Purchaser. All the subscribers of
Seller are party to a written contract with Seller; all of such contacts are
substantially in the form of the contract attached hereto as Exhibit "D." Except
only as to contracts and documents listed on Schedule 5(n), Seller, with respect
to the Business, is not a party to any written or oral (i) contract not made in
the ordinary course of business; (ii) employment contract which is not
terminable without cost or other liability to Seller on notice of thirty (30)
days or less, (iii) contract with any labor union, (iv) bonus, deferred
compensation, pension, profit-sharing, retirement, stock purchase,
hospitalization, insurance or similar plan providing employee benefits, (v)
lease with respect to any property, real or personal, whether as lessor or
lessee, (vi) continuing contract for the future purchase of materials, supplies
or equipment in excess of the requirements of the Business now booked or for
normal operating inventories, (vii) contract involving the expenditure of more
than one thousand dollars ($1,000), (viii) contract continuing over a period of
more than one year from its date, (ix) contract interfering with Seller's
exclusive and unrestricted use of any Trade Names or other Intellectual
Property, or other contract, agreement or understanding, (x) inter-carrier
agreement, agreement with a reseller or agreement with an agent, (xi)
interconnection agreement with any local exchange carrier or interexchange
carrier, or (xii) any agreement relating to circuits used to control the
transmitters used in the Business (collectively,"Material Contracts") and the
Business is not subject to any restriction that materially adversely affects the
Assets, or the Business or its financial condition or prospects.
(o) Compliance With Laws; Litigation.
(i) Except as set forth in Schedule 5(o)(i), to Seller's
Knowledge, each of Seller and the Predecessor Entity has complied in all
material respects with all laws, regulations and orders affecting the Business
and its operations (including without limitation the rules of the FCC relating
to regulatory fees, universal service fund obligations, telecommunications relay
service, antenna support structure lighting and marking, tower registration,
timely construction of facilities and the provision of service to subsidiaries,
and the timely filing of applications and reports). Neither the Seller nor the
Predecessor Entity has received notice or otherwise been advised that Seller,
the Predecessor Entity or the Business is not in conformity with any such laws.
To Seller's Knowledge, there are no actions, suits or proceedings, either at law
or in equity, pending or threatened against Seller or the Business
(collectively, an"Action"). No Action involves the possibility of any judgment
or liability against Seller or the Business not fully covered by insurance,
which may result in a materially adverse change in the financial condition of
the Business, or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
(ii) Except as set forth on Schedule 5(o)(ii), there are no
lawsuits or other private or governmental investigations, inquiries, proceedings
or claims pending or threatened against Seller or the Business, or any of its
property or assets, or which could affect the consummation of the transactions
contemplated hereby; and to Seller's Knowledge there is no valid basis for any
such lawsuit, proceeding or claim. Except as set forth on Schedule 5(o)(ii),
there are
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no judgments, decrees or orders binding upon Seller or the Business, the effect
of which would be to prohibit any business practice of the Business, the
disposition of the Assets by Seller, the conduct of the Business by Seller or
Purchaser or the consummation of the transactions contemplated herein. Except as
set forth on Schedule 5(o)(ii) there are no violations, citations, fines,
injunctions or penalties heretofore asserted against or imposed on Seller, the
Business, or its properties or assets, or with respect to the conduct of the
Business under any federal, state or local law or of which Seller has received
notice or which otherwise bind the properties or assets of Seller or the
Business, and none has been threatened.
(iii) Except as set forth in Schedule 5(o)(iii), there exists
no default under any mortgage indenture, contract or agreement, which default
may result in a materially adverse change in the Assets, or the financial
condition or business or operations of the Business.
(p) Accounts Receivable. All Accounts Receivable arise from bona
fide transactions made in the ordinary course of business and represent services
rendered or inventory sold in the ordinary course of business. All such Accounts
Receivable are fairly presented, and all the Accounts Receivable are the result
of arms-length transactions with third parties. The collectibility of the
Accounts Receivable will not be impaired by any statute of limitations, right of
set-off, counterclaim or defense. Set forth on Schedule 5(p) are computer
printouts containing detailed listings of Accounts Receivable as of the dates
specified therein (which shall be updated through the Closing Date) and which
reflect the periods of time that such accounts have been outstanding as of the
dates of such listings.
(q) Licenses; Service Area.
(i) Schedule 5(q)(i) sets forth all of the FCC Licenses held
by Seller, the Predecessor Entity or relating to the Business and copies of all
associated pending license applications, 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 the FCC Licenses, and
any authority provided under the FCC rules for fill-in transmitters that have
not been memorialized by any filing with the FCC, but which are listed on
Schedule 5(q)(i) ("Fill-in Transmitters"). The FCC Licenses are in full force
and effect, are validly held by Seller, and are free and clear of Liens,
conditions or other restrictions of such nature as would materially limit the
operation of Seller's antenna and transmitter sites covered by the FCC Licenses,
including sites for any Fill-in Transmitter, (all such sites are collectively
referred to as the "Transmitter Facilities"). Except for the FCC Licenses, there
are no permits, licenses or other authorizations currently held by it, or
required by law to be held by it, with respect to ownership of the Assets or
operation of Business, except where the failure to hold such a permit, license
or other authorization would not reasonably be expected to materially effect
ownership of the Assets or conduct of the Business. The sites set forth in the
FCC Licenses and any associated sites for Fill-in Transmitters listed therewith
in Schedule 5(q)(i) constitute all of the sites necessary for the conduct of the
Business and have been timely constructed and placed into operation with service
to subscribers by Seller in accordance with the rules of the FCC. There are no
applications, petitions to deny, complaints or proceedings
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pending before the FCC or relating to the operations of or the provision of
service from the Transmitter Facilities that could preclude Seller from entering
into this transaction or consummating the transactions contemplated hereby or
that could affect the validity of the FCC Licenses.
(ii) The service areas in which the Business operates are
described on Schedule 5(q)(ii).
(iii) The FCC Licenses have been validly transferred from the
Predecessor Entity to Seller ("License Transfer") and no further filings are
required in order to effectuate the License Transfer.
(r) Benefit Plans. Except as disclosed in Schedule 5(r), the
Business does not have any pension, retirement, profit sharing or bonus plan, or
other employee welfare or benefit plan. Neither Seller nor the Business
participates in, nor does it have any obligation to contribute to, or any
withdrawal liability with respect to, any "multiemployer plan" as such term is
defined in Section 4001 of ERISA and has not received notice of the
reorganization of any such plan.
(s) Employees. Set forth in Schedule 5(s) is a list of all employees
of Seller and the compensation of each. Seller is not a party to any union or
collective bargaining agreement or other agreements or arrangements of any kind
with any other employee organization or association with respect to any of its
employees. To Seller's Knowledge, there is no condition or circumstance which
will or may cause the Business to suffer any strike, union representation
contest, labor trouble or work stoppage, and the Business has not suffered any
strike, union representation contest, labor trouble or work stoppage within the
past five (5) years.
(t) Insurance. Set forth on Schedule 5(t) is a list of all insurance
policies relating to the Business to which Seller is a party, including the
expiration dates of said policies. Complete copies of said policies have been
delivered to Purchaser. Prior to the Closing, Seller will use its reasonable
commercial efforts to continue in full force and effect after the Closing, at
Purchaser's expense, the policies which Purchaser requests to be kept.
(u) Account Information. Schedule 5(u) contains (i) a current list
of resellers with whom Seller has contracts or agreements and accounts of the
Business, (ii) a current list of Seller's service rates for all resellers and
all types of service and accounts, (iii) a list of accounts and resellers which
sets forth the number of accounts and resellers by type and the average monthly
billing for each reseller and type of account, and (iv) a summary of the number
and type of accounts on each frequency used by the Business. Seller is not aware
of any circumstances currently existing which could result in the loss of any
current reseller or account of the Business as a consequence of the transfer of
ownership of the Business.
(v) Consents and Approvals. Except as set forth on Schedules
5(m)(ii) and 5(v), no consent, approval or waiver of or by any third party,
except those which have been obtained and which have been delivered to
Purchaser, is necessary in order to permit the transfer and assignment
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of the Business and the Assets to Purchaser, free and clear of any liens or
encumbrance, and the failure by Seller to secure any consent or waiver will not
result in any adverse affect upon the Assets or upon Purchaser or its abilities
to operate the Business.
(w) Changes in the Business. Except as set forth on Schedule 5(w),
since January 1, 1998, neither Seller, the Predecessor Entity nor the Business
has:
(i) Made any material changes in the Business or operations of
the Business or the manner of conducting such Business or operations;
(ii) Suffered any damage, destruction or loss materially
adversely affecting the Business or its operations;
(iii) Sold, assigned or transferred any trade secret, customer
list or account or suffered any materially adverse change with respect to any of
the foregoing;
(iv) Suffered any material adverse change in its condition,
financial or otherwise;
(v) Sold, leased, disposed of, mortgaged, pledged or suffered
(without being released or relieved therefrom), any lien or encumbrance or
waived any substantial rights relating to any property or assets, tangible or
intangible, relating to the Business, other than in the ordinary course of
business; or
(vi) Entered into any transaction or material contract or
agreement other than in the ordinary course of business.
(x) Documents Relating to Business. Seller has furnished, or in the
case of Seller's subscribers, made available, to Purchaser every material
agreement, instrument, letter, pleading, consent, waiver, notice, note and every
material document of whatever nature relating to the Business, and to Seller's
Knowledge, there is no other material document or instrument of any kind that
Seller has failed to furnish that would or might affect the truth, accuracy or
completeness of the representations and warranties contained herein. No
representation or warranty by Seller in this Agreement or any Exhibit, Schedule
or related agreement contains or will contain any untrue statement of a material
fact nor omits or will omit to state a material fact necessary to make the
statements contained therein not misleading.
(y) Books and Records. To Seller's Knowledge, the records of the
Business are complete and accurate in all material respects. The financial books
and records of the Business have been maintained consistently in accordance with
sound business practices and are accurate and complete in all material respects.
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(z) Payments.
(i) Except as set forth on Schedule 5(z) neither Seller, the
Predecessor Entity nor the employees or agents, or any other person acting on
behalf of Seller, the Predecessor Entity or the Business, has, directly or
indirectly, within the past five (5) years given or agreed to give any gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office or other person who is or may be in a position to help
or hinder the Business which: (A) might subject Seller, Purchaser or the
Business to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or, (B)which if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Business
as reflected in the Financial Statements or (C) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Business.
(ii) Seller has not obtained, directly or indirectly, any
property as a result of activities, or used any property to conduct activities,
which activities may constitute or result in a violation of any federal, state
or local law, rule or regulation, the penalty for which could be forfeiture of
such property.
(aa) Schedules. Each of the Schedules described in this Agreement is
dated the date of this Agreement (unless the Schedule indicates specifically
that it is prepared as of a different date), identified specifically as a
schedule to a particular Section and is hereby certified by Seller as being true
and complete. Any information disclosed in any Schedule described in this
Agreement shall be deemed disclosed for purposes of all other such Schedules to
which such information is relevant.
(bb) Active Units. The number of Active Units as of February 28,
1999 was 24,474.
(cc) Environmental Matters. With respect to any real property leased
by Seller pursuant to a Lease (any such real property is referred to herein as
"Real Property"), to Seller's Knowledge, there has been no use, generation,
manufacture, production, storage, release, discharge or disposal of any
Hazardous Material (as defined below) on, under or about the Real Property or
transportation by Seller or its employees, agents or representatives of any
Hazardous Materials to or from the Real Property, except for petroleum-based
solvents and products ("Petroleum Materials") that are used in connection with
the servicing of equipment in the normal course of the Business, which Petroleum
Materials are stored or handled on the Premises in full compliance of all
applicable laws. For purposes of this Section 5(cc), "Hazardous Materials" means
any hazardous material, hazardous substance, regulated substance, pollutant or
contaminant, hazardous waste, or hazardous chemical, as those terms are defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any other comparable "Superfund" or "Superlien" law, the
Resource Conservation and Recovery Act of 1976, as amended, the Hazardous
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Materials Transportation Act, any regulations promulgated under the foregoing,
or by the U.S. Environmental Protection Agency or any applicable state or local
environmental agency.
(dd) Contracts. Except as set forth in Schedule 5(dd), each
agreement, arrangement, commitment, contract, lease, license, instrument or
other obligation which is included in the Assets (collectively,"Contracts") is
valid, binding and enforceable in accordance with its terms and is in full force
and effect, and there are no existing violations or defaults by Seller or to
Seller's Knowledge any other party thereto and to Seller's Knowledge no event,
act or omission has occurred which (with or without notice or the passage of
time or both) would result in a material violation in default under any such
Contract. Except as reflected in the Schedules, all amounts due and payable
under each such contract have been paid.
(ee) Billing Software. Seller is the sole owner of all right title
and interest in and to the billing software used to bill accounts in connection
with the business and all intellectual property rights thereto (the "Billing
Software"). The computer hardware set forth in Schedule 2(a)(iv) and the Billing
Software collectively comprise the billing system utilized by Seller to perform
billing services. The Billing Software as configured and delivered to Purchaser
at the Closing, shall perform and function and be in the same condition as was
the case during the three billing cycles immediately preceding the date hereof.
6. Representations and Warranties of Purchaser and Group. As an inducement
for Seller to enter into this Agreement and perform its obligations hereunder,
each of Purchaser and Group represents and warrants to Seller as set forth
below. Each of such representations and warranties are correct and complete as
of the date hereof and shall be correct and complete as of the Closing, with the
same effect as if said representations and warranties had been made at and as of
the Closing Date:
(a) Organization and Good Standing. Each of Purchaser and Group is a
corporation duly organized, validly existing and in good standing under of the
laws of the State of Delaware.
(b) Forestallments. Neither Purchaser nor Group is a party to or
subject to any contract or agreement or any judgment, order, writ, injunction or
decree of any court or governmental body which will prevent its performance of
its obligations under this Agreement.
(c) Authorization. The execution and delivery of this Agreement and
the other agreements, certificates and documents contemplated hereby or referred
to herein has been duly authorized by its directors as required under the laws
of the State of Delaware, and no other corporate action is required for the
approval of this Agreement or such other agreements, certificates and documents
executed and delivered by Purchaser or Group, all of which are valid and binding
upon Purchaser or Group, to the extent each is a party thereto, in accordance
with their respective terms.
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(d) Noncontravention. Neither the execution and delivery of this
Agreement by Purchaser and Group, nor the performance of Purchaser and Group in
consummating the transactions contemplated by this Agreement will conflict with
or result in a violation or breach of, or default, or termination under, any
terms or provisions of either Purchaser's or Group's corporate charter or bylaws
or of any terms or provisions of any other agreement or instrument to which
Purchaser or Group is a party or by which Purchaser or Group is bound.
(e) Consents and Approvals. Except for the approvals of the FCC, and
requisite filings with the Securities and Exchange Commission, no consent,
approval, authorization, waiver, declaration or filing of, by or with any
governmental authority or by any third party, except those which have been
delivered to Seller, is necessary in connection with the execution or delivery
of this Agreement by Purchaser and Group or the consummation by Purchaser or
Group of the transactions contemplated hereby.
(f) FCC Qualification. Purchaser is legally qualified to hold the
FCC Licenses.
7. Conditions Precedent to Purchaser's Obligation to Close. All
obligations of Purchaser to close under this Agreement are subject to the
fulfillment of each of the following conditions, prior to or at the Closing:
(a) Representations and Warranties. The representations and
warranties made by Seller and the Seller GP contained herein, including the
Schedules attached hereto, shall be true and correct at and as of the time of
the Closing, with the same effect as though such representations and warranties
were made at and as of such time, except in respects not materially adverse to
Seller, the Seller GP or the Business, and Seller and Seller GP shall deliver to
Purchaser a certificate dated the Closing Date so stating. As used herein, the
phrase "in respects not materially adverse to Seller" shall mean in respects not
materially adverse to the overall financial condition, business or prospects of
the Business.
(b) Performance and Compliance. Seller, on or before the Closing,
shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with at or before the
Closing.
(c) Certificate. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and signed by an appropriate officer of
Seller certifying as to the fulfillment of the conditions set forth in
Subsections (a) and (b) of this Section 7.
(d) Opinion Letters. Purchaser shall have been furnished with
opinions, dated the Closing Date, of Scott, Hulse, Marshall, Feuille, Finger &
Thurmond, P.C., counsel to Seller and of Lukas, Nace, Gutierrez & Sachs, Special
FCC Counsel to Seller, each in substantially the form of Exhibit "E" attached
hereto.
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(e) Governmental Action. No order, ruling or regulation (general or
specific) of any governmental authority shall have been issued or promulgated,
and no judicial or administrative action shall have been taken and shall have
not been rescinded, canceled or reversed, which action has the purpose or would
have the effect of prohibiting the transactions herein contemplated or the
effect of interfering with or materially affecting the right or ability of any
party to this Agreement to consummate any of the transactions contemplated
hereby.
(f) Consents and Approvals. All consents, approvals and waivers of
third parties, including those set forth on Schedule 5(v), the FINOVA Consent,
and consents, permits and approvals of all regulatory agencies or other
authorities having jurisdiction over the transactions contemplated by this
Agreement, including a Final Order from the FCC, shall have been procured and
delivered to Purchaser, and all other requirements prescribed by law shall have
been satisfied.
(g) Prohibitive Proceedings. No suit, action or other proceeding
shall be pending or directly threatened by any federal or state governmental
agency having jurisdiction or authority over either Seller, Seller GP, Purchaser
or Group in which it is sought to restrain or prohibit consummation of the
transactions contemplated by this Agreement.
(h) Other Documentation. Seller shall have delivered such other
documents, opinions and certificates as are reasonably requested by counsel for
Purchaser to effect the consummation of the transactions contemplated herein.
(i) Accountant's Review. Purchaser shall not have been advised by
Purchaser's accountants (the "Accountants"), at or prior to the Closing Date,
that, based upon a review (but not an audit) of the affairs of the Business
through the Closing Date, there has come to their attention facts or
circumstances causing them to believe that Seller's representations and
warranties relating to the Assets, the Financial Statements, and the financial
condition of the Business are not materially true and correct as of the Closing
Date. Any such advice shall be in writing and shall specify in detail the
particulars as to what facts or circumstances have caused the Accountants to
believe that any such representations or warranties are not materially true and
correct or that any such condition has not been fulfilled. Seller shall be given
a reasonable opportunity (not to exceed five (5) business days after delivery to
it of such advice) to explain or remedy any alleged misrepresentation or breach
of warranty. If the Closing thereafter occurs, it shall be deemed to have
occurred as of the originally scheduled Closing Date. In preparing such advice
the Accountants may rely upon written statements of Seller and need not audit
the financial condition of Seller.
(j) Amounts Payable. All amounts payable by Seller to the Business
and all amounts payable by the Business to Seller shall have been netted and
paid in full.
(k) Zoning. There shall not have been commenced, threatened or
received any proceeding, or notice thereof, which results or could result in the
citation of Seller or the Business for violation of zoning ordinances in
connection with the use of the Seller's principal office or requiring the
cessation of such use.
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(l) Other Consents and Approvals. Seller shall have delivered all
consents, approvals and waivers required under any contracts, licenses, leases
(including the Leases) or other agreements material to the Business or shall
have executed and delivered assignments of all such instruments.
(m) UCC Termination Statements. Purchaser shall have received
originally executed UCC-3 termination statements releasing all of Montwood
National Bank's liens.
(n) Dispute Resolution. The matters set forth on Schedule 5(dd)
shall have been resolved to the reasonable satisfaction of Purchaser. In the
absence of such resolution, if either US West Communications or Southwestern
Bell Telephone Company threaten to terminate service to the Purchaser as a
result of such matters, then Purchaser shall be entitled to settle such matters
as it determines to do so and will be entitled to withdraw from the funds being
held pursuant to the Closing Escrow Agreement any amounts expended to settle
such matters.
(o) Transfer of Active Units. The number of Active Units to be
transferred at Closing shall not be less than 23,000.
8. Conditions Precedent to Seller's Obligation to Close. All obligations
of Seller to close under this Agreement are subject to the fulfillment of each
of the following conditions, prior to or at the Closing:
(a) Representations and Warranties. The representations and
warranties made by Purchaser and/or Group contained herein shall be true and
correct at and as of the time of the Closing, with the same effect as though
such representations and warranties were made at and as of such time, except in
respects not materially adverse to Purchaser or Group, and Purchaser shall
deliver to Seller a certificate dated the Closing Date so stating. As used
herein, the phrase "in respects not materially adverse to Purchaser" shall mean
in respects not materially adverse to the overall financial condition, business
or prospects of Purchaser or Group.
(b) Performance and Compliance. Purchaser, on or before the Closing,
shall have performed and complied with all terms, covenants and conditions
required by this Agreement to be performed or complied with at or before the
Closing.
(c) Certificate. Purchaser shall have delivered to Seller a
certificate, dated the Closing Date and signed by an appropriate officer of
Purchaser certifying as to the fulfillment of the conditions set forth in
Subsections (a) and (b) of this Section 8.
(d) Opinion Letter. Seller shall have been furnished with an
opinion, dated the Closing Date, of Phillips Nizer Benjamin Krim &Ballon LLP,
counsel to Purchaser, in substantially the form of Exhibit "F" attached hereto.
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(e) Governmental Action. No order, ruling or regulation (general or
specific) of any governmental authority shall have been issued or promulgated,
and no judicial or administrative action shall have been taken and shall have
not been rescinded, canceled or reversed, which action has the purpose or would
have the effect of prohibiting the transactions herein contemplated or the
effect of interfering with or materially affecting the right or ability of any
party to this Agreement to consummate any of the transactions contemplated
hereby.
(f) Consents and Approvals. All consents, approvals and waivers of
third parties, including the FINOVA Consent, and consents, permits and approvals
of all regulatory agencies or other authorities having jurisdiction over the
transactions contemplated by this Agreement, including a Final Order from the
FCC, shall have been procured and delivered to Seller, and all other
requirements prescribed by law shall have been satisfied.
(g) Prohibitive Proceedings. No suit, action or other proceeding
shall be pending or directly threatened by any federal or state governmental
agency having jurisdiction or authority over either Seller, Seller GP, Purchaser
or Group in which it is sought to restrain or prohibit consummation of the
transactions contemplated by this Agreement.
(h) Other Documentation. Purchaser shall have delivered such other
documents, opinions and certificates as are reasonably requested by counsel for
Seller to effect the consummation of the transactions contemplated herein.
9. Access; FCC Approvals.
(a) Access.
(i) Prior to the Closing, Seller will give to Purchaser and
Purchaser's counsel, accountants or other representatives full access (during
normal business hours) to all properties, documents, contracts, books, records
and other data of the Business; provided, however, that all information received
by Purchaser, Purchaser's counsel, accountants or other representatives shall be
held wholly confidential by each of them and that in taking advantage of such
access, none of them shall interfere with the operation of the Business, and,
provided further, that if the transaction contemplated hereby shall not be
consummated, all data of every kind and nature and all copies of documents taken
by any of said persons shall upon request be returned to Seller and not
otherwise utilized by Purchaser, and provided further that information publicly
available or previously known by Purchaser or later acquired from third parties
having no obligation of confidentiality to Seller need not be held confidential.
(ii) From and after the Closing, Seller will give to
Purchaser, Purchaser's counsel, accountants or other representatives full access
(during normal business hours) to all books and records of Seller with respect
to the period ending on the Closing Date.
