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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999.
OR
|_| TRANSITION REPORT UNDER 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 of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1719A ROUTE 10
SUITE 300
PARSIPPANY, NEW JERSEY 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-8000
Securities registered under Section 12(b) of the Securities Exchange Act of
1934:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $0.01 par value Boston Stock Exchange
Securities registered under Section 12(g) of the Securities Exchange Act of
1934:
Title of Each Class
None
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. |X| Yes |_| No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |_|
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of April 12, 2000, was approximately $28,032,453 based
upon a last sales price on such date of $2.25. The information provided shall in
no way be construed as an admission that any person whose holdings are excluded
from the figure is an affiliate or that any person whose holdings are included
is not an affiliate, and any such admission is hereby disclaimed. The
information provided is solely for record keeping purposes of the Securities and
Exchange Commission.
As of April 12, 2000, there were 17,156,878 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement issued or to be
issued in connection with the annual meeting of stockholders (Part III).
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
When used in this Annual Report on Form 10-K and in other public
statements by the Company and Company officers, the words "expect," "estimate,"
"project," "intend," and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others, the risk factors described under Item 1 in this Annual
Report. Additional factors are described in the Company's other public reports
filed with the Securities and Exchange Commission. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date made. The Company undertakes no obligation to publicly release the
result of any revision of these forward-looking statements to reflect events or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Aquis Communications Group, Inc. ("Aquis" or the "Company") was
incorporated under the laws of Delaware on February 17, 1994 as "Paging Partners
Corporation." The Company commenced construction of its paging system in
November 1990 and initiated service in June 1991.
On March 31, 1999 the Company, through a wholly-owned subsidiary,
merged with Aquis Communications, Inc. ("ACI") in a transaction accounted for as
a reverse acquisition. In connection with the merger, the Company changed its
name to its present name. On December 31, 1998, ACI acquired licenses and other
assets relating to the paging business of the Bell Atlantic Corporation (the "BA
Paging Business"), subject to certain liabilities relating to the BA Paging
Business. The purchase price for the Paging Business was approximately
$29,200,000 which was financed by a blend of senior debt, seller financing and
equity. As of December 31, 1998, the BA Paging Business served approximately
257,000 users. Prior to December 31, 1998, ACI had conducted no business.
On June 15, 1999, a wholly-owned subsidiary of the Company entered into
a Stock Purchase Agreement (the "SunStar Agreement") with SunStar
Communications, Inc., an Arizona corporation ("SunStar"), 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. Pursuant to the Agreement, SunStar became a
wholly-owned subsidiary of the Company and changed its name to "Aquis IP
Communications, Inc." Total consideration paid was $275,000 cash and 1,150,000
shares of the Company's common stock.
On January 31, 2000, Aquis, through its wholly-owned
subsidiary, ACI, acquired substantially all of the assets of SourceOne Wireless,
Inc. ("SOWI"), SourceOne Wireless, L.L.C. ("LLC"), and SourceOne Wireless II,
L.L.C. ("LLC II," together with SOWI and LLC, "SourceOne"). SourceOne operated
Commercial Mobile Radio Service one-way paging systems on multiple frequencies
in the midwest and other geographical areas in the United States (the "SourceOne
Paging Systems"). The SourceOne Paging Systems provided service to subscribers
pursuant to licenses issued to LLC II by the Federal Communications Commission
(the "FCC"). 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 (Eastern District) (the "Bankruptcy
Court") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy
Code"). ACI and SourceOne entered into an Asset Purchase Agreement dated as of
August 2,1999, as amended by the Amendment to Asset Purchase Agreement dated as
of November 15, 1999 (the "SourceOne Purchase Agreement"). Due to the Debtors'
insufficient resources to continue operations of the SourceOne Paging Systems,
ACI and SourceOne entered into an Agreement Pending Purchase Closing dated as of
August 2, 1999 (the "Management Agreement"), pursuant to which ACI agreed to
manage the SourceOne Paging Systems located in the midwest United States and to
assume certain financial responsibilities pending the closing of the Purchase
Agreement. On November 18, 1999, the Bankruptcy Court entered an order (the
"Order") approving the SourceOne Purchase Agreement, as amended, authorizing the
Debtors to execute and deliver the SourceOne Purchase Agreement, as amended, to
the Company, authorizing and directing the Debtors to implement and satisfy the
procedures necessary to assume and assign certain executory contracts and
unexpired leases to the Company, and authorizing and directing the consummation
by the Debtors of the sale of substantially all of their assets to the Company
under Section 363(b) of the Bankruptcy Code as contemplated by the SourceOne
Purchase Agreement, which closed on January 31, 2000. As consideration for the
purchase of the assets acquired from SourceOne, the Company paid a purchase
price (the "Purchase Price") consisting of: (i) $2.25 million in cash (the "Cash
Payment"); and (ii) $1.5 million of 7 1/2% Redeemable Preferred Stock of the
Company, par value $.01 per share (the "Preferred Stock"). In addition, the
Company assumed or agreed to perform the following obligations and liabilities
of SourceOne:
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- all liabilities and obligations that accrue or are required to be
performed after the Closing Date pursuant to any unexpired leases
or executory contracts that were included in the assets acquired
by the Company and assumed and assigned under Bankruptcy Code
Section 365 pursuant to the Order;
- all liabilities and obligations that accrue or are required to be
performed after the Closing Date to the extent related to the
ownership or operation of the Paging Systems acquired by the
Company;
- all liabilities and obligations of SourceOne for revenues billed
or received by SourceOne for services not yet rendered as of the
Closing Date;
- all liabilities with respect to the return of or performance
required as a result of deposits made by subscribers of the Paging
Systems with SourceOne; and
- severance compensation for certain SourceOne employees.