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(b) FCC Approvals. Promptly upon execution of this Agreement, Seller
shall commence the proceedings necessary to obtain FCC approval of the transfer
of the FCC Licenses to Purchaser, including filing with the FCC within thirty
(30) days hereof the applications requesting FCC consent to the proposed
assignment of the FCC Licenses to Purchaser. Seller agrees to take all action
necessary to facilitate the granting of such approval and to keep Purchaser
informed as to the course of such proceedings, and Purchaser agrees to cooperate
with Seller in providing any information or assistance reasonably required to
expedite such approval proceedings. Each party shall bear its own costs
associated with obtaining FCC approval of the transfer of the FCC Licenses to
Purchaser, including reasonable attorney's fees. Purchaser and Seller agree to
share equally the filing fees required for such approvals.
10. Affirmative Covenants of Seller. Except as otherwise consented to by
Purchaser, Seller covenants that, throughout the period commencing on the date
hereof and ending on the Closing Date, it will:
(a) Conduct of Business. Conduct the Business only in the ordinary
course, consistent with prior practice;
(b) Maintenance of Property. Maintain and keep the material
properties, machinery and equipment of the Business in as good repair and
condition in all material respects as at present, except for depreciation due to
ordinary wear and tear;
(c) Insurance. Maintain in full force and effect insurance at least
as great as the amounts and comparable in scope of coverage to that now
maintained by the Business as described on Schedule 5(t) hereto;
(d) Performance of Obligations. Consistent with past business
practices, perform all material obligations under material contracts, leases and
documents relating to or affecting the material assets, properties and business
of the Business;
(e) Maintenance and Preservation of Business. Consistent with its
past practices, use its best efforts to maintain and preserve the Business;
(f) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities, including filing with the FCC all documents required to be filed in
connection with the FCC Licenses and the operation of the Transmitter Facilities
and the Equipment, including without limitation all renewal applications in
connection with the FCC Licenses, in a timely manner and in the ordinary course,
as provided in the FCC rules. Prior to the timely filing of a renewal
application for any FCC License, cause all Transmitter Facilities and Equipment
covered by such FCC License to be in compliance with the FCC rules pertaining to
human exposure to radio frequency emissions;
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(g) Notice of Certain Events. By written notice to Purchaser, notify
Purchaser of the commencement of any litigation against Seller or the Business
involving an amount exceeding $5,000 in each instance or of the existence of
adverse business conditions threatening the continued, normal business
operations of the Business;
(h) Licenses. Use its best efforts to assure that all the FCC
Licenses will be in full force and effect on the Closing Date;
(i) Satisfaction of Condition. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement and grant
Purchaser reasonable access to the business and the premises to permit
familiarization therewith.
(j) Good Standing. Maintain its existence as a limited partnership
validly existing and in good standing under the laws of the States of Texas and
qualified to do business in New Mexico.
11. Negative Covenants of Seller. Seller covenants that, throughout the
period commencing on the date hereof and ending on the Closing Date, unless
Purchaser shall have otherwise consented in writing, it will not:
(a) Material Contracts. Enter into or institute any Material
Contract or any material employment contract or other agreement not in the
normal course of the Business or, except as required by applicable law or
regulation, renew, amend or modify any such contract or agreement now in
existence.
(b) Inconsistent Agreements. Enter into any agreement, understanding
or commitment, written or oral, with any other person which is in any material
respect inconsistent with the obligations of Seller arising under this
Agreement.
12. Affirmative Covenants of Purchaser. Except as otherwise consented to
by Seller, each of Purchaser and Group covenants that, throughout the period
commencing on the date hereof and ending on the Closing Date, it will:
(a) Good Standing. Maintain its existence as a corporation validly
existing in good standing under the laws of the state of Delaware;
(b) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement;
(c) Maintenance and Preservation of Business. Use its best efforts
to maintain and preserve its business; and
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(d) Compliance with Laws. Comply with and perform all material
obligations and duties imposed upon it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities, except in respects not materially adverse to its financial
condition or business.
13. Termination.
(a) Grounds for Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(i) by mutual consent of Seller and Purchaser; or
(ii) by the nonbreaching party hereto, if :
(a) the other party shall have:
(1) misstated any representation or been in breach
of any warranty contained herein and such misrepresentation or warranty has not
been cured within ten (10) days after notice from the non-breaching party, or
(2) been in breach of any covenant, undertaking or
restriction contained herein and such breach has not been cured within ten (10)
days after notice from the non-breaching party, or
(b) a condition to Closing applicable to it hereunder
has not been satisfied by the Closing Date (or such earlier date as specified
herein) that has not been waived in writing by such party;
(iii) by Seller or Purchaser if a Final Order from the FCC has
not been received on or prior to December 31, 1999 provided, however, that if a
Final Order has not been obtained by December 31, 1999, but the application for
FCC approval is still pending and a Final Order is reasonably likely to be
granted by March 31, 2000, then the time period for FCC approval shall be
extended for so long as such Final Order is reasonably likely, but not beyond
March 31, 2000; or
(iv) by Seller or Purchaser if the FINOVA Consent has not been
obtained as provided in Section 16 hereof.
(b) Consequences of Termination. In the event of the termination and
abandonment hereof pursuant to the provisions of this Section 13 this Agreement
shall become void and have no effect (except for Section 18), without any
liability on the part of the parties hereto or
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any of their partners, directors, officers or stockholders in respect of this
Agreement, except for liability of any party then in breach, which shall not be
affected by such termination.
14. Deliveries at Closing.
(a) Seller. At the Closing, Seller shall deliver or cause to be
delivered to Purchaser the following, duly authorized and executed by Seller
(unless otherwise indicated):
(i) an assignment and assumption agreement substantially in
the form attached hereto as Exhibit "G" ("Assignment and Assumption Agreement";
(ii) an instrument of conveyance or bill of sale substantially
in the form attached hereto as Exhibit "H";
(iii) a certificate of Seller, as required under Section 7(c)
hereof;
(iv) the opinions required under Section 7(d)hereof;
(v) the Closing Escrow Agreement;
(vi) a non-competition, confidentiality and nondisclosure
agreement substantially in the form of Exhibit "I";
(vii) the Registration Rights Agreement;
(viii) all such other endorsements and instruments as
Purchaser may reasonably request for the purpose of (a) vesting in Purchaser
good and valid title to the Assets, free and clear of all liens, charges and
encumbrances (except those permitted hereunder), (b) transferring the FCC
Licenses and the Leases, and (c) enabling Purchaser to operate the Business.
(ix) the object code and machine readable source code for the
Billing Software and the related documentation and a copy of the Billing
Software on the appropriate physical medium as agreed to in good faith by Seller
and Purchaser;
(x) originally executed UCC-3 termination statements releasing
all liens of Montwood National Bank (or other lender for such related credit
facility);
(xi) Purchaser shall arrange to have all records relating to
the FCC Licenses, including those held by counsel to Seller, delivered to
Purchaser within seven (7) days of the Closing;
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(xii) good standing certificates of Seller GP from the
Secretary of State of Texas and of Seller from the Secretaries of State of Texas
and New Mexico each dated within ten (10) days prior to the Closing Date.
(b) Purchaser. At the Closing, Purchaser shall deliver or cause to
be delivered to Seller the following, duly authorized and executed by Purchaser
(unless otherwise indicated):
(i) the Assignment and Assumption Agreement;
(ii) a certificate of Seller, as required under Section 8(a)
hereof;
(iii) the Closing Escrow Agreement;
(iv) original stock certificates for the Shares, bearing the
appropriate legend;
(v) the Registration Rights Agreement; and
(vi) the opinion required under Section 8(d)hereof.
(c) Further Assurances. At any time and from time to time after the
Closing, at the request of any party and without further consideration, the
other party will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as the requesting
party may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign the properties transferred hereunder and to
effectuate the terms hereof. In addition, Seller shall use commercially
reasonable efforts to obtain the prompt transfer of any telecommunications
transmissions services listed on Schedule 5(c)(i) and the Telephone Number
Inventory listed on Schedule 5(f) to Purchaser.
(d) Proration. State and local property taxes on the Assets, rents
paid or due under the Leases, regulatory fees paid or due in the ordinary course
in connection with the Business or the Assets (including fees under the
universal service fund and telecommunications relay service), and payments made
or due under the other Contracts assigned to Purchaser hereunder shall be
prorated as of the Closing Date, with the Seller being responsible for all
amounts arising out of occurrences on or through the Closing, and the Purchaser
being responsible thereafter. To the extent determinable, such proration shall
be made at the Closing, and the amounts due pursuant to Section 4(a)(i)(1)
hereof shall be appropriately adjusted. To the extent not so determinable, the
appropriate amount shall be paid promptly upon demand of the party entitled
thereto.
15. Brokers. Except for Dixon Capital Associates, Inc. with whom Seller
has entered into a separate commission agreement, and which commission shall be
paid by Seller (the "Seller Broker Agreement"), and except for Deerfield
Partners, with whom Purchaser has entered into a separate agreement and the
obligations of which shall be paid by Purchaser (the "Purchaser Broker
29
<PAGE>
Agreement"), Seller and Purchaser represent and warrant each to the other that
they have not dealt with any broker, sales person or finder in connection with
this transaction. Seller and Purchaser each agree to indemnify, defend and hold
the other harmless from and against any loss, cost, liability or expense
suffered or incurred by the other party as a result of a claim or claims for
brokerage commissions, finder's fees or other similar fees from any party or
firm that is based on the act or omission of the party in breach of the above
warranty.
16. Consent of Lender. Seller and Purchaser hereby acknowledge and agree
that this Agreement and the transactions contemplated hereunder are subject to
and contingent upon the written consent of FINOVA Capital Corporation ("FINOVA
Consent"),the senior lender under a credit facility with Purchaser. Following
execution and delivery of this Agreement by the parties, should Purchaser be
unable to obtain FINOVA Consent for any reason within sixty (60) days from the
date hereof, this Agreement may be terminated by Seller or Purchaser pursuant to
the terms of Section 13.
17. Expenses. Except as specifically provided in Section 9 hereof,
Purchaser and Seller will each pay their respective counsel, accountants and
other expenses incurred in connection with the negotiation and consummation of
the transactions contemplated herein.
18. Nondisclosure of Confidential Information. Purchaser and Seller each
agree that if for any reason whatsoever the transactions contemplated by this
Agreement shall not be consummated, all information disclosed to the other party
pursuant to Section 9 or otherwise shall remain confidential and each party
shall not use or furnish or divulge the same to any other person, except for
information not deemed confidential as provided in Section (9)(a)(i) hereof.
19. Survival of Representations and Warranties.
(a) Period of Survival. All representations, covenants and
warranties made by Seller and Purchaser under this Agreement in connection with
the transactions contemplated hereby or in any Exhibit, Schedule, certificate,
list or other instrument delivered pursuant hereto shall survive the Closing for
a period of one (1)year.
(b) Reliance. Notwithstanding any right of Purchaser to fully
investigate the affairs of Seller relating to the Business and notwithstanding
any knowledge of facts determined or determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has the right to rely fully
upon the representations, warranties, covenants and agreements of Seller
contained in this Agreement or in any document delivered or to be delivered
pursuant to this Agreement by Seller or any of Seller's representatives
(including, but not limited to, any accountant or attorney representing Seller),
in connection with the transactions contemplated by this Agreement. Each
warranty, representation, agreement and covenant contained herein is independent
of all warranties, representations, agreements and covenants contained herein or
in any Exhibit, Schedule, certificate, list or other instrument or documents
(whether or not covering identical or related subject matter) and must be
independently and separately complied with and satisfied.
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20. Indemnification.
(a) By Seller and Purchaser. Seller hereby indemnifies Purchaser and
agrees to hold Purchaser harmless from and against any and all damages, losses,
costs and expenses (including reasonable counsel fees and expenses in connection
with the contest of any claim) paid or incurred by Purchaser and arising out of
(i) any and all inaccurate representations or breaches of covenant or warranty
made by Seller under this Agreement in connection with the transactions
contemplated hereby (including, without limitation, withdrawal liability
regarding any employee(s) of Seller) or in any Exhibit, Schedule, certificate,
list or other instrument delivered pursuant hereto, (ii) any and all claims made
against Purchaser for any liability that Purchaser did not assume pursuant to
Section 2(c) hereof including the Retained Liabilities, which include, without
limitation, any of the claims set forth on Schedule 5(dd), or withdrawal
liability regarding any employee(s) of Seller, or (iii) Seller's failure to
comply with the Bulk Acts. Purchaser shall have the right in enforcing this
Section 20(a) first to obtain reimbursement in satisfaction of any of Seller's
obligations hereunder from the funds held in escrow pursuant to the Closing
Escrow Agreement, in accordance with the terms of such Closing Escrow Agreement.
Purchaser hereby indemnifies Seller and agrees to hold Seller
harmless from and against any and all damages, losses, costs and expenses
(including counsel fees and expenses in connection with the contest of any
claim) paid or incurred by Seller and arising out of any and all inaccurate
representations or breaches of covenant or warranty made by Purchaser under this
Agreement in connection with the transactions contemplated hereby or in any
Exhibit, Schedule, certificate, list or other instrument delivered pursuant
hereto.
(b) Procedure for Claims. Promptly after receipt by an indemnified
party under Section 20(a) of notice of the commencement of any action asserting
a claim based upon any cause enumerated herein, the indemnified party shall, if
it claims the benefits of indemnification pursuant to Section 20(a) with respect
to such action, notify the indemnifying party of the commencement thereof. Upon
receipt of such notice, the indemnifying party shall have the option of either
assuming the defense of such action (and the cost thereof) with counsel
reasonably satisfactory to both the indemnified and the indemnifying parties or
participating in the defense of such action at the sole expense, however, of the
indemnifying party. In the event of the indemnifying party's assumption of the
defense of such action, counsel selected by the indemnified party may at the
election of the indemnified party participate in any such defense, at the sole
expense, however, of the indemnified party. No settlement or compromise to be
paid by the indemnifying party shall be entered into without the written consent
of the indemnified party, which consent shall not be unreasonably withheld.
(c) Time Period for Claims. The indemnity provided in Section 20(a)
shall be limited in time, in that no party may assert a claim in respect of such
indemnity at any time after one (1) year after the Closing Date.
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(d) Minimum Claim. Notwithstanding anything herein to the contrary,
no party shall assert a claim for indemnity pursuant to Section 20(a) unless the
aggregate of all such claims by such indemnified party against such indemnifying
party shall exceed $30,000.00, in which event the indemnifying party's
obligation shall apply to all indemnified losses in excess of such amount.
21. Employees. Purchaser shall have the unlimited right, but not the
obligation, to seek and secure the employment of any employee of Seller, and
Seller shall reasonably assist Purchaser in such efforts, provided, however,
that Seller shall not be required to incur any expense thereby, and, provided
further, that Seller does not warrant or guarantee the availability to Purchaser
of any of the current employees of Seller.
22. Accounts Receivable. Purchaser will use efforts consistent with
standard practice to collect the Accounts Receivable. Ninety (90) days after the
Closing Date, Purchaser shall give Seller notice of any Accounts Receivable that
existed as of the Closing Date that remain uncollected at such date. Seller
shall then have thirty (30) days to collect such uncollected Accounts Receivable
at its own expense. Seller shall deliver to Purchaser any amounts it receives
during such period from such efforts. At the end of such thirty (30) day period,
to the extent that Accounts Receivable remain uncollected in excess of $50,000,
Purchaser shall have the right to retransfer and re-assign to Seller the
Accounts Receivable representing such excess (with respect to accounts which are
not billed on a monthly basis, such amount shall be limited to the amount of
such Accounts Receivable which relate to services rendered through the date of
such retransfer) and to collect from the Escrow Agent the amount of such excess.
After any such transfer to Seller, any amounts thereafter collected by Seller
shall be the property of Seller.
23. Bulk Sales Compliance. Purchaser waives compliance by Seller with the
provisions of any applicable bulk transfer laws and/or bulk sales tax acts
(including, without limitation, any notice provisions thereunder) (the "Bulk
Acts").
24. Risk of Loss. From the date hereof through the Closing Date, if any
Asset is destroyed or damaged by fire or any other cause, other than use, wear
or loss in the ordinary course of business and the aggregate amount of such
damage exceeds $5,000.00, or the damage could otherwise adversely affect the
operations of the Business, Seller shall give written notice to Purchaser as
soon as practicable (but in no event later than five (5) calendar days) after
discovery by Seller of such damage or destruction. Seller shall have the option
of (a) having such Asset delivered to it at the Closing in its destroyed or
damaged condition in which event the Purchase Price shall be reduced by the
amount allocated to such Assets (to the extent of such damage or destruction),
as mutually agreed by the parties, (b) excluding such Assets from this
Agreement, in which event the Purchase Price shall be reduced by the amount
allocated to such Assets, as mutually agreed by the parties, or (c) replacing or
repairing such Assets (any replacement shall be deemed an Asset) at Seller's
expense.
25. Names. Notwithstanding anything in this Agreement to the contrary,
Seller and Purchaser agree that Seller and L. Frederick Francis, one of the
principals of Seller, shall continue
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to have the right to use the name "Francis," alone or in combination with any
other words, other than in combination with the word "Communications."
Additionally, Purchaser agrees to cease use of the name "Francis Communications"
and all derivations thereof six (6) months after the Closing Date.
26. Notices. All notices and communications shall be in writing and
delivered as follows (or to such other address as any party may furnish to the
other in writing in accordance with the terms of this Section):
If to Purchaser: Aquis Communications, Inc.
1719A Route 10, Suite 300
Parsipanny, New Jersey 07054
Attention: John X. Adiletta, President
with a copy to: Phillips Nizer Benjamin Krim & Ballon LLP
666 5th Avenue
New York, New York 10103
Attention: Monte Engler, Esq.
If to Seller: Francis Communications I, Ltd.
5750 Trowbridge
El Paso, Texas 79925
Attention: Mr. L. Frederick Francis
with a copy to: Scott, Hulse, Marshall, Feuille, Finger &
Thurmond, P.C.
1100 Chase Tower, 201 East Main Drive
Post Office Box 68123
El Paso, Texas 79999
Attention: W. David Bernard, Esq.
Any notices and communications pursuant to this Agreement, shall be sent by
hand, by registered or certified first-class mail, postage prepaid, or by such
other form of delivery as shall provide the sender with documentary evidence of
delivery, and shall be deemed to be delivered when sent.
27. Miscellaneous.
(a) Severability. If any term or provision of this Agreement shall
to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be
valid and enforced to the fullest extent permitted by law.
(b) Assignment. Neither Purchaser nor Seller may assign this
Agreement or any rights hereunder prior to the Closing without the prior written
consent of the other party; provided,
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<PAGE>
however, that Purchaser may assign this Agreement or any of its rights hereunder
to Group, provided that Group assumes all obligations of Purchaser hereunder.
After the Closing, the terms, provisions, covenants and conditions of this
Agreement shall bind and benefit the parties hereto and their respective heirs,
successors, personal representatives and assigns.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be an
original instrument, but such counterparts, together, shall constitute a single
agreement.
(d) No Waiver. No waiver of any breach or default under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any party hereto may, at or before the Closing, waive any conditions to its
obligations hereunder which are not fulfilled.
(e) Entire Agreement; Amendments. This Agreement, including the
Exhibits and Schedules referred to herein which are a part hereof, contains the
entire understanding of the parties hereto with respect to the subject matter
contained herein and may be amended only by a written instrument executed by the
parties hereto or their respective successors or assigns. There are no
restrictions, promises, warranties, covenants or undertakings other than those
expressly set forth herein.
(f) Governing Law, Venue. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Notwithstanding
the foregoing, the parties irrevocably submit to the jurisdiction of the United
States District Court for the Western District of Texas, El Paso Division, over
any suit, action or proceeding arising out of or in any way related to this
Agreement. The parties irrevocably waive, to the fullest extent permitted by
law, any objection which either of them may have to the laying of venue of any
such suit, action or proceeding brought in such court, and any claim that such
suit, action or proceeding brought in such court has been brought in an
inconvenient forum. It is the intention of the parties that any suit, action or
proceeding arising out of or in any way related to this Agreement be brought
only in the United States District Court for the Western District of Texas, El
Paso Division. In the event there does not exist federal jurisdiction, then
either party may bring any such suit, action or proceeding in any court having
jurisdiction. In the event that either party shall not have appointed an agent
for service of process in Texas, each party agrees that it may be served with
process by registered or certified mail, postage prepaid, mailed to the
addresses set forth in Section 26 hereof.
(g) Headings. Headings are inserted for convenience and do not form
part of the Agreement.
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(h) No Solicitation. Seller hereby agrees that prior to the Closing
or termination of this Agreement, Seller shall neither directly nor indirectly
solicit, hold discussions or negotiate with or otherwise cooperate with any
person or entity other than Purchaser and its representatives concerning any
sale of Seller, the Assets or the Business.
(i) Public Announcements. No party shall issue a press release, make
publically available any document or make any public announcement concerning
this Agreement, the terms hereof or the transactions contemplated hereby without
obtaining the prior written consent of the other party, which consent shall not
be unreasonably withheld or delayed, except to the extent that such party, or a
publically held parent company of such party, is required to issue such a press
release, to make available such a document or to make such a public statement
under the rules of a stock exchange (or the NASD) on which such party's or such
party's parent company's securities are listed, or pursuant to any applicable
law or regulation, in which case such party shall provide prompt notice of such
disclosure to the other party.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Purchaser and Seller sign this Agreement as of the day
and year first above written.
AQUIS COMMUNICATIONS, INC.
By: /s/ JOHN X. ADILETTA
-------------------------------------
John X. Adiletta
Its: President
AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ JOHN X. ADILETTA
-------------------------------------
John X. Adiletta
Its: President
------------------------------------
FRANCIS COMMUNICATIONS I, LTD.
By: Francis Communications Texas, Inc.
Its: General Partner
By: /s/ L. Frederick Francis
-------------------------------
L. Frederick Francis
Its: President
FRANCIS COMMUNICATIONS TEXAS, INC.
By: /s/ L. Frederick Francis
-------------------------------------
L. Frederick Francis
Its: President
36
PRE-CLOSING ESCROW AGREEMENT
THIS PRE-CLOSING ESCROW AGREEMENT ("Escrow Agreement") is made and entered
into as of the 10th day of June, 1999 by and between FRANCIS COMMUNICATIONS I,
LTD., a Texas limited partnership ("Seller"), AQUIS COMMUNICATIONS, INC., a
Delaware corporation ("Purchaser"), and CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (hereinafter referred to as "Escrow Agent" or "Bank").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and provisions of that certain Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated as of June 10, 1999
by and among Seller, Purchaser, Aquis Communications Group, Inc., a Delaware
corporation and Francis Communications Texas, Inc., a Texas corporation, Seller
has agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller
the radio paging business presently being conducted by Seller (the "Paging
Business"); and
WHEREAS, the Asset Purchase Agreement provides that contemporaneously with
the execution of the Asset Purchase Agreement, Seller shall deliver to Escrow
Agent One Hundred Thousand Dollars ($100,000.00), said cash to be held by Escrow
Agent pending the closing of the Asset Purchase Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Escrow Agent. Seller and Purchaser hereby appoint and
designate Escrow Agent as escrow agent for the purpose herein set forth and
Escrow Agent accepts such appointment. All references to the "Escrow Agent," as
that term is used herein, shall refer to the Escrow Agent solely in its capacity
as escrow agent hereunder.
2. Transfer into Escrow. Purchaser has delivered the sum of One Hundred
Thousand Dollars ($100,000.00) (the "Escrowed Funds") to the Escrow Agent
contemporaneously with the execution of this Escrow Agreement. Escrow Agent
hereby acknowledges receipt of $100,000.00 paid to it by Purchaser as the
initial Escrowed Funds. Escrow Agent shall hold the Escrowed Funds in a
segregated account entitled "Chase Bank of Texas, National Association, as agent
pursuant to an Escrow Agreement dated as of June 10, 1999, among it, Francis
Communications I, Ltd., and Aquis Communications, Inc.". It is hereby expressly
stipulated and agreed that all interest and other earnings on the Escrowed Funds
shall become a part of the Escrowed Funds for all purposes, and that all losses
resulting from the investment or reinvestment thereof from time to time and all
amounts charged thereto to compensate or reimburse the Escrow Agent from time to
time for
EXHIBIT "A" - Page 1 of 11
<PAGE>
amounts owing to it hereunder shall, from the time of such loss or charge, no
longer constitute part of the Escrowed Funds.
3. Investment. Upon the delivery by Purchaser of the Escrowed Funds to the
Escrow Agent, the Escrow Agent shall invest the Escrowed Funds in Vista U.S.
Government Money Market Fund Vista Shares unless otherwise instructed by
Purchaser in writing from time to time during the term of this Escrow Agreement.
Such written instructions, if any, referred to in the foregoing sentence shall
specify the type and identity of the investments to be purchased and/or sold and
shall also include the name of the broker-dealer, if any, which the Purchaser
directs the Escrow Agent to use in respect of such investment, any particular
settlement procedures required, if any (which settlement procedures shall be
consistent with industry standards and practices), and such other information as
Escrow Agent may require. Escrow Agent shall not be liable for failure to invest
or reinvest funds absent sufficient written direction. Unless Escrow Agent is
otherwise directed in such written instructions, Escrow Agent may use a
broker-dealer of its own selection, including a broker-dealer owned by or
affiliated with Escrow Agent or any of its affiliates. The Escrow Agent or any
of its affiliates may receive compensation with respect to any investment
directed hereunder.
4. Payment of Interest. Intentionally Omitted.
5. Distribution of Escrowed Funds.
(a) Escrow Agent shall hold the Escrowed Funds until receipt of a
written directive (a "Distribution Notice") jointly signed by Seller and
Purchaser instructing Escrow Agent to distribute the Escrowed Funds in
accordance with such Distribution Notice.
(b) Ten (10) Business Days (as defined in Section 7 hereof) after
Escrow Agent's receipt of a Distribution Notice from Purchaser (which notice the
Purchaser shall give to the Seller at the same time it is given to Escrow Agent)
that the Asset Purchase Agreement has been terminated for any reason other than:
(i) breach by Purchaser pursuant to Section 13(a)(ii) of the Asset Purchase
Agreement, or (ii) failure by Purchaser to obtain the FINOVA Consent pursuant to
Section 13(a)(iv) of the Asset Purchase Agreement, then Escrow Agent shall
disburse the Escrowed Funds to the Purchaser, unless the Escrow Agent shall have
received notice from Seller within such ten (10) Business Days disputing that
the Asset Purchase Agreement has been so terminated.
(c) In the event Escrow Agent has not received a Distribution Notice
jointly signed by Seller and Purchaser on or before March 31, 2000 (and the
Escrowed Funds have not otherwise been distributed pursuant to clauses (a) or
(b) above), then the Escrow Agent shall send a notice to each of Seller and
Purchaser on such date informing them that Escrow Agent shall deliver the
Escrowed Funds to Purchaser ten (10) Business Days after Escrow Agent's delivery
of such notice, and following such ten (10) Business Days Escrow Agent shall so
deliver the Escrowed Funds unless Escrow Agent shall have received a notice from
the Seller within such ten (10) Business Days disputing that the Asset Purchase
Agreement was terminated pursuant to Section 13(a)(iii) of the Asset Purchase
Agreement.
EXHIBIT "A" - Page 2 of 11
<PAGE>
(d) In the event Seller timely gives the Escrow Agent a disputing
notice pursuant to subsection (b) or (c) above, Escrow Agent shall not disperse
the Escrowed Funds in accordance with such subsection until the dispute has been
resolved. Upon receipt by Escrow Agent of a copy of a final judgment, decree or
order of a court of competent jurisdiction, or copy of a final arbitration
award, adjudicating the dispute, Escrow Agent shall distribute the Escrowed
Funds in accordance with such adjudication or in accordance with a Distribution
Notice jointly signed by Seller and Purchaser.
6. Agent's Duties. All parties understand and agree that Escrow Agent is
not a principal, participant or beneficiary of the underlying transaction which
necessitates this Escrow Agreement. The Escrow Agent shall be obligated only for
the performance of such duties as are specifically set forth herein and may rely
and shall be protected in acting or refraining from acting on any instrument
believed by it to be and to have been signed or presented by the proper party or
parties, their officers, representatives or agents. The Escrow Agent shall not
be liable for any action taken or omitted by it in good faith and reasonably
believed by it to be authorized hereby, nor for action taken or omitted by it in
accordance with the advice of its counsel. Escrow Agent shall be responsible for
holding, investing and disbursing the Escrowed Funds pursuant to this Agreement,
but in no event shall Escrow Agent be liable for any exemplary or consequential
damages in excess of Escrow Agent's fee hereunder.
7. Acceptance and Investment of Escrowed Funds. Receipt or investment of
the Escrowed Funds shall be confirmed by the Escrow Agent as soon as practicable
by account statement unless otherwise indicated; and any discrepancies shall be
noted to Escrow Agent within thirty (30) calendar days after receipt thereof.
For purposes of this paragraph, (a) each account statement shall be deemed to
have been received by the party to whom directed on the earlier to occur of (i)
actual receipt thereof and (ii) three "Business Days" (hereinafter defined)
after the deposit thereof in the United States Mail, postage prepaid and (b) the
term "Business Day" shall mean any day of the year, excluding Saturday, Sunday
and any other day on which national banks are required or authorized to close in
El Paso, Texas. Failure to inform Escrow Agent in writing of any discrepancies
shall be deemed confirmation of the description of Escrowed Funds listed on the
report, regardless of any variations from the original schedule. The Escrow
Agent shall not be liable for losses on any investments, market risk due to
premature liquidation, or other actions taken in compliance with this Escrow
Agreement or appropriate written instructions. Prior to any investment, the
parties hereto shall provide the Escrow Agent with written certification of the
respective taxpayer identification numbers or appropriate foreign taxpayer
exemptions. Failure to provide such information may incur a penalty and cause
the Escrow Agent to be required to withhold tax on any interest payable
hereunder. Any payments of income shall be subject to applicable United States
withholding regulations then in force.
8. Interpleader. Should any controversy arise between the undersigned with
respect to this Escrow Agreement or with respect to the right to receive the
Escrowed Funds or should a substitute Escrow Agent fail to be designated as
provided in Section 10 hereof or if Escrow Agent should be in doubt as to what
action to take, Escrow Agent shall have the right to consult counsel,
EXHIBIT "A" - Page 3 of 11
<PAGE>
withhold delivery of the Escrowed Funds and/or to institute a bill of
interpleader in any court of competent jurisdiction to determine the rights of
the parties (subject to Section 16 hereof). Should such actions be necessary, or
should Escrow Agent become threatened or involved in litigation or binding
arbitration in any manner whatsoever on account of this Escrow Agreement or the
Escrowed Funds, the undersigned hereby jointly and severally bind and obligate
themselves, their heirs, successors, assigns and legal representatives to pay
Escrow Agent reasonable attorney's fees incurred by Escrow Agent, and any other
disbursements, expenses, losses, costs and damages in connection with or
resulting from such actions, except in the event of Escrow Agent's willful
misconduct or gross negligence.
9. Standard of Care. The Escrow Agent shall have no liability under, or
duty to inquire beyond the terms and provisions of this Escrow Agreement, and it
is agreed that its duties are purely ministerial in nature, and that the Escrow
Agent shall incur no liability whatsoever except for (i) its failure to perform
its obligations as specified herein (ii) willful misconduct or (ii) gross
negligence, so long as it has acted in good faith. The Escrow Agent shall not be
bound by any modification, amendment, termination, cancellation, rescission or
supersession of this Escrow Agreement unless the same shall be in writing and
signed by all of the other parties hereto and, if its duties as Escrow Agent
hereunder are affected hereby, unless it shall have given prior written consent
thereto. Without limiting the generality of the foregoing, it is hereby
expressly agreed and stipulated by the parties hereto that Escrow Agent shall
not be required to exercise any discretion hereunder and shall have no
investment or management responsibility, and accordingly, shall have no duty to,
or liability for its failure to, provide investment recommendations or
investment advice to the Purchaser or Seller. It is the intention of the parties
hereto that Escrow Agent shall never be required to use, advance or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or the exercise of any of its rights and powers hereunder.
10. Resignation. The Escrow Agent may, at any time, resign hereunder by
giving written notice of its resignation to the other parties hereto, at their
address set forth herein at least ten (10) days prior to the date for such
resignation specified to take effect. Upon the effective date of such
resignation, the Escrowed Funds shall be delivered to such successor escrow
agent or other person as may be mutually designated in writing by both Purchaser
and Seller, whereupon all the Escrow Agent's obligations hereunder shall cease
and terminate. The Escrow Agent's sole responsibility until such termination
shall be to keep safely all Escrowed Funds and to deliver the same to a person
designated by the appropriate parties executing this Escrow Agreement or in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction at which time of delivery, Escrow Agent's obligations
hereunder shall cease and terminate.
11. Indemnification. The parties jointly and severally agree to indemnify,
defend and hold the Escrow Agent harmless from and against any and all loss,
damage, tax, liability and expense that may be incurred by the Escrow Agent
arising out of or in connection with its acceptance or appointment as Escrow
Agent hereunder except for the negligence, willful misconduct or gross
negligence of Escrow Agent, or the failure of Escrow Agent to perform its
obligations as specified herein, including the legal costs and expenses of
defending itself against any claim or liability in
EXHIBIT "A" - Page 4 of 11
<PAGE>
connection with its performance hereunder. IT IS THE EXPRESS INTENT OF EACH
Purchaser AND SELLER TO INDEMNIFY EACH OF THE INDEMNIFIED PARTIES FOR, AND HOLD
THEM HARMLESS AGAINST, THEIR OWN NEGLIGENT ACTS OR OMISSIONS.
12. Fees. The parties jointly and severally agree to pay the Escrow Agent
its fees for the services rendered pursuant to the provisions of this Escrow
Agreement in accordance with the Escrow Fee Schedule attached hereto as Schedule
B and will reimburse the Escrow Agent for reasonable expenses, including
reasonable attorney's fees incurred in connection with the negotiation, drafting
and performance of such services. Except where otherwise noted, this fee covers
account acceptance, set up and termination expenses; plus usual and customary
related administrative services such as safekeeping, investment and payment of
funds specified herein or in exhibits attached. Activities requiring excessive
administrator time or out-of-pocket expenses such as optional substitution of
collateral or securities shall be deemed extraordinary expenses for which
related costs, transaction charges, and additions fees will be billed at Escrow
Agent's standard charges for such items.
13. Lien. Escrow Agent is hereby given a lien on the Escrowed Funds for
all fees, expenses, taxes, indebtedness, and other financial obligations that
may become owing to Escrow Agent arising hereunder, including any indemnities
prescribed herein, which lien may be enforced by Escrow Agent without notice or
presentment by set-off or appropriate foreclosure proceedings. In all cases, any
unpaid fees may be deducted by Escrow Agent without prior notice before final
disbursement of the Escrowed Funds.
14. Disclaimer. The parties warrant to the Escrow Agent that there are no
federal, state or local tax liabilities or filing requirements whatsoever
concerning the Escrow Agent's actions contemplated hereunder and warrant and
represent to the Escrow Agent that the Escrow Agent has no duty to withhold or
file any report or any tax liability under any federal or state income tax,
local or state sales or use taxes, or any other tax by any taxing authority. The
parties hereto agree to jointly and severally indemnify the Escrow Agent fully
for any tax liability, penalties or interest incurred by the Escrow Agent
arising hereunder and agree to pay in full any such tax liability together with
penalty and interest if any is ultimately assessed against the Escrow Agent for
any reason as a result of its action hereunder (except for the Escrow Agent's
individual tax liability).
15. Force Majeure. Except for the negligence, willful misconduct or gross
negligence of Escrow Agent, the Escrow Agent shall have no liability for loss
arising from any cause beyond its control, including, but not limited to, the
following: (a) acts of God, force majeure, including, without limitation, war
(whether or not declared or existing), revolution, insurrection, riot, civil
commotion, accident, fire, explosion, stoppage of labor, strikes and other
differences with employees; (b) the act, failure or neglect of any agent or
correspondent selected by the Escrow Agent or the parties hereto; (c) any delay,
error, omission or default connected with the remittance of funds; (d) any
delay, error, omission or default of any mail, telegraph, cable or wireless
agency or operator; (e) the acts or edicts of any government or governmental
agency or other group or entity exercising
EXHIBIT "A" - Page 5 of 11
<PAGE>
governmental powers. Escrow Agent is not responsible or liable in any manner
whatsoever for the sufficiency, correctness, genuineness or validity of the
subject matter of this Escrow Agreement or any part hereof or for the
transaction or transactions requiring or underlying the execution of this Escrow
Agreement, the form of execution hereof or for the identity or authority of any
person executing this Escrow Agreement or any part hereof or depositing the
Escrowed Funds.
16. Choice of Laws; Cumulative Rights. This Escrow Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. Notwithstanding the foregoing, the parties irrevocably submit to the
jurisdiction of the United States District Court for the Western District of
Texas, El Paso Division, over any suit, action or proceeding arising out of or
in any way related to this Escrow Agreement. The parties irrevocably waive, to
the fullest extent permitted by law, any objection which either of them may have
to the laying of venue of any such suit, action or proceeding brought in any
such court, and any claim that such suit, action or proceeding brought in such
court has been brought in an inconvenient forum. It is the intention of the
parties that any suit, action or proceeding arising out of or in any way related
to this Escrow Agreement be brought only in the United States District Court for
the Western District of Texas, El Paso Division. In the event there does not
exist federal jurisdiction, then either party may bring any such suit, action or
proceeding in any court having jurisdiction. In the event that either party
shall not have appointed an agent for service of process in Texas, each party
agrees that it may be served with process by registered or certified mail,
postage prepaid, mailed to the addresses set forth in Section 24 hereof.
17. Taxpayer Indemnification. In addition, due to the requirement that all
trust accounts have Taxpayer Identification Numbers documented by appropriate
W-8 or W-9 Forms, failure to provide such forms to the account administrator
with 30 days of opening the account may prevent or delay final disbursement of
funds.
18. Funds Transfer. In the event funds transfer instructions are given
(other than in writing at the time of execution of this Escrow Agreement),
whether in writing, by telefax, or otherwise, the Escrow Agent is authorized to
seek confirmation of such instructions by telephone call-back to the person or
person designated on Schedule A hereto, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in writing
actually received and acknowledged by the Escrow Agent. The parties to this
Escrow Agreement acknowledge that such security procedure is commercially
reasonable.
It is understood that the Escrow Agent and the beneficiary's bank in
any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank.
The Escrow Agent may apply any of the Escrowed Funds for any payment order it
executes using any such identifying number, even where its use may result in a
person other than
EXHIBIT "A" - Page 6 of 11
<PAGE>
the beneficiary being paid, or the transfer of funds to a bank other than the
beneficiary's bank or an intermediary bank, designated.
19. Consultation with Legal Counsel. Escrow Agent may consult with its
counsel or other counsel satisfactory to it concerning any question relating to
its duties or responsibilities hereunder or otherwise in connection herewith and
shall not be liable for any action taken, suffered or omitted by it in good
faith upon the advice of such counsel.
20. Assignment. This Escrow Agreement shall not be assigned by either of
the Seller and Purchaser without the prior written consent of Escrow Agent (such
assigns of the Seller and Purchaser to which Escrow Agent consents, if any, and
Escrow Agent's assigns being hereinafter referred to collectively as "Permitted
Assigns").
21. Severability. If one or more of the provisions hereof shall for any
reason by held to be invalid, illegal or unenforceable in any respect under
applicable law, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and this Escrow Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein, and the remaining provisions hereof shall be given full force and
effect.
22. Termination. This Escrow Agreement shall terminate upon the
disbursement, in accordance with Sections 5 or 10 hereof, of the Escrowed Funds
in full; provided, however, that in the event all fees, expenses, costs and
other amounts required to be paid to Escrow Agent hereunder are not fully and
finally paid prior to termination, the provisions of Section 12 hereof shall
survive the termination hereof and, provided further, that the last two
sentences of Section 8 hereof and the provisions of Section 11 hereof shall, in
any event, survive the termination hereof.
23. General. The section headings contained in this Escrow Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Escrow Agreement. This Escrow Agreement and any
affidavit, certificate, instrument, agreement or other document required to be
provided hereunder may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
but one and the same instrument. Unless the context shall otherwise require, the
singular shall include the plural and vice-versa, and each pronoun in any gender
shall include all other genders. The terms and provisions of this Escrow
Agreement constitute the entire agreement among the parties hereto in respect of
the subject matter hereof, and neither the Seller, Purchaser nor the Escrow
Agent has relied on any representations or agreements of the other, except as
specifically set forth in this Escrow Agreement. This Escrow Agreement or any
provision hereof may be amended, modified, waived or terminated only be written
instrument duly signed by the parties hereto. This Escrow Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and their respective
heirs, devisees, executors, administrators, personal representatives,
successors, trustees, receivers and Permitted Assigns. This Escrow Agreement is
for the sole and exclusive benefit of the Seller, Purchaser and the Escrow
Agent, and nothing in this Escrow Agreement, express or implied, is intended to
confer or shall be
EXHIBIT "A" - Page 7 of 11
<PAGE>
construed as conferring upon any other person any rights, remedies or any other
type or types of benefits.
24. Notices and Instructions. All notices and instructions ("Notices")
provided for or permitted hereunder shall be in writing and shall be deemed
given if delivered personally (including delivery by an express delivery service
or by facsimile transmission during the recipient's regular business hours) or
mailed, by certified or registered mail, return receipt requested, with postage
prepaid, and addressed to the parties hereto as follows:
If to Seller:
Francis Communications I, Ltd.
5750 Trowbridge
El Paso, Texas 79925
Attention: L. Frederick Francis
Telephone: (915) 778-2000
Telefax: (915) 775-9941
With a copy to:
Scott, Hulse, Marshall, Feuille,
Finger & Thurmond, P.C.
100 Chase Tower, 201 E. Main
El Paso, Texas 79901
Attention: W. David Bernard
Telephone: (915) 533-2493
Telefax: (915) 546-8333
If to Purchaser:
Aquis Communications, Inc.
1719A Route 10, Suite 300
Parsipanny, New Jersey 07054
Attention: John X. Adiletta, President
Telephone: (973) 560-8001
Telefax: (973) 560-8060
EXHIBIT "A" - Page 8 of 11
<PAGE>
With a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Monte Engler, Esq.
Telephone: (212) 977-9700
Telefax: (212) 262-5152
If to Escrow Agent:
Chase Bank of Texas, National Association
P.O. Box 140
El Paso, Texas 79980
Attention: Corporate Trust
Phone: (915) 546-6500
Fax: _________________
Any such Notice shall be effective upon receipt. Any party may change its
address and facsimile number for the purpose of notice by giving notice in
accordance with the provisions of this Section 24.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
EXHIBIT "A" - Page 9 of 11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day and year first above written.
SELLER:
FRANCIS COMMUNICATIONS I, LTD.
By: Francis Communications Texas, Inc.
Its: General Partner
By: /s/ L. Frederick Francis
------------------------------------
L. Frederick Francis
Its: President
PURCHASER:
AQUIS COMMUNICATIONS, INC.
By: /s/ John X. Adiletta
------------------------------------------
Its: PRESIDENT
------------------------------------------
ESCROW AGENT:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By: /s/ Sara Wilson
------------------------------------------
Its: SARAH WILSON
VICE PRESIDENT
------------------------------------------
EXHIBIT "A" - Page 10 of 11
<PAGE>
SCHEDULE A
Telephone Number(s) for Call-Backs and Person(s)
Designated to Confirm Funds Transfer Instructions
If to Seller:
Name Telephone Number
---- ----------------
1. L. Frederick Francis (915) 778-2000
2. Ellis Gerrish (915) 778-2000
If to Purchaser:
Name Telephone Number
---- ----------------
1. John X. Adiletta (973) 560-8001
2. Brian Plunkett (973) 560-8006
Telephone call-backs shall be made to each of Seller and Purchaser if joint
instructions are required pursuant to the Agreement.
EXHIBIT "A" - Page 11 of 11
ASSET PURCHASE AGREEMENT
By and Between
AQUIS COMMUNICATIONS, INC., as Purchaser
and
SOURCEONE WIRELESS, INC.
SOURCEONE WIRELESS, L.L.C. and
SOURCEONE WIRELESS II, L.L.C., as Sellers
DATED AS OF AUGUST 2, 1999
<PAGE>
This ASSET PURCHASE AGREEMENT (together with Schedules and Exhibits,
"Agreement") is made as of this 2nd day of August 1999 by and between Aquis
Communications, Inc., a Delaware Corporation ("Purchaser") and SourceOne
Wireless Inc. ("SOWI"), SourceOne Wireless, L.L.C. ("LLC"), SourceOne Wireless
II, L.L.C. ("LLC II, together with SOWI and LLC, "Sellers"). SOWI, LLC, LLC II,
and Aquis may sometimes be referred to individually as "Party" and collectively
as the "Parties." SOWI, LLC, and LLC II may sometimes be referred to
collectively as "SourceOne."
RECITALS
A. SourceOne currently operates Commercial Mobile Radio Service ("CMRS")
one-way paging systems ("Systems") on multiple frequencies in numerous
geographic areas throughout the United States pursuant to licenses ("Licenses")
issued to LLC II by the Federal Communications Commission ("FCC") for provision
of service to subscribers.
B. The largest of these Systems is a one-way paging system ("Midwest
System") operating pursuant to licenses ("Midwest Licenses") issued by the FCC
in the Paging And Radiotelephone Service on the frequency 931.1875 MHz in the
midwest United States. The Midwest System comprises (a) seventy-five (75)
transmitter sites ("Midwest Transmitter Sites") through which SourceOne provides
paging service to certain Subscribers ("Midwest Subscribers") and (b) fifty-two
(52) other transmitter sites ("Other Midwest Transmitter Sites"). A list of the
Midwest Transmitter Sites and Other Midwest Transmitter Sites that make up the
Midwest System and the associated Midwest Licenses is attached as Schedule A to
the Management Agreement (defined below).
C. The remaining Systems ("Other Systems") authorized to SourceOne
pursuant to FCC Licenses issued to LLC II on other frequencies ("Other
Licenses") provide service to other Subscribers ("Other Subscribers").
D. SourceOne also provides paging service to additional subscribers
("Additional Subscribers") in various geographic areas on systems not licensed
to SourceOne, including through resale and other agreements ("Additional
Subscriber Agreements"). The term "Subscribers" as used hereinafter will be
defined to include Midwest Subscribers and Additional Subscribers.
E. LLC II is wholly owned and controlled by LLC and LLC is, in turn,
controlled by SOWI.
F. On April 29, 1999, SOWI and, on July 2, 1999, LLC (together with SOWI,
"Debtors") filed voluntary petitions for relief in the Bankruptcy Court for the
Northern District of Illinois ("Bankruptcy Court") under chapter 11 of title 11
of the United States Code ("Bankruptcy Code"). Debtors have continued in the
possession of their assets and the management of their business pursuant to
Bankruptcy Code sections 1107 and 1108.
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G. This Agreement sets forth the terms and conditions upon which, subject
to Bankruptcy Court approval, Sellers will sell, transfer, assign, and deliver
to Purchaser, and upon which Purchaser will purchase and acquire from Sellers
the Transferred Assets (defined below).
H. The Closing is conditioned upon, among other things, FCC consent to
assignment of the Midwest Licenses from LLC II to Purchaser pursuant to
applications (together "Assigned Application") that must be filed with,
processed, and granted by the FCC ("FCC Approval").
I. Pending FCC Approval, and subject to Bankruptcy Court approval of the
Management Agreement, Aquis will operate the Midwest Business (as defined in the
Management Agreement) pursuant to (a) a Special Temporary Authority ("STA") to
acquire de facto control of the Midwest System and (b) a management agreement
("Management Agreement"), substantially in the form attached as Exhibit A.
THE PARTIES AGREE THEREFORE AS FOLLOWS:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Transferred Assets.
On the terms and subject to the conditions of this Agreement, at the
Closing, Sellers agree to sell, transfer, assign, and deliver to Purchaser and
Purchaser agrees to purchase from the Sellers all of each Seller's right, title,
and interest in and to all of the rights, properties, and assets specified in
this section 1.1 ("Transferred Assets") other than the Excluded Assets:
1.1.1 Midwest System Assets. All Midwest System Assets as defined in the
Management Agreement, other than those specified in Management
Agreement sections 1.1.9 (Retained Employees), 1.1.10 (Bank
Accounts), and 1.1.13 (right to operate).
1.1.2 - 1.1.21 [Intentionally Left Blank]
1.1.22 FCC Licenses. The Midwest Licenses specified on Schedule A
attached to the Management Agreement.
1.1.23 Prepaid Expenses. All prepaid expenses of Sellers as will be
specified.
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1.1.24 Actions. All claims, causes of action, and choses in action
related to the Transferred Assets except as provided in section
1.3(i) of this Agreement.
1.1.25 Goodwill. All goodwill of Sellers related to the Midwest Business.
1.1.26 Telephone Numbers. The telephone numbers that have been assigned
to or associated with individual paging units (or are available
for such assignment to or association with individual paging
units) as part of the Midwest Business ("Telephone Number
Inventory") and office telephone and other utility services
related to the Midwest Business.
1.1.27 Other Subscriber Assets. All Other Subscriber Assets as defined in
the Management Agreement.
1.1.28 Schedules. The Transferred Assets, including prepaid expenses and
Telephone Number Inventory will be set forth in Schedules agreed
to and prepared by the Parties at least ten (10) days prior to
Closing.
Section 1.2 Transferred Assets Free and Clear.
All of the Transferred Assets will be transferred by Sellers and
acquired by Purchaser free and clear of all liens, claims, encumbrances or
adverse or third-party interests, or restrictions ("Encumbrances"). The purchase
of the Transferred Assets will be effective as of the Closing Date.
Section 1.3 Excluded Assets.
Notwithstanding anything to the contrary herein, from and after the
Closing, (i) Sellers will retain all of their existing right, title, interest in
and to all of its assets that are not identified as Transferred Assets and (ii)
the following are excluded from the sale, transfer, and assignment to Purchaser
(together, "Excluded Assets"):
(a) The corporate seals, certificates of incorporation, articles of
organization, operating agreements, minute books, stock books, tax returns, or
other records having to do with the organization of Sellers prior to the Closing
Date.
(b) All books and records related to the Excluded Assets and
Excluded Liabilities and that are not necessary to operate the Midwest Business.
(c) The Tax attributes of Sellers (including any Tax refund or net
operating losses).
(d) Claims, reserves, refunds, and other rights in respect of
insurance policies of Sellers.
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<PAGE>
(e) All cash, cash equivalents, and cash in transit, as of the
Closing Date, subject to Sellers' obligations under the Management Agreement.
(f) All interests in any limited liability company.
(g) Professional retainers paid by Sellers.
(h) The rights which accrue or will accrue to Sellers under this
Agreement.
(i) All claims and causes of action of Debtors' bankruptcy estates
arising under Bankruptcy Code sections 544, 547, 548, 549, 550, and 553 and
claims and causes of action specified on Schedule 1.3(i).
(j) Other Systems and Other Licenses.
Section 1.4 Assumption of Certain Liabilities.
In addition to the consideration provided for in Section 1.6, at the
Closing, Purchaser agrees to assume and discharge or perform when due the
following obligations and liabilities of Sellers expressly set forth in this
Section 1.4 and no others ("Assumed Liabilities"):
(a) All liabilities and obligations that accrue or are required to
be performed after the Closing Date pursuant to any unexpired leases or
executory contracts ("Section 365 Contracts") that are included among the
Transferred Assets and assumed and assigned under Bankruptcy Code section 365
and in accordance with the Approval Order (defined below). Section 365 Contracts
will be identified prior to Closing and the time to assume and assign Section
365 Contracts will be extended to permit assumption and assignment to Purchaser.
(b) All liabilities and obligations that accrue and are required to
be performed after the Closing Date to the extent related to or arising out of
the ownership or operation of the Transferred Business (defined below) by
Purchaser after the Closing.
(c) All liabilities and obligations of Sellers for deferred revenue,
which are revenues billed or received by Seller for services not yet rendered as
of the Closing Date.
(d) All liabilities with respect to return of or performance
required as a result of Deposits and Other Deposits, as those terms are defined
in the Management Agreement.
(e) If Purchaser retains any of Sellers' employees (who are Retained
Employees under the Management Agreement) after the Closing and the employment
of any of those employees is subsequently terminated without cause within 45
days after the
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<PAGE>
Closing, then Purchaser agrees to pay that employee severance compensation equal
to 90 days of that employee's salary or compensation.
Section 1.5 Excluded Liabilities.
(a) Liabilities Expressly Excluded. Except as expressly provided by
Section 1.4 of this Agreement, Purchaser has not assumed and is not liable or
responsible for any of the liabilities, commitments, or obligations of Sellers,
of any kind or nature whether presently in existence or arising in the future,
including, but not limited to, any obligation or liability arising out of any
Seller's employment or termination of any employee ("Excluded Liabilities").
(b) Responsibility of Sellers. All Excluded Liabilities are retained
by and remain obligations and liabilities of Sellers. It is expressly understood
and agreed that the Parties intend that Purchaser is not considered to be a
successor to any Seller by reason of any theory of law or equity and that
Purchaser has no liability, except as otherwise expressly provided in this
Agreement, for any liability of any Seller.
(c) Cure Amounts. Sellers will pay all cure amounts owing under any
of the Section 365 Contracts that must be paid as a condition to their
assumption or assignment to Purchaser in the amount that (a) the parties to
those contracts agree or (b) the Bankruptcy Court orders to be paid. If
Purchaser identifies that certain Sellers' contract with MCI Telecommunications
Corp. ("MCI Contract") as a Section 365 Contract to be assumed and assigned to
Purchaser, then Purchaser will pay any cure amounts related to the MCI Contract.
Section 1.6 Purchase Price.
(a) Purchase Price. The purchase price ("Purchase Price") for the
Transferred Assets is as follows:
(i) The sum of $4,000,000 ("Cash Payment") subject to
adjustments in accordance with section 1.6(d), by
certified or bank check or by wire transfer payable to
Sellers.
(ii) In addition to the Cash Payment set forth above,
Purchaser will deliver to Sellers $3,375,000 of Aquis
7.5% Cumulative Preferred Shares in the form attached as
Exhibit __ (the "Aquis Shares) subject to adjustments in
accordance with section 1.6(e).
(b) Allocation of Purchase Price. Prior to the Closing, the Parties
will agree to the allocation of the Purchase Price for tax and accounting
purposes. This allocation will also provide that $880,000 of the Aquis Shares
will be allocated to equipment located at Other Midwest Transmitter Sites.
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(c) Pre-Closing Escrow. Concurrent with the execution and delivery
of this Agreement, Purchaser will deposit the sum of $200,000 ("Escrow Fund")
with the escrow agent under the terms of the Escrow Agreement acceptable to the
Parties. At Closing, the Parties agree to direct escrow agent to pay the Escrow
Fund to Sellers. The Escrow Fund will (i) be part of the Purchase Price and (ii)
reduce the Cash Payment. If this Agreement is terminated without a Closing, then
the Escrow Fund will secure Purchaser's obligations, as manager under the
Management Agreement, to remit the Returned Receivables Amount and the Returned
Other Receivables Amount and to pay Outstanding Expenses, as those terms are
defined in the Management Agreement.
(d) Purchase Price Adjustments. The Purchase Price will be reduced,
first from the Cash Payment and then from the Aquis Shares, by the following
amounts:
(i) The amount by which $7.26 million exceeds the actual Net
Service Revenue on the Take-Over Date (as defined in the
Management Agreement) due to the termination (voluntary
or involuntary) of Subscribers and Other Subscribers
prior to the Take-Over Date, but for whom billing had
not been terminated by that date.
For this subsection 1.6(d)(i), "Net Service Revenue"
means (a) all Sellers' revenues from paging service,
rentals, maintenance, and related charges, but excluding
revenues from sale of pagers, parts, and accessories;
tax refunds, insurance claims, or other similar refunds
or recoveries; and late charges, minus (b) payments to
third party service providers and resellers, including
expenses incurred to bill and collect amounts owed by
users of "calling party pays" services, and payments for
any dispatch services. A form of the calculation of Net
Service Revenues is attached as Schedule 1.6.(d).
(e) Other Price Adjustments. The Sellers' failure to sell, assign,
transfer, and deliver the following Transferred Assets will not be a basis to
terminate this Agreement, but will reduce the Aquis Shares portion of the
Purchase Price by the following amounts:
(i) For an unexpired lease ("Site Lease") for use of an
Other Midwest Transmitter Site, Purchaser may, in its
sole and absolute discretion, require that a Site Lease
for an Other Midwest Transmitter Site be assigned at
Closing and, in that event, Purchaser agrees to pay
one-half of the cure amount required under Bankruptcy
Code section 365 to effect the assignment and the amount
of Purchaser's portion of the cure amount will be
deducted from the Aquis Shares portion of the Purchase
Price.
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(ii) For equipment missing from an Other Midwest Transmitter
Site: $18,000 per site.
Section 1.7 Closing.
The closing of the purchase and sale provided for in this Agreement
will take place at the offices of Phillips Nizer Benjamin Krim & Ballon LLP, New
York, New York, or such other place as the Parties may agree, on a date not more
than five (5) days after the date upon which all of the conditions precedent to
the Closing stated in Article IV have been satisfied in full and occurs no later
than February 28, 2000. (This closing is sometimes referred to as the "Closing,"
and the time and date of the Closing are sometimes referred to as the "Closing
Date").
Section 1.8 Deliveries By Sellers at Closing.
At the Closing, Sellers will deliver to Purchaser:
(a) Transfer Documents. Instrument(s) of conveyance or bills(s) of
sale and assumption and assignment agreements in form and substance reasonably
satisfactory to Purchaser.
(b) Closing Certificates. One or more certificates on behalf of
Sellers, dated as of the Closing Date and signed by an officer, certifying that
Sellers have performed and complied with all of the conditions set forth in
Sections 4.1 and 4.2 of this Agreement, and the receipt of all necessary
authorizations and incumbency matters.
(c) Approval Order. A certified copy of the Approval Order.
(d) LLC II. Certificates of good standing of LLC II dated within
five (5) days of the Closing Date from the jurisdiction of organization of LLC
II together with certificates bringing down to date the information contained in
each certificate dated not earlier than five days prior to the Closing Date.
(e) All such other certificates, documents, endorsements,
instruments, and opinions of counsel as Purchaser may reasonably request for the
purpose of (A) vesting in Purchaser good and valid title to the Transferred
Assets, free and clear of all Encumbrances, (B) transferring the Section 365
Contracts, and (C) enabling Purchaser to operate the Midwest Business and the
business of providing service to Other Subscribers using the Other Subscriber
Assets (together with the Midwest Business, "Transferred Business").
Section 1.9 Deliveries By Purchaser at Closing.
At the Closing, Purchaser will deliver to Sellers:
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(a) Cash Consideration. The Cash Payment less the Escrow Fund and
the Closing Adjustments, which amount will be paid at the Closing by wire
transfer as directed in writing by Sellers.
(b) Aquis Shares. Original stock certificates for the Aquis Shares,
bearing the appropriate legend.
(c) Closing Certificates. One or more certificates on behalf of
Purchaser, dated as of the Closing Date and signed by an officer, certifying
that Purchaser has performed and complied with all of the conditions set forth
in Sections 4.1 and 4.3 of this Agreement, and the receipt of all necessary
authorizations, and incumbency matters.
(d) Good Standing. Certificates of good standing of Purchaser dated
within five (5) days of the Closing Date from the jurisdiction of organization
of Purchaser.
(e) Aquis Shares Issuer. Certified certificate of incorporation of
the issuer of Aquis Shares and certificates, documents, endorsements,
instruments, and opinions of counsel as Sellers may reasonably request to
determine the valid issuance of the Aquis Shares.
Section 1.10 Regulatory Obligations.
At Closing, Sellers will confirm in a manner reasonably satisfactory
to Purchaser, that all obligations specified in Sections 6.10(i)-(iv) and (vi)
of the Management Agreement that accrue prior to the Take Over Date ("Regulatory
Obligations") have been paid or satisfied. Absent such confirmation, Purchaser
will withhold from the Cash Payment funds sufficient, in Purchaser's reasonably
exercised judgment, to satisfy the unpaid Regulatory Obligations and the Parties
will cooperate and consult with the FCC (or administrators of the programs
governing those Regulatory Obligations) to determine and pay those obligations
from the heldback monies. Promptly after determination and payment of those
Regulatory Obligations, Purchasers will remit any remaining amount of heldback
monies to Sellers. If heldback monies are insufficient to satisfy those unpaid
obligations, then Sellers will pay that deficiency. Under no circumstances will
Purchaser be obligated to pay any Regulatory Obligations.
Section 1.11 Further Assurances.
At any time and from time to time after the Closing, at the request
of any Party and without further consideration, the other Party will execute and
deliver such other instruments of sale, transfer, assignment, and confirmation
and take such action as the requesting Party may reasonably deem necessary or
desirable in order to more effectively transfer and assign the Transferred
Assets and to effectuate the terms of and transactions contemplated in this
Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Sellers.
As an inducement for Purchaser to enter into and perform its
obligations under this Agreement, Sellers make the following representations and
warranties to Purchaser. Sellers represent and warrant to Purchaser that each of
the following representations and warranties is correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing with
the same effect as if these representations and warranties had been made at and
as of the Closing Date.
(a) Organization. Each Seller is a legal organization, duly formed,
validly existing, and in good standing under the laws of the state of its
organization (except for SOWI due solely to SOWI's failure to pay franchise
taxes), and is licensed or qualified to do business and is in good standing
under the laws of each state in which it operates. Correct and complete copies
of the organizational documents, each as amended to date, of each Seller have
been delivered by each Seller to Purchaser. Such organizational documents are in
full force and effect.
(b) Power and Authority. Subject to the entry of the Approval Order,
each Seller has full and lawful power and authority to execute and deliver, and
to perform its obligations under, this Agreement and to own all of the
Transferred Assets and to carry on the activities of the Transferred Business as
presently conducted and to own, hold, and operate the properties that it owns
and holds. The execution and delivery of this Agreement and the other
agreements, certificates, and documents executed pursuant to this Agreement by
each Seller has been duly authorized, and such agreements, certificates, and
documents are valid and binding upon each Seller in accordance with their
respective terms.
(c) No Conflicts or Violations. Upon entry of the Approval Order and
the grant of the FCC Approval, neither the execution and delivery of this
Agreement by each Seller, nor the performance by each Seller in consummating the
transactions contemplated by this Agreement will, with or without the giving of
notice or passage of time (or both), conflict with, violate any provisions of,
result in the breach of, constitute a default under, or create or impose any
Encumbrance or condition on any Transferred Asset under: (i) any organizational
documents of any Seller, including, as applicable, certificates of
incorporation, articles of organization, by laws, or operating agreements; (ii)
any federal, state, or local state law, ordinance, regulation, or rule or any
order, writ, injunction, judgment, license, franchise, permit, or decree of any
governmental authority or arbitration tribunal by which any Seller or any
Transferred Assets are or may be bound; or (iii) any contract, indenture,
instruments, agreement, mortgage, lease, right or other obligation or
restriction to which any Seller is a party or by which any Seller or the
Transferred Assets are or may be bound.
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(d) Governmental Approvals. Except for the FCC Approval and the
Approval Order, no consent, approval, authorization of, or declaration or filing
with any governmental authority or other third party is required in connection
with the (a) execution or delivery of this Agreement by any Seller, (b) sale of
the Transferred Assets and operation of the Transferred Business as currently
operated by Sellers and the continued operation of the Transferred Business by
Purchaser as currently operated, or (c) the consummation by Sellers of the
transactions contemplated by this Agreement.
(e) Title to Transferred Assets. Sellers have good and marketable
title to all Transferred Assets. At the Closing, Purchaser will acquire good and
marketable title to the Transferred Assets, free and clear of any Encumbrances.
The Transferred Assets other than the Other Midwest Transmitter
Sites (a) constitute all of the properties, assets, and rights that have been
used in the conduct of the Transferred Business and which are necessary to the
operation of the Transferred Business; (b) generate all of Sellers' Net Service
Revenue (as defined in Section 1.6(d)(i) of this Agreement); and (c) are in
compliance with FCC regulations. There are no assets of Sellers not included in
the Transferred Assets other than the Other Midwest Transmitter Sites which are
material to the operation of the Transferred Business and the absence of which
would have a material adverse effect on the Transferred Business. The
Transferred Assets are now and will be at the Closing Date located at each
Seller's places of business where they were previously used in the operation of
the Transferred Business and will not be removed from those locations unless
Sellers receive Purchaser's prior written consent to such action, which consent
is subject to Purchaser's sole and absolute discretion.
(f) Management Agreement Representations and Warranties. Each seller
restates and incorporates into this Agreement each representation and warranty
set forth in section 6 of the Management Agreements as if set forth in full in
this Section 2.1.
(g) Limited Purpose Seller. LLC II represents that (a) it was formed
for the limited purpose of holding the Licenses, including the Midwest Licenses,
(b) it has not conducted or operated any business, (c) its organizations
documents limit its activities to holding the Licenses, (d) it has at all time
complied with its organizational documents which limit its activities to holding
the Licenses, (e) it has no creditors and does not know of any claims or
liabilities asserted against it. Promptly after the execution of this Agreement,
LLC II will deliver to Purchaser certified copies of its organizational
documents and financial statements acceptable to Purchaser in support of the
representations of this Section 2.1(g).
(h) Investment Intent; Restricted Securities. Immediately upon each
Seller's acquiring its percentage of the Aquis Shares, each Seller will transfer
such shares to its creditors pursuant to Bankruptcy Court order. Each Seller
agrees and each creditor will be advised (and the Bankruptcy Court order will
provide) that each acquiror of Aquis Shares is acquiring them solely for its own
account and not with the view to, or for resale in connection with, any
distribution thereof, other than as may be permitted under applicable
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law without registration under the Securities Act. Sellers understand (a) that
the Aquis Shares have not been and are not being registered under the Securities
Act by reason of specified exemptions therefrom, which depend upon, among other
things, the bona fide nature of its investment intent as expressed herein and as
explicitly acknowledged hereby, and (b) that the Aquis Shares are "Restricted
Securities" under the federal securities laws inasmuch as they are being
acquired from Purchaser in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited sets of
circumstances. Seller agrees that the Aquis Shares may not be sold, transferred,
offered for sale, pledged, hypothecated, or otherwise disposed of without
registration under the Securities Act except as may be permitted under
applicable law. The Aquis Shares will bear appropriate legends restricting
transfer. Purchaser understands and agrees that delivery of the Aquis Shares to
Sellers creditors pursuant to Bankruptcy Court order will not constitute a
transfer in violation of this Section 2.1(h).
Section 2.2 Representations and Warranties of Purchaser.
As an inducement for Sellers to enter into this Agreement and
perform their obligations hereunder, Purchaser makes the following
representations and warranties to Seller. Purchaser represents and warrants to
Sellers that each of the following representations and warranties is correct and
complete as of the date hereof and will be correct and complete as of the
Closing, with the same effect as if said representations and warranties had been
made as of the Closing Date.
(a) Organization and Good Standing. Purchaser is a corporation duly
formed, validly existing, and in good standing under of the laws of the State of
Delaware and is licensed to do business and is in good standing under the laws
of each state in which it operates. Correct and complete copies of the
Purchaser's organizational documents, each as amended to date, have been
delivered to Sellers. Such organizational documents are in full force and
effect.
(b) Power and Authority. Purchaser has full and lawful corporate
power and authority to enter into this Agreement and purchase the Transferred
Assets.
(c) Forestallments. Purchaser is not a party to or subject to any
contract or agreement or any judgment, order, writ, injunction, or decree of any
court or governmental body which will prevent its performance of its obligations
under this Agreement.
(d) Authorization. The execution and delivery of this Agreement and
the other agreements, certificates, and documents contemplated by or referred to
in this Agreement have been duly authorized by Purchaser's directors as required
under the laws of the State of Delaware, and no other corporate action is
required for the approval of this Agreement or such other agreements,
certificates, and documents executed and delivered by
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Purchaser, all of which are valid and binding upon Purchaser in accordance with
their respective terms.
(e) No Conflicts or Violations. Subject to the conditions of this
Agreement, neither the execution nor delivery of this Agreement, nor the
performance of Purchaser in consummating the transactions contemplated by this
Agreement will conflict with or result in a violation or breach of, or default
under, any terms or provisions of (i) the corporate charter or bylaws of
Purchaser; (ii) any terms or provisions of any agreement or instrument to which
Purchaser is a party or by which it is bound; or (iii) any federal. state or
local law, ordinance, regulation, or rule or any order, writ, injunction,
judgment, license, franchise, permit, or decree of any governmental authority or
arbitration tribunal by which Purchaser is or may be bound.
(f) Approvals. Except for the FCC Approval, no consent, approval, or
authorization of or declaration or filing with any governmental authority is
required in connection with the execution or delivery of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated by
this Agreement.
(g) FCC Qualification. Purchaser is legally qualified to hold the
Midwest Licenses.
ARTICLE III
COVENANTS
Section 3.1 Covenants of Sellers.
Except as otherwise consented to by Purchaser, throughout the period
commencing on the date hereof and ending on the Closing Date, Sellers covenant
that they will do the following:
(a) Access. Sellers will give to Purchaser and Purchaser's counsel,
Accountants, or other representatives full access (during normal business hours)
to all properties, documents, contracts, books, records, and other data of the
Transferred Business and the Transferred Assets; provided, however, that all
information received by Purchaser and its representatives will be held in
confidence by each of them, and, provided further, that if the transaction
contemplated hereby is not consummated, all data of every kind and nature and
all copies of documents taken by any of those persons will, upon request, be
returned to Sellers and not otherwise utilized by Purchaser, and provided
further that information publicly available or previously known by Purchaser or
later acquired from third parties having no obligation of confidentiality to
Seller need not be held in confidence.
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(b) Compliance with Laws. Sellers will comply with and perform all
material obligations and duties imposed upon it by all federal and state laws
and all rules, regulations, and orders imposed by federal or state governmental
authorities,
(c) Notice of Certain Events. By written notice to Purchaser,
Sellers will notify Purchaser of the commencement of any litigation against any
Seller or the Transferred Business or of the existence of adverse business
conditions threatening the continued, normal business operations of the
Transferred Business.
(d) Leases; Licenses. Sellers will continue to meet all obligations
under all Assigned Contracts, the Midwest Licenses, and other leases and
contracts, consistent with the terms of the Management Agreement.
(e) Satisfaction of Conditions. Sellers will use their best efforts
to assure, as soon as is reasonably practicable, the satisfaction of the
conditions to the effectiveness of the transactions contemplated in this
Agreement.
(f) Good Standing. Each Seller (except for SOWI as to payment of
franchise fees) will maintain in good standing its corporate existence under the
laws of the state in which it is incorporated or organized and not adopt or
propose any change to its organizational documents except a change that would
not have any adverse effect on the transactions contemplated in this Agreement.
(g) Tax Returns, Filings, and Payments. Each Seller will prepare and
timely file all Tax returns for periods ending on or prior to the Closing Date
and will pay all Taxes for periods ending on or prior to the Closing Date. All
personal property transfers, documentary, sales, use, registration, value added,
and other similar taxes (including interest, penalties and additions to any such
tax) incurred in connection with the transactions contemplated hereby ("Transfer
Taxes") will be borne by Sellers, and Sellers will indemnify Purchaser for any
such Tax incurred by Purchaser as a result of Sellers' failure to pay any such
Tax.
(h) Compliance with WARN. Prior to the Closing Date, no Seller will
effectuate a "plant closing" or "mass layoff," as those terms are defined in
WARN, affecting any of Sellers' employees and requiring a notice to employees
pursuant to WARN, without notification to Purchaser in advance.
(i) Approval Order. Upon execution of this Agreement, Debtors will
promptly request entry of the Procedure Order and the Approval Order.
Section 3.2 Covenants of Purchaser.
Except as otherwise consented to by Sellers, Purchaser covenants
that, throughout the period commencing on the date hereof and ending on the
Closing Date, it
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will:
(a) Good Standing. Maintain its existence as a corporation validly
existing and in good standing under the laws of the State of Delaware;
(b) Satisfaction of Conditions. Use its best efforts to assure, as
soon as is reasonably practicable, the satisfaction of the conditions to the
effectiveness of the transactions contemplated in this Agreement;
(c) FINOVA Consent. Upon execution of this Agreement, promptly seek
the FINOVA Consent.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Obligations of Sellers and Purchaser.
The respective obligations of each Party to effect the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) No statute, rule, regulation, executive order, decree, ruling,
or preliminary or permanent injunction exists or has been enacted, entered,
promulgated, or enforced by any federal or state court or governmental authority
that prohibits, restrains, enjoins, or restricts the consummation of the
transactions contemplated by this Agreement that has not been withdrawn or
terminated;
(b) No Action exists or has commenced by or before any federal,
state, or local or any foreign government, governmental, regulatory, or
administrative authority, agency, or commission or any court, tribunal or
judicial or arbitral body against Purchaser or Seller, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
that, in the reasonable good faith determination of any Party, is likely to
render it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 4.1 shall not apply to any Party
that has directly or indirectly solicited or encouraged any such Action.
(c) The Approval Order, FCC Approval, and the FINOVA Consent are
obtained.
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Section 4.2 Conditions Precedent to Purchaser's Obligation to Close.
All obligations of Purchaser to close under this Agreement are
subject to the fulfillment of each of the following conditions, prior to or at
the Closing:
(a) The representations and warranties made by Sellers contained
herein are true and correct at and as of the time of the Closing, with the same
effect as though such representations and warranties were made at and as of such
time, except for the representations and warranties set forth in Sections 6.1,
6.2, and 6.3 of the Management Agreement concerning Other Midwest Transmitter
Sites.
(b) Sellers, on or before the Closing, have performed and complied
with all terms, covenants, and conditions required by this Agreement to be
performed or complied with at or before the Closing.
(c) Sellers deliver to Purchaser a certificate, dated the Closing
Date and signed by an appropriate officer of Seller, certifying as to the
fulfillment of the conditions set forth in Subsections (a) and (b) of this
Section 4.2.
(d) The FINOVA Consent, the FCC Approval, and the Approval Order are
obtained.
(e) On or before October 15, 1999, Sellers will deliver to Purchaser
audited financial statements of Sellers with auditors' consents as of the fiscal
years ending December 31, 1996, 1997, and 1998 and for the period from January
1, 1999 through June 30, 1999. For the audited financial statements of Sellers
for the fiscal year ending December 31, 1998 and for the period from January 1,
1999 through June 30, 1999, Purchaser agrees to pay the following portion of the
reasonable costs and expenses of this audit at the Closing: (a) one-half of the
first $30,000 and (b) all reasonable audit costs and expenses over $30,000
(together, "Purchaser's Audit Payment"). If the Closing does not occur due to
Purchaser's default, then Purchaser will pay the Purchaser's Audit Payment.
(f) There has not been commenced, threatened, or received any
proceeding, or notice thereof, that results or could result in the citation of
any Seller or the Transferred Business for violation of zoning ordinances in
connection with the use of the Seller's locations or requiring the cessation of
such use.
(g) Sellers deliver such other documents, opinions, and certificates
as are reasonably requested by counsel for Purchaser.
Section 4.3 Conditions Precedent to the Sellers' Obligation to Close.
All obligations of Sellers to close under this Agreement are subject
to the fulfillment of each of the following conditions prior to or at the
Closing:
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(a) The representations and warranties made by Purchaser contained
herein are true and correct at and as of the time of the Closing, with the same
effect as though such representations and warranties were made at and as of such
time.
(b) Purchaser, on or before the Closing, has performed and complied
with all terms, covenants, and conditions required by this Agreement to be
performed or complied with at or before the Closing.
(c) Purchaser delivers to Sellers a certificate, dated the Closing
Date and signed by an appropriate officer of Purchaser, certifying as to the
fulfillment of the conditions set forth in Subsections (a) and (b) of this
Section 4.3.
(d) The FCC Approval and the Approval Order are obtained.
(e) Sellers' receipt of the Purchase Price in accordance with
Section 1.6.
ARTICLE V
TERMINATION
Section 5.1 Grounds for Termination.
Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated in any of the following ways at any time before the
Closing Date only as follows:
(a) By mutual written consent of Sellers and Purchaser.
(b) By the Purchaser if any Seller has (i) misstated any material
representation or been in breach of any material warranty contained herein and
such misrepresentation or warranty breach has not been cured within 5 days after
notice from the Purchaser or (ii) been in breach of any material covenant,
undertaking or restriction contained herein and such breach has not been cured
within 5 days after notice from the Purchaser.
(c) By the Sellers if Purchaser has (i) misstated any material
representation or been in breach of any material warranty contained herein and
such misrepresentation or warranty breach has not been cured within 5 days after
notice from the Sellers or (ii) been in breach of any material covenant,
undertaking or restriction contained herein and such breach has not been cured
within 5 days after notice from the Sellers.
(d) By a Party, if a condition to Closing applicable to it hereunder
has not been satisfied by the Closing Date (or such earlier date as specified
herein) or waived in writing by that Party.
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(e) By Sellers or Purchaser if the Approval Order has not been
obtained by September 30, 1999.
(f) By Purchaser if FINOVA Consent has not been obtained by August
6, 1999.
(g) By Sellers or Purchaser if the FCC Approval has not been
obtained by February 15, 2000, unless otherwise agreed to in a writing signed by
the Parties.
(h) By Sellers or Purchaser if the Closing has not occurred by
February 28, 2000, but a Party cannot terminate this Agreement under this
Section 5.1(h) if that Party's material breach prevented the Closing.
(i) By Purchaser if (i) a trustee or examiner under chapter 7 or
chapter 11 of the Bankruptcy Code is appointed for either of the Debtors or (ii)
LLC II becomes subject to a case under the Bankruptcy Code.
(j) By Purchaser if the Bankruptcy Court does not enter a Procedure
Order which approves the amount of the Breakup Fee in accordance with Section
6.1.
(k) Automatically, if (a) the STA is terminated prior to Closing;
(b) FCC Approval is denied; (c) the Management Agreement is terminated prior to
Closing; or (d) Sellers accept a Superior Bid (as defined below).
(l) Notwithstanding the provisions of this Section 5.1, Purchaser
may not terminate this Agreement based on a non-willful breach of the
representations and warranties set forth in Sections 6.1, 6.2, and 6.3 of the
Management Agreement concerning any Other Midwest Transmitter Site.
Section 5.2 Consequences of Termination.
If the Agreement is terminated pursuant to Section 5.1, all further
obligations of the Parties will terminate and the Escrow Fund, with interest,
will be returned to Purchaser and no Party will have any liability to any other
Party or its respective directors, officers, employees, or agents, except for
any obligation of Sellers to pay the Break-up Fee (as described in Section 6.1
below).
Section 5.3 Brokers.
Except for Houlihan, with whom Sellers have entered into a separate
compensation agreement, and which compensation will be paid by Sellers, Sellers
and Purchaser represent and warrant each to the other that they have not dealt
with any broker, sales person, or finder in connection with this transaction.
Sellers and Purchaser each agree
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to indemnify, defend, and hold harmless from and against any loss, cost,
liability, or expense suffered or incurred by the other party as a result of a
claim or claims for brokerage commissions, finder's fees or other similar fees
from any party or firm that is based on the act or omission of the party in
breach of the above warranty.
ARTICLE VI
CONSENTS
Section 6.1 Procedure Order.
No later than ten (10) days after execution of this Agreement,
Debtors will file a motion with the Bankruptcy Court requesting entry of an
order in form and substance reasonably acceptable to Purchaser ("Procedure
Order"), which, among other things; (a) sets forth the procedures for notice and
approval of this Agreement; (b) sets forth bid procedures and provides overbid
protections by requiring that any initial competing bid for the Transferred
Assets must exceed the Purchase Price by $375,000; (c) approves the Management
Agreement; and (d) if Sellers accept another bid for the Transferred Assets
("Superior Bid") authorizes and directs the payment of a break-up fee of
$375,000 ("Breakup Fee") to Purchaser immediately upon receipt of a downpayment
or other monetary consideration from the entity providing the Superior Bid.
Section 6.2 Approval Order.
Concurrently with the filing of the motion requesting the Procedure
Order, Debtors will file a motion with the Bankruptcy Court requesting entry of
an order (in form and substance acceptable to Purchaser) which among other
things, (i) approves the Agreement; (ii) authorizes the sale of the Transferred
Assets free and clear of Encumbrances; and (iii) approves assumption and
assignment of the Section 365 Contracts.
Section 6.3 Consent of Lender.
Sellers and Purchaser acknowledge and agree that Purchaser's ability
to consummate the purchase of the Transferred Assets and complete the
transactions contemplated hereunder are subject to and contingent upon the
written consent of FINOVA Capital Corporation for Purchaser to enter into this
Agreement ("FINOVA Consent"), the senior lender under a credit facility with
Purchaser, which FINOVA Consent is in the sole, absolute discretion of FINOVA
Capital Corporation. This consent is not a financing contingency.
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Section 6.4 FCC Approval.
Purchaser and Sellers will, promptly after the date hereof, prepare
and file with the FCC the applications ("Assignment Applications") necessary to
obtain by "Final Order" FCC consent to the de jure assignment of the Midwest
Licenses to Purchaser. "Final Order" means an order or written action by the FCC
granting the Assignment Applications, which order or action (i) is no longer
subject to administrative or judicial reconsideration, review or appeal; and
(ii) which, if challenged, has been reaffirmed or upheld or the challenge has
been withdrawn and the applicable period for seeking further administrative or
judicial reconsideration, review or appeal has expired without the filing of any
action, petition, request for further review or further challenge. Purchaser and
Sellers will each prepare their respective portions of the Assignment
Applications and FCC fees associated therewith will be paid equally by Purchaser
and Sellers. Purchaser and Sellers will cooperate and use their reasonable
efforts to prosecute and obtain grant of the Assignment Applications by Final
Order, including, but not limited to, provision of any additional information
requested by the FCC. FCC Approval for purposes of this Agreement will only
occur upon FCC grant of the Assignment Applications by Final Order.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification.
(a) Sellers will indemnify Purchaser and agree to hold Purchaser
harmless from and against any and all damages, losses, costs, and expenses
(including reasonable counsel fees and expenses in connection with the contest
of any claim) paid or incurred by Purchaser and arising out of (i) any and all
inaccurate representations or breaches of covenant or warranty made by any
Seller under this Agreement or in any Exhibit, Schedule, certificate, list, or
other instrument delivered pursuant to this Agreement or (ii) arising out of any
and all claims made against Purchaser for any liability that Purchaser did not
assume pursuant to Section 1.5 hereof.
(b) Purchaser will indemnify Sellers and agrees to hold Sellers
harmless from and against any and all damages, losses, costs, and expenses
(including reasonable counsel fees and expenses in connection with the contest
of any claim) paid or incurred by Sellers and arising out of any and all
inaccurate representations or breaches of covenant or warranty made by Purchaser
under this Agreement or in any Exhibit, Schedule, certificate, list, or other
instrument delivered pursuant hereto.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action asserting a claim based upon any cause enumerated in
this Section 7.1, the indemnified party will, if it claims the benefits of
indemnification pursuant to this Section 7.1 with respect to such action, notify
the indemnifying party of the
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commencement thereof. Upon receipt of such notice, the indemnifying party has
the option of either assuming the defense of such action (and the cost thereof)
with counsel reasonably satisfactory to both the indemnified and the
indemnifying parties or participating in the defense of such action at the sole
expense of the indemnifying party. In the event of the indemnifying party's
assumption of the defense of such action, counsel selected by the indemnified
party may at the election of the indemnified party participate in any such
defense, at the sole expense of the indemnified party. No settlement or
compromise to be paid by the indemnifying party will be entered into without the
written consent of the indemnifying party, which consent will not be
unreasonably withheld.
(d) The indemnity provided in this Section 7.1 is limited in time
such that no party may assert a claim in respect of such indemnity at any time
after twelve (12) months after the Closing Date.
(e) Notwithstanding anything in this Section 7.1 to the contrary, no
Party may assert a claim for indemnity pursuant to Section 7.1 unless the
aggregate of all such claims by such indemnified party against such indemnifying
party exceeds $100,000, in which event the indemnifying party's obligation will
apply to all indemnified losses in excess of such amount.
(f) Notwithstanding the provisions of this Section 7.1, Purchaser
will have no claim for indemnification against any Seller based on a non-willful
breach of the representations and warranties set forth in Sections 6.1, 6.2, and
6.3 of the Management Agreement concerning any Other Midwest Transmitter Site.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Expenses.
Purchaser and Seller will each pay their respective counsel,
accountants, and other expenses incurred in connection with the negotiation and
consummation of the transactions contemplated in this Agreement.
Section 8.2 Nondisclosure of Confidential Information.
The Parties each agree that if for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, all information
disclosed to the other party pursuant to this Agreement or in furtherance of it
will remain confidential, unless otherwise in the public domain, and each Party
will not use or furnish or divulge the same to any other person.
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Section 8.3 Survival of Representations and Warranties.
(a) All representations, covenants and warranties made by Sellers
and Purchaser in this Agreement or in any Exhibit, Schedule, certificate, list,
or other instrument delivered pursuant hereto will survive the Closing for a
period of twelve (12) months.
(b) Notwithstanding any right of Purchaser to fully investigate the
affairs of Sellers relating to the Transferred Business and notwithstanding any
knowledge of facts determined or determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has the right to rely fully
upon the representations, warranties, covenants, and agreements of Sellers
contained in this Agreement or in any document delivered or to be delivered
pursuant to this Agreement by any Seller or any of the Sellers' representatives
(including, but not limited to, Houlihan or any accountant or attorney
representing Seller), in connection with the transactions contemplated by this
Agreement. Each warranty, representation, agreement, and covenant contained
herein is independent of all warranties, representations, agreements, and
covenants contained herein or in any Exhibit, Schedule, certificate, list or
other instrument or documents (whether or not covering identical or related
subject matter) and must be independently and separately complied with and
satisfied.
Section 8.4 Employees.
Purchaser has the unlimited right, but not the obligation, to seek
and secure the employment of any employee of any Seller, and Sellers shall
reasonably assist Purchaser in such efforts, but Sellers will not be required to
incur any expense thereby and, further, Sellers do not warrant or guarantee the
availability to Purchaser of any of the current employees of any Seller.
Section 8.5 Risk of Loss.
From the date hereof through the Closing Date, if any Transferred
Asset is destroyed or damaged by fire or any other cause, other than use, wear,
or loss in the ordinary course of business, Sellers will give written notice to
Purchaser as soon as practicable (but in no event later than 5 days) after
discovery by any Seller of such damage, destruction, or loss. Purchaser will
have the option of (a) having such Transferred Asset delivered to it at the
Closing in its destroyed or damaged condition in which event the Purchase Price
will be reduced by the amount allocated to such Transferred Asset (to the extent
of such damage or destruction), as mutually agreed by the parties, (b) excluding
such Transferred Asset from this Agreement, in which event the Purchase Price
shall be reduced by the amount allocated to such Transferred Asset, as mutually
agreed by the parties, or (c) replacing or repairing such Transferred Asset (any
replacement will be deemed a Transferred Asset) at Sellers' expense.
Section 8.6 Notices.
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All notices and other communications under this Agreement will be in
writing and be deemed given and effective (a) when delivered personally to the
recipient (b) when sent to recipient by electronic facsimile if during
recipient's normal business hours, otherwise on the next Business Day (with
receipt electronically confirmed and with a hard copy sent within one business
day by any other means described in this paragraph), or (c) on the first
Business Day following the day sent to the recipient for next Business Day
(morning delivery) by a nationally recognized overnight courier. Notices will be
sent to the Parties at the following addresses or facsimile telephone numbers
(or to such other address as a Party may have specified by notice given to the
other Parties pursuant to this provision).
(a) If to Purchaser:
Aquis Communications Group, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
Attention: John X. Adiletta, President
Facsimile: 973-560-8078
with a copy (which will not constitute notice) to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Monte Engler, Esq.
Facsimile: 212-262-5152
(b) If to Sellers:
SourceOne Wireless, Inc.
1040 South Milwaukee Avenue
Wheatley, Illinois 60090
Attention: David P. Harris
Facsimile: 847-465-5575
with a copy (which will not constitute notice) to:
Hopkins & Sutter
Three First National Plaza
Chicago, Illinois 60602
Attention: Mark A. McDermott
Facsimile: 312-558-5190
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and a copy (which will not constitute notice) to:
O'Connor & Hannon, LLP 1919 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20006-3483
Attn: Audrey P. Rasmussen
Facsimile: 202-466-2198
Section 8.7 Miscellaneous.
(a) Severability. If any term or provision of this Agreement is to
any extent, invalid or unenforceable, then this Agreement will not be affected
thereby, and each term and provision of the Agreement will be valid and enforced
to the fullest extent permitted by law.
(b) Assignment. Neither Purchaser nor any Seller may assign this
Agreement or any rights hereunder prior to the Closing without the prior written
consent of the other party, but Purchaser may assign its rights hereunder to one
or more of its affiliates. After the Closing, the terms, provisions, covenants
and conditions of this Agreement will bind and benefit the Parties to and their
respective heirs, successors, personal representatives, and assigns, including,
as to Sellers, any trustee who is appointed in the Debtors' chapter 11 cases or
in any subsequent chapter 7 cases under the Bankruptcy Code.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, will be an original
instrument, and such counterparts, together, will constitute a single agreement.
(d) No Waiver. No waiver of any breach or default under this
Agreement will be considered valid unless in writing and signed by the Party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any Party may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
(e) Entire Agreement; Amendments. This Agreement and the Management
Agreement, together with Exhibits and Schedules referred to or attached to this
Agreement and the Management Agreement, contain the entire agreement among the
Parties and supersede any other agreement, whether written or oral, among the
Parties relating to the transactions contemplated in this Agreement with respect
to the subject matter contained herein. This Agreement cannot be amended except
by a written instrument executed by the Parties that specifically states that it
is intended to amend this Agreement. No representations, promises, warranties,
covenants, understandings or undertakings exist except as expressly set forth in
this Agreement.
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(f) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
reference to the choice of law doctrine of such state. For so long as Debtors
are subject to the jurisdiction of the Bankruptcy Court, the Parties elect as
the sole judicial forum for adjudication of any dispute between Sellers and
Purchaser arising under or related to this Agreement, and consent to
jurisdiction of, the Bankruptcy Court. After Debtors are no longer subject to
Bankruptcy Court jurisdiction, the Parties elect as the sole judicial forum for
adjudication of any matters arising under or related to this agreement, and
consent to the jurisdiction of, the Courts of the County of New York, State of
New York and the Southern District of New York.
(g) Titles and Headings. Titles and headings are inserted for
convenience and do not form part of the Agreement.
Signed: AQUIS COMMUNICATIONS, INC.
August , 1999
By: /s/ JOHN X. ADILETTA
----------------------------------
Name: John X. Adiletta, President
Title: President
Signed: SOURCEONE WIRELESS, INC.
August , 1999
By: /s/ DAVID P. HARRIS
----------------------------------
Name: DAVID P. HARRIS
Title: DIP MANAGER
Signed: SOURCEONE WIRELESS L.L.C.
August , 1999
By: /s/ DAVID P. HARRIS
----------------------------------
Name: DAVID P. HARRIS
Title: DIP MANAGER
Signed: SOURCEONE WIRELESS II, L.L.C.
August , 1999
By: /s/ STEVEN J. ZABEL
----------------------------------
Name: STEVEN J. ZABEL
Title: CFO
24
AGREEMENT PENDING PURCHASE CLOSING
This AGREEMENT PENDING PURCHASE CLOSING ("Management Agreement") dated as
of this 2nd day of August, 1999 ("Execution Date") is made and entered into by
and among SourceOne Wireless Inc. ("SOWI"), SourceOne Wireless, L.L.C. ("LLC"),
SourceOne Wireless II, L.L.C. ("LLC II") and Aquis Communications, Inc.
("Aquis"). SOWI, LLC, LLC II and Aquis may sometimes be referred to hereinafter
individually as "Party" and collectively as the "Parties." SOWI, LLC and LLC II
may sometimes be referred to collectively hereinafter as "SourceOne."
RECITALS
WHEREAS, SourceOne currently operates Commercial Mobile Radio Service
("CMRS") one-way paging systems ("Systems") on multiple frequencies in numerous
geographic areas throughout the United States pursuant to licenses ("Licenses")
issued to LLC II by the Federal Communications Commission ("FCC").
WHEREAS, the largest of these Systems is a one-way paging system ("Midwest
System") operating pursuant to licenses ("Midwest Licenses") issued by the FCC
in the Paging And Radiotelephone Service on the frequency 931.1875 MHz in the
midwest United States. The Midwest System is made up of one hundred and
twenty-seven (127) 931.1875 MHz transmitter sites: (i) seventy-five (75)
("Midwest Transmitter Sites") of which are clearly currently operational and
used by SourceOne to provide paging service to certain subscribers ("Midwest
Subscribers"); and (ii) fifty-two (52) ("Other Midwest Transmitter Sites") of
which may not currently be operational, but SourceOne has no knowledge that such
Other Midwest Transmitter Sites have been off the air for ninety (90) or more
continuous days as represented by SourceOne herein, and have been used to
provide paging service to Midwest Subscribers. A list of the Midwest Transmitter
Sites and Other Midwest Transmitter Sites that make up the Midwest System and
associated Midwest Licenses is attached hereto as Schedule A.
WHEREAS, the remaining Systems ("Other Systems") authorized to SourceOne
pursuant to FCC Licenses issued to LLC II on other frequencies ("Other
Licenses") provide service to other subscribers ("Other Subscribers").
WHEREAS, SourceOne also provides paging service to additional subscribers
("Additional Subscribers") in various geographic areas on systems not licensed
to SourceOne, including through resale and other agreements ("Additional
Subscriber Agreements"). The term "Subscribers" as used hereinafter will be
defined to include Midwest Subscribers and Additional Subscribers.
WHEREAS, LLC II is wholly owned and controlled by LLC and LLC is, in turn,
controlled by SOWI.
<PAGE>
WHEREAS, On April 29, 1999, SOWI, and on July 2, 1999, LLC (together with
SOWI "Debtors") filed voluntary petitions for relief in the Bankruptcy Court for
the Northern District of Illinois ("Bankruptcy Court") under chapter 11 of title
11 of the United States Code ("Bankruptcy Code"). Debtors have continued in the
possession of their assets and the management of their business pursuant to
Bankruptcy Code sections 1107 and 1108.
WHEREAS, as part of Debtors' bankruptcy cases, either simultaneously
herewith or promptly after the Execution Date, Aquis, SOWI, LLC and LLC II will
execute an asset purchase agreement ("Purchase Agreement") pursuant to which
Aquis will purchase the: (i) Midwest System, including the Midwest Licenses, the
Midwest Subscribers and all assets used in the operation of the Midwest System;
(ii) the Other Subscribers and certain other assets used by SourceOne in the
operation of the Other Systems; and (iii) the Additional Subscribers and certain
other assets used by SourceOne in the provision of service to Additional
Subscribers pursuant to Additional Subscriber Agreements.
WHEREAS, the Purchase Agreement requires (or will require) that the
Parties obtain requisite prior FCC consent to assignment of the Midwest Licenses
from LLC II to Aquis pursuant to applications (collectively "Assignment
Application") that must be filed with, processed and granted by the FCC before
the Parties can consummate sale of the assets and de jure assignment of the
Midwest Licenses to Aquis at a closing ("Purchase Closing") to be conducted by
the Parties pursuant to the Purchase Agreement.
WHEREAS, based on representations by SourceOne that SourceOne's dire
financial circumstances severely threaten SourceOne's ability to continue to
operate the Midwest System, Aquis has agreed to step in and assume day-to-day
operational and management control of the Midwest System and related
responsibilities pursuant to this Management Agreement until Purchase Closing.
WHEREAS, LLC II and Aquis have sought and obtained Special Temporary
Authority ("STA") for Aquis to acquire de facto control of the Midwest System
pending filing and FCC grant of the Assignment Application and de jure
assignment of the Midwest Licenses to Aquis at Purchase Closing. This STA will
enable Aquis to provide the functions specified in this Management Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, mutually agree as follows.
1. Assumption Of Midwest Business. At 12:01 AM on a date to be mutually
agreed by the Parties no more than five (5) Business Days after Bankruptcy Court
approval of this Management Agreement ("Take-Over Date"): (i) SourceOne will
transfer and Aquis will
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acquire de facto control of the Midwest System and assume full day-to-day
operational and management responsibilities for operation of the Midwest System,
including provision of service to Midwest Subscribers; and (ii) Aquis will
commence provision of service to Additional Subscribers pursuant to Additional
Subscriber Agreements. The functions referred to in subsections (i) and (ii)
hereof will be referred to collectively hereinafter as the "Midwest Business."
In order to effectuate this transfer, the Parties hereby agree to take the
following actions:
1.1. Use Of Midwest System Assets. On the Take-Over Date, SourceOne
will transfer to Aquis SourceOne's rights to use, have access to and control
over each and every asset utilized by SourceOne in the operation of the Midwest
Business ("Midwest System Assets"), including, but not limited to the following:
1.1.1. All transmission equipment located at the Midwest
Transmitter Sites, Other Midwest Transmitter Sites, or at any other location
utilized in the operation of the Midwest System.
1.1.2. The paging terminals and all associated hardware and
software utilized in the Midwest System and the "calling party pays" platform,
software and associated hardware ("CPP") used as part of the Midwest Business to
provide service to Subscribers.
1.1.3. The satellite control facilities utilized in the
Midwest System, including but not limited to any earth station facilities,
satellite space, associated wireline or wireless transmission facilities,
hardware and software, whether owned by SourceOne or utilized by SourceOne
pursuant to existing agreements with third parties.
1.1.4. All site leases, licenses or other agreements ("Site
Agreements") pursuant to which SourceOne operates transmission equipment at each
of the Midwest Transmitter Sites and Other Midwest Transmitter Sites, it being
Aquis's understanding that SourceOne does not currently own the sites or
supporting structures at any of the Midwest Transmitter Sites or Other Midwest
Transmitter Sites.
1.1.5. All rights to interconnection with the public switched
telephone network ("PSTN") utilized by SourceOne in the operation of the Midwest
Business, whether pursuant to agreement, tariff or otherwise.
1.1.6. Certain leases, licenses or other agreements ("Office
Agreements") for office space related to, or at which SourceOne currently
operates, the Midwest Business as specified at Schedule hereto.
1.1.7. All office equipment, furniture and
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fixtures, computer equipment, tools, vehicles, and other personal property
("Personal Property") utilized by SourceOne in any way in connection with the
Midwest Business.
1.1.8. All software and licenses and other agreements to
utilize software ("Software") utilized by SourceOne in any way in connection
with the Midwest Business.
1.1.9. Those SourceOne employees specified on Schedule hereto
("Retained Employees"), it being expressly understood that: (i) as of the
Take-Over Date, SourceOne will terminate the employment of any other SourceOne
employees currently involved in operation of the Midwest Business and/or
reassign such other employees to operation of the Other Systems with SourceOne
assuming full and complete responsibility for all actions, costs, expenses,
claims and liabilities of any nature whatsoever associated with such termination
and/or reassignment of non-Retained Employees; and (ii) to the extent that
SourceOne will pay "stay bonuses" to Retained Employees, SourceOne will only pay
such "stay bonuses" on or after Purchase Closing, or as otherwise provided in a
Bankruptcy Court order.
1.1.10. All bank accounts ("Bank Accounts") utilized by
SourceOne in the operation of the Midwest Business.
1.1.11. All customer lists and goodwill for Subscribers
(collectively "Customer Lists").
1.1.12. All deposits ("Deposits") held by SourceOne for
Subscribers.
1.1.13. The right to operate the Midwest System in accordance
with the Midwest Licenses as the Midwest Licenses may be modified by LLC II
pursuant to the request of Aquis, subject only to LLC II's ongoing obligations
imposed as the de jure FCC licensee of the Midwest Licenses.
1.1.14. All inventory, pagers and other equipment and/or items
held for resale or lease (or already leased to Subscribers) by SourceOne.
1.1.15. On the Take-Over Date, all accounts receivable held or
owned by SourceOne for Subscribers, including all rights to receive compensation
from "calling party pays" agreements and all accrued but unbilled revenue from
operation of the Midwest Business (collectively, "Accounts Receivable"), will be
turned over to Aquis as manager for administration and collection. SourceOne
represents that accrued but unbilled revenues are not older than thirty-one (31)
days except that accrued but unbilled revenues for July, 1999, are not older
than forty (40) days. The Accounts Receivable transferred on the Take-Over Date
("Take-Over Receivables") will be specified on a schedule agreed to by the
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Parties and will be valued with the following discount factors ("Discount
Factors") as follows:
(a) 100% of the face amount of Accounts Receivable outstanding including
accrued but unbilled revenue for 30 days or less before the
Take-Over Date;
(b) 70% of the face amount of Accounts Receivable outstanding for
between 31 and 60 days before the Take-Over Date;
(c) 40% of the face amount of Accounts Receivable outstanding for
between 61 and 90 days before the Take-Over Date;
(d) 0% of the face amount of Accounts Receivable outstanding for more
than 90 days before the Take-Over Date; and
(e) 95% of the net amount of those certain Accounts Receivable owed by
ESBI and Ameritech and related to "calling party pays" service.
If the Purchase Agreement closes, the Accounts Receivable will be transferred to
Aquis as Purchaser under the Purchase Agreement. If the Management Agreement is
terminated and the Purchase Closing has not occurred, then Aquis will return to
SourceOne accounts receivable from the Midwest Business whose value (after
adjustment by the Discount Factors) is not less than the discounted value of the
Take-Over Receivables less the "Net Service Revenue Adjustment" amount
("Returned Receivables Amount") subject to the first priority lien thereon in
favor of Foothill Capital Corporation, as agent. If the discounted value of the
Take-Over Receivables exceeds the Returned Receivables Amount, then Aquis will
promptly pay SourceOne the difference subject to the first priority lien thereon
in favor of Foothill Capital Corporation, as agent. If the discounted value of
the Take-Over Receivables is less than the Returned Receivables Amount, then
such difference ("Excess Returned Receivables") will be promptly paid by Source
One to Aquis as a fee in addition to any other fees provided in this Management
Agreement. The Net Service Revenue Adjustment amount under this Section is
calculated as follows: (discounted value of the Take-Over Receivables divided by
$7.26 million) times actual Net Service Revenue (as defined in Purchase
Agreement Section 1.6(d)(i)).
1.1.16. All contract rights ("Contracts") held by SourceOne
and utilized in connection with the Midwest Business, such as Additional
Subscriber Agreements, agreements related to "calling party pays", and
subscriber agreements with Subscribers.
1.1.17. All books, records, models and spreadsheets (whether
in hard copy or computerized form) kept in the ordinary course and useful, in
the sole discretion of Aquis, in the operation of the Midwest Business,
including sales and
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marketing information and Retained Employee files.
1.1.18. All corporate names, logos, trade names, trademarks
and copyrights of SourceOne and all other intellectual property owned by or
licensed to SourceOne, used in connection with operation of the Midwest
Business.
1.1.19. Any other assets, privileges, rights, claims or
credits of every kind, character and description, whether tangible, intangible,
real, personal, or mixed and wherever located, owned, leased by SourceOne or
used, or held for use in connection with the Midwest Business as of the
Take-Over Date ("Other Assets").
1.2. No Assumption Of Liabilities By Aquis. It is expressly
understood and agreed that the Parties intend that Aquis is not and will not be
considered to be a successor to SourceOne by reason of any theory of law or
equity.
1.3. Title To Midwest System Assets. Subject to Aquis's right to
use, have access to and control over the Midwest System Assets pursuant to
Section hereof, title to the Midwest System Assets will remain with SourceOne
during the Term of this Management Agreement (as hereinafter defined). Title
will pass to Aquis at Purchase Closing pursuant to the Purchase Agreement;
subject, however, to the provisions of Section hereof.
1.4. Good Faith Cooperation. SourceOne agrees to cooperate in good
faith, use its best efforts and timely take (or omit to take) any additional
action that Aquis reasonably believes is necessary to: (i) effectuate the de
facto transfer of control of the Midwest System and allow Aquis to assume
day-to-day operational and management control of the Midwest System; (ii) allow
Aquis to assume provision of service to Additional Subscribers pursuant to
Additional Subscriber Agreements; and (iii) allow Aquis to carry out any other
related responsibilities with respect to the Midwest Business specified in this
Management Agreement.
2. Operation Of The Midwest Business.
2.1. Aquis Responsibilities. On the Take-Over Date, Aquis will
assume day-to-day operational and management control of the Midwest System using
the Midwest System Assets. Aquis will exercise a reasonable standard of care
normally exercised by operators of similar CMRS one-way paging systems in
similar circumstances; provided, however, that the Parties explicitly recognize
that Debtors' Chapter 11 bankruptcy may result in significant obstacles that may
prevent Aquis from meeting this standard of care. Aquis will use its reasonable
best efforts consistent with sound commercial practice to provide for the
successful operation of the Midwest System and Aquis will render or
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obtain all services and perform or cause to be performed all duties necessary or
appropriate for the operation of the Midwest System. Aquis will also continue
provision of service to Additional Subscribers pursuant to Additional Subscriber
Agreements. Aquis's duties will including the following:
2.1.1. Operate the Midwest System for provision of service to
existing and new Midwest Subscribers in compliance with the Midwest Licenses and
applicable FCC Rules (as hereinafter defined).
2.1.2. Provide service to existing and new Additional
Subscribers pursuant to Additional Subscriber Agreements.
2.1.3. Analyze the existing technical configuration of the
Midwest System and, subject to Section hereof, plan and implement any expansion,
modification or reduction of the Midwest System that Aquis believes in its sole
and unfettered discretion will increase the economic, efficient operation of the
Midwest System.
2.1.4. Analyze the Other Midwest Transmitter Sites to
determine whether transmitting equipment at those sites (such equipment at each
site referred to as "Other Midwest Transmitter Site Equipment") is operational
and that the representations made by SourceOne at Section , and hereof ("Other
Midwest Transmitter Site Representations") with respect to the Other Midwest
Transmitters Sites and all Other Midwest Transmitter Site Equipment are
accurate. To the extent that: (i) Aquis determines that any or all of the Other
Midwest Transmitter Site Representations are not accurate; or (ii) Aquis, in its
sole and unfettered discretion, determines that operation cannot and/or should
not be timely recommenced at any Other Midwest Transmitter Site in accordance
with FCC Rules for any reason whatsoever; then Aquis may instruct SourceOne to
modify the Midwest Licenses for any such Other Midwest Transmitter Site(s).
Aquis's sole remedy in the event SourceOne does not modify the Midwest Licenses
as instructed will be the Purchase Price (as defined in the Purchase Agreement)
adjustments specified at Section 1.6(e) of the Purchase Agreement.
2.1.5. Supervise, manage and train the Retained Employees and
other administrative, technical and sales staff, if any, necessary for the
operation of the Midwest Business.
2.1.6. Administer the invoicing and collection of all accounts
of Subscribers, including new subscribers to the Midwest System and new
Additional Subscribers, and Accounts Receivable; collect and receive all
payments on such accounts; and arrange for the billing and collection of all
other revenues, fees, charges or other compensation ("Revenues") due in
connection with
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the Midwest Business.
2.1.7. Arrange for the payment of all expenses and fees, if
any, incurred in connection with the Midwest Business after the Take-Over Date
during the Term of this Management Agreement (as hereinafter defined)
("Expenses").
2.1.7.1. The Parties agree that Expenses will be pro
rated as of the Take-Over Date with SourceOne retaining sole responsibility for
payment of Expenses prior to the Take-Over Date and Aquis assuming
responsibility for payment of Expenses after the Take-Over Date in accordance
with this Management Agreement and subject to Section hereof.
2.1.8. Maintain the Customer List and files concerning
subscriber agreements for all Subscribers; and
2.1.9. Maintain appropriate property, casualty, liability and
other insurance for the Midwest System.
2.1.10. Maintain appropriate office recordkeeping, bookkeeping
and accounting procedures.
2.1.11. Return to any Subscribers any Deposits transferred to
Aquis pursuant to Section ; provided, however, that the Parties expressly agree
that Aquis undertakes no responsibility for or liability to return to any
Subscriber any Deposit held by SourceOne prior to the Take-Over Date that is not
transferred by SourceOne to Aquis as of the Take-Over Date pursuant to Section
hereof.
2.1.12. In providing services in connection with operation of
the Midwest Business, Aquis may make arrangements to consolidate the provision
of such services with other stations owned, operated or managed by Aquis.
2.1.13. The Parties agree that Aquis will not enter into any
contracts or other agreements during the Term of this Management Agreement (as
hereinafter defined) that would result in an obligation to pay expenses and fees
in connection with the Midwest Business beyond the Purchase Termination Date (as
hereinafter defined); provided, however, that Aquis may enter into such
contracts and agreements upon the prior written consent of SourceOne, such
consent in SourceOne's sole discretion, and upon prior written notice to
Foothill Capital Corporation pursuant to written instructions that Foothill
Capital Corporation will provide to Aquis and SourceOne promptly after the
Execution Date; provided, however, that nothing herein shall be deemed to
constitute consent of Foothill Capital Corporation to the use of its collateral
to pay expenses incurred under such contracts and agreements after the Purchase
Termination Date (as hereinafter defined). The Parties agree that in no event
will Aquis have any liability whatsoever to
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pay any Expenses incurred after the Purchase Termination Date (as hereinafter
defined).
2.2. SourceOne Obligations.
2.2.1. As the FCC de jure licensee of the Midwest Stations
pending Purchase Closing, SourceOne will exercise the minimum amount of
supervision necessary as an FCC de jure licensee subject to Aquis's de facto
control of the Midwest System authorized by the FCC pursuant to the STA.
2.2.2. SourceOne designates Steve Zabel as officer of LLC II,
LLC and SOWI, who SourceOne represents and warrants will be available at all
times to assist Aquis in the operation of the Midwest Business pursuant to this
Management Agreement, including, but not limited to, signing any FCC application
or other written submissions that Aquis believes, in its sole and unfettered
discretion and as the party in de facto control of the Midwest System, should be
submitted. SourceOne may specify alternate officers of LLC II, LLC and/or SOWI
upon prior written consent of Aquis.
2.2.3. SourceOne will cooperate with Aquis and use its best
efforts to assist Aquis in the operation of the Midwest Business as specified
herein, including, but not limited to:
2.2.3.1. Assisting Aquis in modifying any signature
cards related to the Bank Accounts to be transferred to Aquis pursuant to this
Management Agreement to make authorized representatives of Aquis the sole
parties authorized to conduct transactions with respect to such Bank Accounts.
2.2.3.2. Fully cooperating with Aquis in its review of
the Other Midwest Transmitter Sites specified at Section hereof and, to the
extent requested by Aquis in Aquis's sole and unfettered discretion, use
reasonable best efforts to assist in recommencement of operation of Other
Midwest Transmitter Site Equipment at the Other Midwest Transmitter Sites,
including, but not limited to: (i) replacement of nonfunctional or nonexistent
Other Midwest Transmitter Site Equipment with other equipment owned by
SourceOne; (ii) assisting Aquis in dealing with owners of Other Midwest
Transmitter Sites; and (iii) assisting Aquis in negotiating with any equipment
manufacturers or other entities with loans or other interests in Other Midwest
Transmitter Site Equipment.
2.3. Additional Obligations.
2.3.1. In addition to its other obligations under this
Management Agreement:
2.3.1.1. In the event Aquis is unable to pay
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all Expenses from Revenues, funds available in Bank Accounts to be transferred
to Aquis and/or collection of any Accounts Receivable transferred to Aquis, then
Aquis will provide funds to pay such Expenses subject to the provisions of this
Section 2.3.
2.3.1.2. In the event that Aquis is unable to pay for
any capital improvements that Aquis believes, in its sole and unfettered
discretion, should be made to the Midwest System or Midwest System Assets
("Capital Improvements"), and Aquis is unable to pay for such Capital
Improvements from Revenues, funds available in Bank Accounts to be transferred
to Aquis and/or collection of any Accounts Receivable transferred to Aquis, then
Aquis will provide funds to pay such Capital Expenditures subject to the
provisions of this Section . If: (i) Aquis pays for any Capital Improvement out
of its own funds or provides equipment to operate the Midwest System; and (ii)
the Purchase Closing does not occur, then Aquis may remove, at its expense,
those Capital Improvements and equipment on or after the Purchase Termination
Date (as hereinafter defined).
2.4. SourceOne Inspection. During the Term of this Management
Agreement (as hereinafter defined), SourceOne may, upon reasonable prior written
request to Aquis and at a reasonable time and place, inspect Aquis's operation
of the Midwest Business and/or the records maintained by Aquis in connection
with the operation of the Midwest Business.
3. Other Subscribers On Other Systems.
3.1. Transfer Of Other Subscriber Assets. Even though Aquis will not
acquire de facto control of or provide any management responsibilities for
SourceOne's Other Systems pursuant to this Management Agreement, as of the
Take-Over Date, SourceOne will also transfer to Aquis SourceOne's rights to use,
have access to and control over the following ("Other Subscriber Assets"):
3.1.1. All customer lists and goodwill ("Other Customer List")
for all of SourceOne's Other Subscribers, regardless of the SourceOne Other
System on which those subscribers receive service.
3.1.2. All deposits ("Other Deposits") held by SourceOne for
Other Subscribers on Other Systems.
3.1.3. On the Take-Over Date, all accounts receivable held or
owned by SourceOne for Other Subscribers, including all rights to receive
compensation from "calling party pays" agreements and all accrued but unbilled
revenue from operation of the Other Subscriber Business (as hereinafter defined)
(collectively, "Other Accounts Receivable"), will be turned over to Aquis as
manager for administration and collection. SourceOne represents that accrued but
unbilled revenues are not older than
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thirty-one (31) days except that accrued but unbilled revenues for July, 1999,
are not older than forty (40) days. The Other Accounts Receivable transferred on
the Take-Over Date ("Take-Over Other Receivables") will be specified on a
schedule to be agreed to by the Parties and will be valued with the following
discount factors ("Discount Factors") as follows:
(a) 100% of the face amount of Other Accounts Receivable outstanding
including accrued but unbilled revenue for 30 days or less before
the Take-Over Date;
(b) 70% of the face amount of Other Accounts Receivable outstanding for
between 31 and 60 days before the TakeOver Date;
(c) 40% of the face amount of Other Accounts Receivable outstanding for
between 61 and 90 days before the TakeOver Date;
(d) 0% of the face amount of Other Accounts Receivable outstanding for
more than 90 days before the Take-Over Date; and
(e) 95% of the net amount of those certain Other Accounts Receivable
owed by ESBI and Ameritech and related to "calling party pays"
service.
If the Purchase Agreement closes, the Other Accounts Receivable will be
transferred to Aquis as Purchaser under the Purchase Agreement. If the
Management Agreement is terminated and the Purchase Closing has not occurred,
then Aquis will return to SourceOne accounts receivable for Other Subscribers
whose value (after adjustment by the Discount Factors) is not less than the
discounted value of the Take-Over Other Receivables less the "Net Service
Revenue Adjustment" amount ("Returned Other Receivables Amount") subject to the
first priority lien thereon in favor of Foothill Capital Corporation, as agent.
If the discounted value of the Take-Over Other Receivables exceeds the Returned
Other Receivables Amount, then Aquis will promptly pay SourceOne the difference
subject to the first priority lien thereon in favor of Foothill Capital
Corporation, as agent. If the discounted value of the Take-Over Other
Receivables is less than the Returned Other Receivables Amount, then such
difference ("Excess Returned Other Receivables") will be promptly paid by
SourceOne to Aquis as a fee in addition to any other fees provided by this
Management Agreement. The Net Service Revenue Adjustment amount under this
Section is calculated as follows: (discounted value of the Take-Over Other
Receivables divided by $7.26 million) times actual Net Service Revenue (as
defined in Purchase Agreement Section 1.6(d)(i)).
3.1.4. Any pagers and related equipment owned by
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SourceOne and leased to Other Subscribers as of the Take-Over Date ("Leased
Pagers").
3.2. Aquis Actions Regarding Other Subscribers. As of the Take-Over
Date:
3.2.1. It is Aquis's understanding that as of the Take-Over
Date, SourceOne may terminate operation of the Other Systems. Accordingly, as of
the Take-Over Date, Aquis may, in its sole and unfettered discretion, take
whatever action Aquis believes necessary with respect to the Other Subscribers,
including but not limited to arranging for Other Subscribers to become
Additional Subscribers who obtain service under existing Additional Subscriber
Agreements. Arrangements by Aquis to continue provision of service to Other
Subscribers during the Term of this Management Agreement (as hereinafter
defined), if any, will be referred to as "Other Subscriber Business".
3.2.2. Aquis will invoice, collect and receive payment on all
accounts of Other Subscribers, including Other Accounts Receivable, during the
Term of this Management Agreement (as hereinafter defined).
3.2.3. Aquis will return to any Other Subscriber any Other
Deposits transferred to Aquis pursuant to Section hereof; provided, however,
that the Parties expressly agree that Aquis undertakes no responsibility for or
liability to return to any Other Subscriber any Other Deposit held by SourceOne
prior to the Take-Over Date that is not transferred by SourceOne to Aquis as of
the Take-Over Date pursuant to Section hereof.
3.2.4. Aquis will retain any Leased Pagers returned by Other
Subscribers during the Term of this Management Agreement (as hereinafter
defined).
3.2.5. Aquis will pay all expenses and fees, if any,
associated with the Other Subscriber Business ("Other Subscriber Expenses") and
Aquis will retain all revenues associated with or arising from the Other
Subscriber Business ("Other Subscriber Revenues") as provided in Section hereof.
3.3. Title To Other Subscriber Assets. Subject to Aquis's right to
use, have access to and control over the Other Subscriber Assets pursuant to
Section 3.1 hereof, title to the Other Subscriber Assets will remain with
SourceOne during the Term of this Management Agreement (as hereinafter defined).
Title will pass to Aquis at Purchase Closing pursuant to the Purchase Agreement;
subject, however, to the provisions of Section 5 hereof.
4. Compensation. In addition to other consideration provided for in this
Management Agreement and the Purchase Agreement, Aquis will retain as
compensation for services provided
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hereunder:
4.1. All "Midwest Cash Flow," if any, obtained from operation of the
Midwest Business during the Term of this Management Agreement (as hereinafter
defined). Midwest Cash Flow is defined as Revenues plus Accounts Receivable
collected by Aquis during the Term of this Management Agreement (as hereinafter
defined) plus credit balances in Bank Accounts as of the Take-Over Date, if any,
less Expenses and Capital Improvements not paid for directly by Aquis; and
4.2. All "Other Subscriber Cash Flow," if any, obtained from
operation of the Other Subscriber Business during the Term of this Management
Agreement (as hereinafter defined). Other Subscriber Cash Flow is defined as
Other Subscriber Revenues plus Other Subscriber Accounts Receivable collected by
Aquis during the Term of this Management Agreement (as hereinafter defined) less
Other Subscriber Expenses.
5. If No Purchase Closing. In the event that the Purchase Agreement
terminates without Purchase Closing, the following provisions apply:
5.1. Return Of Midwest System Assets. As of the date of termination
of the Purchase Agreement without Purchase Closing ("Purchase Termination
Date"), Aquis will return to SourceOne the rights to use, have access to and
control over all Midwest System Assets in existence as of the Purchase
Termination Date and SourceOne will retain title thereto.
5.2. Return Of De Facto Control Of Midwest System. SourceOne and
Aquis will immediately take all action necessary, including but not limited to
termination of the STA, to return to SourceOne as of the Purchase Termination
Date the de facto control over the Midwest System that was transferred to Aquis.
5.3. Termination Of Aquis Operation Of Midwest Business. As of the
Purchase Termination Date, Aquis will cease operating the Midwest Business
pursuant to Section hereof and, at the request of SourceOne, will terminate
employment of any Retained Employees.
5.4. Return Of Other Subscriber Assets. As of the Purchase
Termination Date, Aquis will return to SourceOne the rights to use, have access
to and control over all Other Subscriber Assets in existence as of the Purchase
Termination Date and SourceOne will retain title thereto; except that if Aquis
made arrangements for continued provision of service to Other Subscribers
pursuant to any arrangement other than converting such Other Subscribers to
become Additional Subscribers under SourceOne Additional Subscriber Agreements
in existence as of the Take-Over Date, Aquis has the right, but not the
obligation, to retain such
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Other Subscribers without returning them to SourceOne and without compensation
to SourceOne.
5.5. Condition Of Assets. Subject to Sections and hereof, the
Parties expressly recognize and agree that the Midwest System Assets and Other
Subscriber Assets may have been modified during the ordinary course of operation
of the Midwest System Assets and Other Subscriber Assets (collectively, "Asset
Change") during Aquis's use thereof in accordance with this Management
Agreement. Aquis will return to SourceOne the Midwest System Assets and Other
Subscriber Assets in the form as of the Take-Over Date, except ordinary wear and
tear and other modifications contemplated by the first sentence of this Section
. Aquis will have no liability of any nature whatsoever for any Asset Change
unless and to the extent such Asset Change was caused by a breach of Aquis's
duty of care as set forth in Section hereof.
5.6. Midwest System Final Accounting.
5.6.1. Within thirty (30) Business Days after the Purchase
Termination Date, Aquis will provide SourceOne with a final accounting ("Final
Accounting") specifying in reasonable detail:
5.6.1.1. The total of any Revenues accrued and related
to the Midwest Business during the Term of this Management Agreement (as
hereinafter defined) ("Outstanding Revenues").
5.6.1.2. The total of any Expenses incurred with respect
to the Midwest Business during the Term of this Management Agreement (as
hereinafter defined) ("Outstanding Expenses").
5.6.1.3. To the extent necessary, Outstanding Revenues
and Outstanding Expenses will be pro rated as of the TakeOver Date and the
Purchase Termination Date.
5.6.2. If Outstanding Revenues exceed Outstanding Expenses
after deducting any prior withdrawals of Midwest Cash Flow by Aquis, then the
difference will be considered "Outstanding Profit" and:
5.6.2.1. SourceOne will pay the Outstanding Profit to
Aquis as additional Midwest Cash Flow earned by Aquis pursuant to Section
hereof; or
5.6.2.2. SourceOne's obligation to pay the Outstanding
Profit to Aquis may be satisfied by allowing Aquis, at Aquis's option, to retain
possession of the Outstanding Revenues, credit balances in Bank Accounts as of
the Purchase Termination Date and the right to collect Accounts Receivable
using, to the
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extent available and at Aquis's expense, the books and records and systems of
SourceOne; and
5.6.2.3. SourceOne's obligation to pay the Outstanding
Profit and Excess Returned Receivables to Aquis is secured by: (i) a first
priority lien and security interest in the Accounts Receivable (exclusive of the
Returned Receivables Amount) and credit balances in Bank Accounts as of the
Purchase Termination Date; and (ii) a senior, first-priority lien and security
interest under Bankruptcy Code section 364(d)(1) in the Accounts Receivable
(exclusive of the Returned Receivables Amount) and credit balances in Bank
Accounts as of the Purchase Termination Date and, further, this obligation to
Aquis will be an allowed super-priority administrative expense claim under
Bankruptcy Code section 364(c)(1), having priority over any and all
administrative expense or priority claims specified in, or ordered under,
Bankruptcy Code sections 330, 331, 503(b), 506(c), or 507(b), except that this
claim will be subordinate to the claim of Foothill Capital Corporation arising
under Sections 364 or 507(b) of the Bankruptcy Code and the Carve-Out, as
defined in the final debtor-in-possession financing order. The Bankruptcy Court
order approving this Management Agreement will provide that the lien and
security interest in this Section will be perfected upon entry of such
Bankruptcy Court order and without the need for filings or other actions by any
of the Parties.
5.7. Returned Receivables Amount. Within thirty (30) Business Days
after the Purchase Termination Date: (i) Aquis will remit the Returned
Receivables Amount and the Returned Other Receivables Amount and pay any
deficiency as described in Sections and hereof. This obligation is not subject
to setoff or deduction.
5.8. Deferred Revenue Adjustment. The Parties will agree in writing
as to the amount of deferred revenues as of the TakeOver Date and the Purchase
Termination Date. If deferred revenues on the Take-Over Date are less than on
the Purchase Termination Date (as calculated in the same manner as of the
Take-Over Date), then Aquis will pay the difference to SourceOne, subject to
Aquis's right to setoff this obligation against any SourceOne obligation owed to
Aquis.
5.9. Returned SourceOne Deposits. The Parties will agree in writing
as to the amount of any SourceOne deposits held by third parties as of the
Take-Over Date and the Purchase Termination Date. If such deposits on the
Take-Over Date are higher than on the Purchase Termination Date (as a result of
return of any such deposits to Aquis or the use of any such deposits by or for
the benefit of Aquis), then Aquis will pay the difference to SourceOne within
thirty (30) Business Days after the Purchase Termination Date.
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5.10. Other Final Accounting.
5.10.1. Within thirty (30) Business Days after the Purchase
Termination Date, Aquis will provide SourceOne with a final accounting ("Other
Final Accounting") specifying in reasonable detail:
5.10.1.1. The total of any Other Subscriber Revenues
accrued and related to the Other Subscriber Business during the Term of this
Management Agreement (as hereinafter defined) ("Outstanding Other Subscriber
Revenues").
5.10.1.2. The total of any Other Subscriber Expenses
incurred with respect to the Other Subscriber Business during the Term of this
Management Agreement (as hereinafter defined) ("Outstanding Other Subscriber
Expenses").
5.10.1.3. To the extent necessary, Outstanding Other
Subscriber Revenues and Outstanding Other Subscriber Expenses will be pro rated
as of the Take-Over Date and the Purchase Termination Date.
5.10.2. If Outstanding Other Subscriber Revenues exceed
Outstanding Other Subscriber Expenses after deducting any prior withdrawals of
Other Subscriber Cash Flow by Aquis, then the difference will be considered
"Outstanding Other Subscriber Profit" and:
5.10.2.1. SourceOne will pay the Outstanding Other
Subscriber Profit to Aquis as additional Other Subscriber Profits earned by
Aquis pursuant to Section hereof; or
5.10.2.2. SourceOne's obligation to pay the Outstanding
Other Subscriber Profit to Aquis may be satisfied by allowing Aquis, at Aquis's
option, to retain possession of the Outstanding Other Subscriber Revenue, credit
balances in Bank Accounts as of the Purchase Termination Date and the right to
collect Other Subscriber Accounts Receivable using, to the extent available and
at Aquis's expense, the books and records and systems of SourceOne; and
5.10.2.3. SourceOne's obligation to pay the Outstanding
Other Subscriber Profit and the Excess Returned Other Receivables to Aquis is
secured by: (i) a first priority lien and security interest in the Other
Subscriber Accounts Receivable (exclusive of the Returned Other Receivables
Amount) and credit balances in Bank Accounts as of the Purchase Termination
Date; and (ii) a senior, first-priority lien and security interest under
Bankruptcy Code section 364(d)(1) in the Other Subscriber Accounts Receivable
(exclusive of the Returned Other Receivables Amount) and credit balances in Bank
Accounts as of the Purchase Termination Date and, further, this obligation to
Aquis will be an allowed
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super-priority administrative expense claim under Bankruptcy Code section
364(c)(1), having priority over any and all administrative expense or priority
claims specified in, or ordered under, Bankruptcy Code sections 330, 331,
503(b), 506(c), or 507(b), except that this claim will be subordinate to the
claim of Foothill Capital Corporation arising under Sections 364 or 507(b) of
the Bankruptcy Code and the Carve-Out, as defined in the final
debtor-in-possession financing order. The Bankruptcy Court order approving this
Management Agreement will provide that the lien and security interest in this
Section will be perfected upon entry of such Bankruptcy Court order and without
the need for filings or other actions by any of the Parties.
5.11. Aquis has no claims against Foothill Capital Corporation or
its collateral, including without limitation, claims arising under Sections 503,
506, or 552 of the Bankruptcy Code, except as expressly set forth in Sections
and of this Management Agreement.
6. Representations And Warranties Of SourceOne. To induce Aquis to enter
into this Management Agreement, SourceOne hereby represents and warrants to
Aquis that:
6.1. Licenses. SourceOne is the bona fide licensee of the Midwest
Licenses and Midwest System. The Midwest Licenses for the Midwest Transmitter
Sites are, and, to the best of SourceOne's actual knowledge the Midwest Licenses
for the Other Midwest Transmitter Sites are, valid, in good standing, in full
force and effect and constitute: (i) all licenses, permits, and authorizations
required by the Communications Act of 1934, as amended (the "Act") and all rules
and regulations promulgated by the FCC thereunder ("FCC Rules"), for the
construction and operation of the Midwest System; and (ii) all of the licenses,
permits and authorizations issued by the FCC to SourceOne for or in connection
with the Midwest System. Except for the Midwest Licenses, there are no permits,
licenses or other authorizations currently held by SourceOne, or required by law
to be held by SourceOne, with respect to ownership of the Transferred Assets (as
defined in the Purchase Agreement) or operation of the Midwest Business, except
where failure to hold such a permit, license or other authorization would not
reasonably be expected to materially affect ownership of the Transferred Assets
(as defined in the Purchase Agreement) or conduct of the Midwest Business.
6.2. Midwest System Construction And Operation. The Midwest System
was timely and properly constructed in substantial accord with its licensed
parameters, and, since commencement of operations, the Midwest System comprised
of the Midwest Transmitter Sites has operated and currently is, and, to the best
of SourceOne's actual knowledge, the Midwest System comprised of the Other
Midwest Transmitter Sites has operated and currently is operating in compliance
with all applicable laws, rules and
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regulations, including the Act and FCC Rules. The Midwest System currently
provides one-way paging service to at least one unaffiliated subscriber from
each of the Midwest Transmitter Sites and no Midwest Transmitter Site has been
off the air for ninety (90) or more continuous days.
6.3. Other Midwest Transmitter Sites. SourceOne has no knowledge
that the Other Midwest Transmitter Sites have been off the air for ninety (90)
or more continuous days.
6.4. No Adverse Condition. SourceOne has no knowledge of any
condition imposed by the FCC on the Midwest System or Midwest Licenses which is
neither: (i) set forth on the face of the Midwest Licenses as provided by
SourceOne to Aquis or as available to the public on FCC databases; nor (ii)
applicable to the CMRS industry generally.
6.5. No Pending Action. There is no pending or, to SourceOne's
knowledge, threatened action by the FCC or any other federal, state or local
governmental authority or third party: (i) to suspend, revoke, terminate or
challenge the Midwest System, any Midwest License, the Midwest Business or the
Other Subscriber Business; or (ii) that could preclude SourceOne from entering
into or consummating the transactions specified in this Management Agreement and
the Purchase Agreement.
6.6. Exclusive Use. The Midwest Licenses grant SourceOne the
exclusive use of the frequency 931.1875 MHz within the service area defined in
FCC Rules. SourceOne is not a party to any intercarrier, frequency or facilities
sharing agreement of any kind that might in any way affect Aquis's rights to
operate (under this Management Agreement) or acquire (under the Purchase
Agreement) the Midwest System and/or the Transferred Business (as defined in the
Purchase Agreement).
6.7. Orders And Decrees. Neither SourceOne, the Midwest System, the
Midwest Licenses, the Midwest Business, nor the Other Subscriber Business are
subject to any judicial or administrative order, or any ordinance or zoning
restriction, which would materially and adversely affect or impose any condition
on SourceOne, the Midwest System, the Midwest Licenses, the Midwest Business or
the Other Subscriber Business.
6.8. Litigation. There is no judicial or administrative action, suit
or proceeding, pending or, to SourceOne's knowledge, threatened against or
relating to SourceOne, the Midwest System, the Midwest Licenses, the Midwest
Business or the Other Subscriber Business before the FCC or any federal, state
or local court, arbitration tribunal or governmental authority which could,
individually or in the aggregate: (i) result in the voluntary or involuntary
transfer of any of the Midwest System or the Midwest Licenses; or (ii) adversely
affect any or all of
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SourceOne, the Midwest System, the Midwest Licenses, the Midwest Business or the
Other Subscriber Business or the transactions contemplated in this Management
Agreement or the Purchase Agreement. SourceOne knows of no facts establishing a
reasonable basis for any such action, suit, proceeding or any governmental
investigation relating to the same.
6.9. Compliance With Laws. SourceOne is in compliance, in all
material respects, with all applicable laws, regulations and administrative
orders of: (i) the United States, including, without limitation, the FCC; (ii)
any state; and (iii) any municipality, county, or other subdivision of any of
the foregoing, to which SourceOne, the Midwest System, the Midwest Licenses, the
Midwest Business or the Other Subscriber Business may be subject.
6.10. Taxes And Required Filings. With respect to the Midwest
System, the Midwest Licenses and the Midwest Business, SourceOne has filed all
federal, state, local, foreign and other tax returns and reports of every nature
required to be filed and has paid or will pay all taxes and other assessments
due (other than certain Illinois and Chicago telecommunications taxes which
accrued prior to the filing of SourceOne's bankruptcy petition), including, but
not limited to the following FCC-mandated requirements: (i) universal service;
(ii) Telecommunications Relay Service ("TRS"); (iii) North American Numbering
Plan ("NANPA"); (iv) Local Number Portability ("LNP"); (iv) Equal Employment
Opportunity ("EEO"); (v) ownership information; (vi) regulatory fees; and (vii)
FCC submissions in connection with electronic filing requirements, including but
not limited to submissions required in connection with the FCC's Universal
Licensing System ("ULS").
6.11. Third Party And Governmental Consents. Aside from the STA and
approval by the Bankruptcy Court, no approval, consent, waiver, order or
authorization of, or registration, qualification, declaration, or filing with,
or notice to, any federal, state or local governmental authority or other third
party is required on the part of SourceOne in connection with the execution or
performance of this Management Agreement.
6.12. Midwest System. The Midwest System Assets other than the Other
Midwest Transmitter Sites: (i) constitute all of the properties, assets, and
rights that have been used in the conduct of the Midwest Business and which are
necessary to the operation of the Midwest Business; and (ii) together with the
Other Subscriber Assets, generate all of SourceOne's Net Service Revenue (as
defined in Section 1.6(d)(i) of the Purchase Agreement). There are no assets of
SourceOne not included in the Midwest System Assets other than the Other Midwest
Transmitter Sites that are material to the operation of the Midwest Business and
the absence of which would have a material adverse effect on the Midwest
Business.
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7. Representations Of Aquis. As of the Take-Over Date, Aquis knows of no
material statement or omission of SourceOne that gives rise to any: (i) material
breach of its representations, warranties, or covenants under this Management
Agreement or in connection with the purchase transaction; or (ii) basis on which
the FCC would not issue its consent to assignment of the Midwest Licenses to
Aquis.
8. Representations And Warranties Of The Parties. Each Party represents to
each other Party as appropriate that: (i) it is a legal organization, duly
organized and validly existing under the laws of the state of its organization;
(ii) it has all necessary power, authority and capacity to enter into and
perform the terms of this Management Agreement; (iii) this Management Agreement
has been authorized by all necessary action; (iv) this Management Agreement has
been duly executed by it and constitutes a valid and binding agreement
enforceable in accordance with its terms; and (v) the execution, delivery and
performance of this Management Agreement does not conflict with the Party's
organizational documents or any indenture, mortgage, deed of trust, agreement or
other instrument by which the Party is bound, and does not violate any law or
regulation, or order or decree of any court applicable to the Party.
9. FCC Compliance. The Parties agree to comply with all applicable FCC
Rules governing the Midwest Licenses and operation of the Midwest System and
specifically agree as follows:
9.1. Aquis may not represent itself as the de jure licensee of the
Midwest System, but Aquis may represent itself as the party in de facto control
of the Midwest System.
9.2. No Party will represent itself as the legal representative of
any other Party before the FCC, but each Party will cooperate with the other
Parties with respect to matters concerning implementation of this Management
Agreement, the Midwest Licenses and the Midwest System.
9.3. In addition to all other obligations imposed on SourceOne
pursuant to this Management Agreement, SourceOne will cooperate with Aquis and
take all actions necessary to keep the Midwest Licenses valid and in full force
and effect and SourceOne will use its best efforts and cooperate with Aquis in
submission to the FCC or any other governmental authority all reports,
applications, renewals, filings or other documents necessary to keep the Midwest
Licenses valid and in full force and effect during the Term of this Management
Agreement.
9.4. SourceOne and Aquis are familiar with a de jure licensee's
responsibilities under the Act and FCC Rules. Nothing in this Management
Agreement is intended to diminish or restrict: (i) SourceOne's remaining
obligations as de jure licensee of the
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Midwest System; or (ii) SourceOne's obligations as de jure and de facto licensee
of the Other Systems. All Parties desire that this Management Agreement be
carried out in compliance with FCC Rules. In the event that the FCC determines
that any provision of this Management Agreement violates any FCC Rule,
regulation or policy, the Parties will make good faith efforts immediately to
correct the problem to bring this Management Agreement into compliance
consistent with the intent of the Parties.
10. SourceOne Covenants. In view of the fact that Aquis anticipates
committing substantial resources to meeting its obligations pursuant to this
Management Agreement and must rely on the maintenance of the Midwest Licenses
and Midwest System to carry out its responsibilities hereunder, SourceOne
covenants and agrees that it:
10.1. Aside from claims asserted prior to SourceOne's bankruptcy
cases and those previously allowed by the Bankruptcy Court, will not permit any
liens or encumbrances to attach to the Midwest Licenses, the Midwest System, the
Midwest Business or the Other Subscriber Business and, if any such liens and
encumbrances arise, SourceOne will immediately cure and remove all such liens
and encumbrances to the extent possible;
10.2. Will not take any action that would jeopardize the Midwest
Licenses, the Midwest System, the Midwest Business or the Other Subscriber
Business or the rights of Aquis under this Management Agreement or the Purchase
Agreement;
10.3. Will immediately notify Aquis of any pending or threatened
action by the FCC or any other governmental agency, court or third party to
suspend, revoke, terminate or challenge the Midwest Licenses, the Midwest
System, the Midwest Business or the Other Subscriber Business or to investigate
the operation thereof; and
10.4. Will not interfere with Aquis's exercise or performance of its
rights and obligations pursuant to this Management Agreement.
11. Indemnification.
11.1. Indemnification By SourceOne. SourceOne will defend, indemnify
and hold Aquis, any subsidiary or affiliate thereof, and its respective
successors, officers, directors and controlling persons (the "Indemnified Aquis
Group") harmless from and against any and all losses, liabilities, damages,
costs or expenses (including reasonable attorney's fees, penalties and interest)
payable to or for the benefit of, or asserted by, any party resulting from,
arising out of, or incurred as a result of: (i) the breach of any representation
made by SourceOne herein or in accordance herewith; (ii) the breach of any
warranty or covenant
21
<PAGE>
made by SourceOne herein or in accordance herewith; (iii) any claim, whether
made before or after the Take-Over Date, or any litigation, proceeding or
governmental investigation, whether commenced before or after the Take-Over
Date, arising out of the business of operating the Systems prior to the
Take-Over Date, or otherwise arising out of any act or occurrence prior to, or
any state of facts existing as of the Take-Over Date (regardless of whether or
not disclosed or known to Aquis as of the Take-Over Date) arising from any act
or omission of SourceOne; or (iv) SourceOne's failure to pay, perform or
discharge any of its obligations, liabilities, agreements or commitments.
Notwithstanding the provisions of this Section , Aquis will have no claims for
indemnification against SourceOne based on a non-willful breach of the
representations and warranties set forth in Sections , and of this Management
Agreement as they relate to Other Midwest Transmitter Sites.
11.2. Indemnification By Aquis. Aquis will defend, indemnify and
hold SourceOne, and its respective successors, officers, directors and
controlling persons (the "Indemnified SourceOne Group") harmless from and
against all direct losses, liabilities, damages, costs or expenses (including
reasonable attorney's fees, penalties and interest) payable to or for the
benefit of, or asserted by, any party resulting from, arising out of, or
incurred as a result of: (i) the breach of any representation made by Aquis
herein or in accordance herewith; (ii) the breach of any warranty or covenant
made by Aquis herein or in accordance herewith; or (c) any claim, whether made
after the Take- Over Date, or any litigation, proceeding or governmental
investigation arising out of Aquis's operation of the Midwest Business or
Aquis's acting as reseller on the Other Systems pursuant to this Management
Agreement after the Take-Over Date.
11.3. Survival Of Covenants And Warranties. This Section of this
Management Agreement will survive the termination of this Management Agreement,
and will be fully enforceable at law or in equity against such other Party and
its successors and assigns for a period of one (1) year after the termination of
this Management Agreement. Any investigation at any time made by or on behalf of
(or any disclosure to) any Party will not diminish in any respect whatsoever its
right to rely on the representations and warranties of any other Party.
11.4. Notice Of Claims.
11.4.1. Each Party will give prompt written notice to any
other Party of any claim against the Party giving notice which might give rise
to a claim by it against the other Party based upon the indemnity provisions
contained herein, stating the nature and basis of the claim and the actual or
estimated amount thereof;
22
<PAGE>
11.4.2. Failure to give notice under Section hereof will not
affect the obligation of the indemnifying Party to provide indemnification in
accordance with the provisions of this Section unless, and only to the extent
that, such indemnifying Party is actually prejudiced thereby.
11.4.3. In the event that any action, suit or proceeding is
brought against any member of the Indemnified SourceOne Group or the Indemnified
Aquis Group with respect to which any Party may have liability under the
indemnification provisions contained herein, the indemnifying Party will have
the right, at its sole cost and expense, to defend such action in the name of or
on behalf of the indemnified Party.
11.4.4. In connection with such action, suit or proceeding
which might give rise to a claim by one Party against another Party based on the
indemnity provisions in this Section , the Parties will render to each other
such assistance as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
11.4.5. An indemnified Party will have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying Party, if
representation of such indemnified Party by the counsel retained by the
indemnifying Party would be inappropriate because of actual or potential
differing interests between such indemnified Party and any other Party
represented by such counsel.
11.4.6. No Party will make any settlement of any claim which
might give rise to liability of another Party under the indemnification
provisions contained herein without the written consent of such other Party,
which consent such other Party covenants will not be unreasonably withheld.
11.5. Notwithstanding the provisions of this Section , Aquis will
not have a claim for indemnification against SourceOne based on a nonwillful
breach of the representations and warranties set forth in Sections , and hereof.
12. Term And Termination.
12.1. Term. The "Term" of this Management Agreement will commence on
the Take-Over Date and end on the Termination Date as defined in Section hereof.
12.2. Termination. This Management Agreement will automatically
terminate on the day ("Termination Date") upon any of the following events
occurs:
12.3. Purchase Closing, in the event that Purchase Closing occurs
pursuant to the Purchase Agreement;
23
<PAGE>
12.4. Termination of the Purchase Agreement on the Purchase
Termination Date in the event that Purchase Closing does not occur pursuant to
the Purchase Agreement;
12.5. The loss, revocation or expiration without renewal of all
Midwest Licenses;
12.6. Otherwise, as mutually agreed by the Parties in writing.
13. Notices. All notices or other communications which may be given or
made pursuant hereto will be in writing and delivered by hand delivery, courier
or facsimile transmission to the following:
If to SourceOne: with copy to:
David P. Harris Audrey P. Rasmussen, Esquire
SourceOne Wireless, Inc. O'Connor & Hannan
1040 S. Milwaukee Ave. 1919 Pennsylvania Ave., N.W.
Wheeling, IL 60090 Suite 800
Fax: (847) 465-5575 Washington, DC 20006
Fax: (202) 466-2198
If to Aquis: with copy to:
Mr. John X. Adiletta Richard S. Becker, Esquire
Aquis Communications, Inc. Richard S. Becker &
1719A Route 10; Suite 300 Associates, Chartered
Parsippany, NJ 07054 1915 I St., N.W.; 8th Fl.
Fax: (973) 560-8060 Washington, DC 20006
Fax: (202) 296-7458
Each Party may designate by notice in writing a new address for it and/or its
attorney to which any notice or communication may thereafter be given. Each
notice or communication will be deemed sufficiently given and received for all
purposes at such time as it is delivered to the addressee or at such time as
delivery is refused by the addressee upon presentation.
14. Amendment. This Management Agreement may not be amended, modified or
changed except in writing signed by all Parties hereto.
15. Successors And Assigns. Aquis may assign its rights and delegate its
duties under this Management Agreement with the consent of SourceOne, which
consent may not be unreasonably withheld or delayed; provided, however, that
Aquis may assign this Management Agreement to an affiliate or subsidiary of
Aquis without SourceOne's prior consent and solely upon notice to SourceOne that
the Aquis affiliate or subsidiary agrees to be bound by the terms of this
Management Agreement and thereupon Aquis will have no
24
<PAGE>
further obligations hereunder. SourceOne may not assign its rights or delegate
its duties under this Management Agreement without the prior consent of Aquis,
which consent may be denied in Aquis's sole and unfettered discretion. This
Management Agreement will be binding upon and inure to the benefit of the
Parties hereto, and their respective heirs, representatives, successors and
permitted assigns.
16. Governing Law. This Management Agreement will be governed by and
construed in accordance with the laws of the State of New York without giving
effect to its principles of conflict of laws.
17. Severability. In the event that any provision of this Management
Agreement is held to be invalid, void, or illegal by the FCC, any governmental
authority or court of competent jurisdiction, the remaining provisions of the
Management Agreement will remain in full force and effect and this Management
Agreement will be construed reasonably to preserve the original intent of the
Parties hereto insofar as practical.
18. Interpretation. This Management Agreement is to be construed fairly
and simply and not strictly for or against any of the Parties hereto. The
section headings contained herein are for convenience of reference only, are not
part of this Management Agreement, and will not affect the meaning or
interpretation of any provision hereof.
19. Entire Agreement. This Management Agreement and the Purchase Agreement
constitute the entire agreement between the Parties with respect to the
transactions contemplated hereby, and supersede all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein, except as may otherwise be specified in this Management Agreement
and/or the Purchase Agreement.
20. Business Days. "Business Days" for the purposes of this Management
Agreement will be considered days on which federally- chartered banks in New
York are open to the public for transaction of business.
21. Counterparts. This Management Agreement may be executed in as many
counterparts as may be required, and all counterparts will collectively
constitute a single agreement.
22. Schedules. The Parties agree that they will cooperate and use their
reasonable best efforts to generate the Schedules of Midwest System Assets and
Other Subscriber Assets no later than ten (10) Business Days prior to the
Purchase Closing.
25
<PAGE>
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Management Agreement as of the Execution Date first written above.
SOURCEONE WIRELESS II, L.L.C.
By: /s/ STEVEN J. ZABEL
----------------------------------
Name: STEVEN J. ZABEL
--------------------------------
Title: CFO
-------------------------------
SOURCEONE WIRELESS, L.L.C.
By: /s/ DAVID P. HARRIS
----------------------------------
Name: DAVID P. HARRIS
--------------------------------
Title: DIP MANAGER
-------------------------------
SOURCEONE WIRELESS, INC.
By: /s/ DAVID P. HARRIS
----------------------------------
Name: DAVID P. HARRIS
--------------------------------
Title: DIP MANAGER
-------------------------------
AQUIS COMMUNICATIONS, INC.
By: /s/ JOHN X. ADILETTA
----------------------------------
Name: JOHN X. ADILETTA
--------------------------------
Title: PRESIDENT AND CEO
-------------------------------
26
<PAGE>
Schedule A
Midwest System Transmitter Sites
An asterisk next to a Midwest Transmitter Site or Other Midwest
Transmitter Site indicates that SourceOne must correct FCC records regarding
this site promptly after the Execution Date and prior to Purchase Closing.
SourceOne must also cooperate with Aquis to resolve any additional FCC licensing
issues reasonably identified by Aquis during the Term of this Management
Agreement, including, but not limited to, provision of radial information where
such information is not currently included in the FCC's Universal Licensing
System ("ULS") database. Call signs specified for each site are based on the
FCC's ULS database.
Midwest Transmitter Sites:
<TABLE>
<CAPTION>
ID STATE CITY FREQ CALL SIGN LAT LONG
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
15002 IL AURORA 931.1875 KNKK670 41.48.26 78.16.07
15043 IL CHICAGO (Hancock) 931.1875 KNKK670 41.53.56 87.37.23
15052 IL CHICAGO (Pullman Bank) 931.1875 KNKK670 41.41.30 87.36.04
15057 IL CHICAGO (Standard Oil) 931.1875 KNKK670 41.53.08 87.37.15
15004 IL CHICAGO RIDGE 931.1875 KNKK670 41.42.31 87.47.02
15036 IL CRETE 931.1875 KNKK670 41.25.16 87.38.39
15037 IL DARIEN 931.1875 KNKK670 41.44.25 88.00.30
15032 IL DECATUR 931.1875 KNKK670 39.48.35 88.59.31
15006 IL DEKALB 931.1875 KNKK670 41.52.33 88.45.16
15008 IL EDWARDSVILLE (SIU) 931.1875 KNKK670 38.47.06 89.59.10
15009 IL ELGIN 931.1875 KNKK670 42.01.16 88.23.08
15010 IL EVANSTON 931.1875 KNKK670 42.02.45 87.40.55
15013 IL GURNEE * 931.1875 KNKK670 42.19.44 87.54.38
15014 IL JOLIET 931.1875 KNKK670 41.32.26 88.02.08
15015 IL KANKAKEE 931.1875 KNKK670 41.07.22 87.53.35
15016 IL LAKE VILLA 931.1875 KNKK670 42.23.17 88.05.37
15017 IL LAKE ZURICH 931.1875 KNKK670 42.14.12 88.04.17
15048 IL MAYWOOD 931.1875 KNKK670 41.52.18 87.50.00
15019 IL MOKENA 931.1875 KNKK670 41.32.11 87.51.17
15024 IL OAKBROOK * 931.1875 KNKK670 41.50.44 87.57.21
15027 IL ROCKFORD (North) 931.1875 KNKK670 42.22.02 89.05.13
15029 IL ROCKFORD (South) 931.1875 KNKK670 42.13.41 89.01.11
15055 IL ROSEMONT 931.1875 KNKK670 41.59.50 87.53.09
15056 IL SCHAUMBURG 931.1875 KNKK670 42.02.39 88.02.36
15031 IL WOODSTOCK 931.1875 KNKK670 42.19.00 88.27.59
16004 IN DANVILLE 931.1875 KNKG880 39.48.06 86.34.24
16006 IN FT. WAYNE (CASS) * 931.1875 KNKG880 41.05.58 85.08.43
16007 IN FT. WAYNE (HILLEGAS) 931.1875 KNKG880 41.06.25 85.11.46
16023 IN GARY 931.1875 KNKG880 41.33.14 87.22.16
16009 IN INDIANAPOLIS-ALABAMA ST. 931.1875 KNKG880 39.46.38 86.09.10
16010 IN INDIANAPOLIS-BURK 931.1875 KNKG880 39.46.03 86.00.12
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
16011 IN INDIANAPOLIS-MURRY 931.1875 KNKG880 39.43.05 86.08.37
16012 IN KOKOMO 931.1875 KNKG880 40.26.58 86.04.57
16013 IN LA PORTE 931.1875 KNKG880 41.38.36 86.48.00
16002 IN LAFAYETTE (Ashgrove) 931.1875 KNKG880 40.32.48 86.50.59
16014 IN NOBLESVILLE 931.1875 KNKG880 40.00.55 85.58.58
16015 IN OSCEOLA 931.1875 KNKK670 41.36.31 86.05.57
16020 IN WHEELER 931.1875 KNKG880 41.31.47 87.12.55
23001 MI ANN ARBOR 931.1875 KNKM321 42.16.30 83.44.10
23002 MI AUBURN HILLS 931.1875 KNKM321 42.42.05 83.15.11
23003 MI BATTLE CREEK 931.1875 KNKM321 42.21.09 85.12.28
23004 MI BENTON HARBOR 931.1875 KNKM321 42.04.19 86.22.14
23026 MI DETROIT (One Center) * 931.1875 KNKM321 42.19.49 83.02.41
23009 MI HOLT 931.1875 KNKM321 42.38.44 84.33.38
23010 MI JACKSON 931.1875 KNKM321 42.16.35 84.24.00
23011 MI KALAMAZOO 931.1875 KNKM321 42.16.29 85.39.14
23013 MI PINCKNEY 931.1875 KNKM321 42.34.53 83.59.27
23016 MI SHELBY TOWNSHIP 931.1875 KNKM321 42.38.55 83.04.31
23017 MI SOUTHFIELD 931.1875 KNKM321 42.27.06 83.12.35
23022 MI SOUTHGATE 931.1875 KNKM321 42.13.32 83.13.44
23018 MI STONY CREEK 931.1875 KNKM321 41.57.26 83.15.30
24007 MN MINNEAPOLIS (IDS Center) 931.1875 KNKL951 44.58.30 93.16.30
24013 MN ST. LOUIS PARK * 931.1875 KNKL951 44.55.50 93.22.26
24014 MN ST. PAUL (World Trade Ctr. 931.1875 KNKL951 44.56.54 93.05.42
25018 MO FLORISSANT 931.1875 KNKM222 38.48.47 90.17.35
25010 MO ST. LOUIS-BRENTWOOD 931.1875 KNKM222 38.38.10 90.20.38
25017 MO WENTZVILLE 931.1875 KNKM222 38.44.53 90.52.56
49044 WI APPLETON * 931.1875 KNKP720 44.15.45 88.21.55
49005 WI FONDULAC 931.1875 KNKP720 43.48.02 88.22.08
49007 WI GREEN BAY * 931.1875 KNKP720 44.32.55 87.47.03
49008 WI HOULTON 931.1875 KNKK670 45.03.39 92.47.33
49009 WI JANESVILLE 931.1875 KNKK670 42.43.47 89.10.10
49010 WI KENOSHA (Pleasant Prairie) 931.1875 KNKP720 42.30.36 87.53.11
49028 WI LA CROSSE 931.1875 KNKK670 43.48.48 91.11.03
49011 WI LEBANON 931.1875 KNLM588 43.17.45 88.37.14
49012 WI MADISON 931.1875 KNLM588 43.04.30 89.22.52
49013 WI MANITOWOC 931.1875 KNKP720 44.08.04 87.44.21
49014 WI MILWAUKEE (First Star Ctr. 931.1875 KNKK670 43.02.18 87.54.05
49016 WI PORT WASHINGTON 931.1875 KNKP720 43.23.50 87.52.33
49017 WI RACINE 931.1875 KNKK670 42.40.56 87.50.58
49019 WI SHEBOYGAN 931.1875 KNKP720 43.47.29 87.59.13
49043 WI STEVENS POINT 931.1875 KNKK670 44.32.36 89.40.07
49020 WI STOCKBRIDGE 931.1875 KNKP720 44.05.20 88.18.29
49021 WI WAUKESHA 931.1875 KNKO781 42.58.05 88.11.24
49002 WI WEST BEND 931.1875 KNKP720 43.24.24 88.18.32
</TABLE>
Other Midwest Transmitter Sites:
<TABLE>
<CAPTION>
ID STATE CITY FREQ CALL SIGN LAT LONG
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15003 IL BELLEVILLE 931.1875 KNKK670 38.29.05 90.03.26
15061 IL CHAMPAIGN 931.1875 KNKK670 40.06.34 88.14.06
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
15007 IL DIXON 931.1875 KNKK670 41.49.29 89.29.51
15060 IL HARWOOD HEIGHTS * 931.1875 KNKK670 41.58.03 87.48.27
15018 IL LENA 931.1875 KNKK670 42.24.57 89.52.13
15021 IL MT. OLIVE 931.1875 KNKK670 39.05.03 89.42.33
15022 IL MT. VERNON 931.1875 KNKK670 38.21.06 88.56.38
15023 IL NORMAL / Bloomington 931.1875 KNKK670 40.28.46 89.03.12
15059 IL OAKBROOK TERRACE * 931.1875 KNKK670 41.51.33 87.57.13
15025 IL OTTAWA 931.1875 KNKK670 41.18.35 88.48.44
15062 IL SPRINGFIELD (Tall) 931.1875 KNKK670 39.46.52 89.36.17
15030 IL VANDALIA 931.1875 KNKK670 38.56.53 89.06.01
16001 IN ANDERSON * 931.1875 KNKG880 40.09.22 85.25.48
16003 IN BLOOMINGTON 931.1875 KNKG880 39.10.34 86.27.56
16005 IN EVANSVILLE 931.1875 KNKG880 38.02.56 87.38.53
16021 IN NEW ALBANY 931.1875 KNKG880 38.21.53 85.50.18
16018 IN SHELBYVILLE 931.1875 KNKG880 39.21.45 85.54.23
16019 IN TERRE HAUTE 931.1875 KNKG880 39.20.13 87.28.00
23005 MI CLARKSTON 931.1875 KNKM321 42.46.28 83.28.14
23007 MI FLINT 931.1875 KNKM321 43.01.12 83.41.34
23008 MI GRAND RAPIDS 931.1875 KNKM321 42.59.15 85.37.26
23020 MI PORT HURON 931.1875 KNKM321 43.04.08 82.28.48
23019 MI TRAVERSE CITY 931.1875 KNKM321 44.46.36 85.41.02
23023 MI WARREN 931.1875 KNKM321 42.28.47 82.58.25
24001 MN BLOOMINGTON 931.1875 KNKL951 44.50.50 93.17.10
24002 MN BUFFALO * 931.1875 KNKL951 45.12.48 93.51.01
24005 MN CENTERVILLE 931.1875 KNKL951 45.09.30 93.02.29
24003 MN ELK RIVER 931.1875 KNKL951 45.20.29 93.32.58
24004 MN ELKO 931.1875 KNKL951 44.33.30 93.18.49
24006 MN LINSTROM 931.1875 KNKL951 45.24.10 92.50.45
24009 MN NEWPORT * 931.1875 KNKL951 44.53.17 92.59.16
24010 MN OSSEO * 931.1875 KNKL951 45.06.56 93.24.19
24016 MN ROCHESTER 931.1875 KNKL951 44.02.32 92.20.26
24011 MN ROSEVILLE 931.1875 KNKL951 45.01.11 93.12.04
24017 MN ST. CLOUD 931.1875 KNKL951 45.31.00 94.13.52
24012 MN ST. CROIX FALLS 931.1875 KNKL951 45.28.53 92.34.24
24015 MN VICTORIA * 931.1875 KNKL951 44.51.35 93.38.01
25001 MO ASHLAND 931.1875 KNKM222 38.47.28 92.17.43
25002 MO DANVILLE 931.1875 KNKM222 38.54.26 91.33.39
25003 MO KINGDOM CITY 931.1875 KNKM222 38.56.18 91.56.42
25004 MO KIRKSVILLE 931.1875 KNKM222 40.15.42 92.34.48
25005 MO LIBERTY/ Nashua 931.1875 KNKM222 39.19.08 94.30.25
25006 MO MARSHALL 931.1875 KNKM222 39.00.24 93.15.11
25007 MO NEW FRANKLIN/Rocheport 931.1875 KNKM222 39.00.27 92.35.19
25008 MO ODESSA 931.1875 KNKM222 39.01.52 93.56.06
25009 MO PLATTE CITY 931.1875 KNKM222 39.17.15 94.47.46
25011 MO ST. LOUIS-DORSETT RD. 931.1875 KNKM222 38.41.56 90.24.33
25012 MO ST. LOUIS-KINGS HWY 931.1875 KNKM222 38.23.18 90.29.16
25013 MO ST. LOUIS-PINE BLVD. 931.1875 KNKM222 38.38.26 90.15.22
25014 MO ST. LOUIS-SUNSET HILLS 931.1875 KNKM222 38.28.56 90.23.53
25016 MO ST.LOUIS (MERCANTILE) 931.1875 KNKM222 38.37.48 90.11.26
49018 WI RIVER FALLS 931.1875 KNKP720 44.55.30 92.37.24
</TABLE>
3
<PAGE>
Schedule
Office Agreements
Office lease for 600 South Federal Street, Suite 501, Chicago, IL
<PAGE>
Schedule
Retained Employees
DEPARTMENT NAME JOB TITLE SALARY
Administration Beskoon, Becky Support $ 27,980.
Billing Leahy, Liz Manager $ 40,232.
Engineering Pavioski, Ken Tech $ 35,900.
Engineering Hawrylicz, Tony VP Engineering $125,000.
Finance Mark, Christine Sr. Acct. $ 41,200.
Operations Cassidy, Danielle Operations $ 38,000.
Call Center Mercado, Ben Manager $ 35,499.
Call Center Zaslowski, Michael CSR $ 24,000.
Call Center Cullen, Sean CSR $ 26,000.
Call Center Perales, Bonnie Jo ESBI $ 26,000.
Call Center Moore, Leonard CSR $ 23,000.
Call Center Hoffman, Susan CSR $ 30,390.
$473,201.00.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 657
<SECURITIES> 0
<RECEIVABLES> 5,784
<ALLOWANCES> 667
<INVENTORY> 1,615
<CURRENT-ASSETS> 9,466
<PP&E> 12,014 <F1>
<DEPRECIATION> 0 <F1>
<TOTAL-ASSETS> 44,338
<CURRENT-LIABILITIES> 8,863
<BONDS> 0
0
0
<COMMON> 164
<OTHER-SE> 9,416
<TOTAL-LIABILITY-AND-EQUITY> 44,338
<SALES> 367
<TOTAL-REVENUES> 14,478
<CGS> 478
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,574
<INCOME-PRETAX> (3,132)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,132)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
<FN>
<F1> Fixed assets are reported net of accumulated depreciation in the balance
sheet
</FN>
</TABLE>