The Company obtained the funds for the Cash Payment through an
extension of an existing credit facility it had with FINOVA Capital Corporation.
During 1999 the Company entered into several other acquisition
agreements, including ABC Paging, Inc., COMAV Corporation, Francis
Communications, Inc. and Intelispan, Inc. Although the Company incurred
significant transaction fees and paid deposits on account of these acquisitions,
it determined not to proceed with these transactions. The Company will continue
to pursue opportunistic acquisitions.
GENERAL
The Company is a leading provider of paging and other wireless
messaging services through its local and regional wireless networks. The Company
offers messaging services through a seven state regional network that provides
coverage into New York, New Jersey, Connecticut, Pennsylvania, Maryland,
Virginia, Delaware and Washington, D.C. as well as through a regional network
providing coverage in six states including Illinois, Indiana, Michigan,
Wisconsin, Minnesota, and Missouri. The Company also provides service to over
1,000 U.S. cities, including the top 100 metropolitan areas through an
interconnect agreement with a nationwide wireless messaging provider. Since
beginning operations in 1994 the Company's subscriber base has increased to
approximately 375,000 units in service as of December 31, 1999. The Company has
achieved this through a combination of internal growth and a program of mergers
and acquisitions. As of December 31, 1999, the Company was the tenth largest
messaging company in the United States based on the number of subscribers. The
Company also markets Internet based products and services through Aquis IP
Communications, Inc., a wholly owned subsidiary ("Aquis IP"). Aquis IP offers
Internet dial up access and various web hosting products and services.
The Company has traditionally operated technologically advanced paging
systems that provide one-way wireless messaging services. The Company has
recently decided to enter the two-way or advanced wireless messaging space. With
the Company's move into advanced wireless messaging the Company envisions itself
as taking part in the convergence of Internet and wireless data services. To
that end, the Company has executed an interconnect agreement with a nationwide
advanced messaging provider. This agreement allows the Company to pass advanced
wireless messaging traffic from its existing technical and engineering
infrastructure to the nationwide advanced wireless messaging company's
transmission facilities on both a regional and nationwide basis. The Company
feels this agreement is important because it allows for a seamless `switched'
environment in which the Company can market advanced wireless messaging services
to its existing subscriber base as well as take part in the potential high
growth of new applications which will require advanced wireless messaging
capabilities.
The Company believes that the paging and wireless messaging industry is
likely to undergo additional consolidation and has announced that it intends to
participate in the consolidation process. Potential future consolidations would
be evaluated on several key operating and financial elements including
geographic presence, potential increase in both free and operating cash flow,
potential synergies and availability of financing. Any potential transaction may
result in substantial capital requirements for which additional financing may be
required. No assurance can be given that such additional financing would be
available on terms satisfactory to the Company.
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The Company derives a majority of its revenues from fixed, periodic
(usually monthly) fees, generally not dependent on usage, charged to subscribers
for paging and wireless messaging services. While a subscriber continues to use
its services, operating results benefit from this recurring revenue with minimal
requirements for incremental selling expenses or fixed costs.
MARKETING
The Company has grown internally by broadening its distribution network
and expanding its target market to capitalize on the growing appeal of messaging
and other wireless products and services. Over the past several years, the
Company has emphasized a distribution channel that is characterized by lower
average revenue per unit (ARPU), such as resellers, and correspondingly lower
operating costs. To offset declines in ARPU and to capitalize on the growth of
paging and other wireless advanced messaging services, the Company has expanded
its channels of distribution through acquisition, strategic partnerships and
alliances, and internal initiatives. While the Company has expanded its
distribution strategy beyond the reseller model it still views the reseller
distribution channel as an additional revenue opportunity and a lower-cost
avenue for growth.
The Company markets its wireless messaging products and services
through its Aquis Wireless subsidiary. Aquis Wireless employs a direct sales
force that targets commercial business accounts. It also markets services
through its indirect distribution channel. The indirect distribution channel
consists of both resellers and agents. Resellers purchase airtime and resell
this airtime to its subscriber base. Aquis Wireless provides one invoice to the
reseller and the reseller invoices its subscriber on an individual basis. Agents
offer a branded Aquis Wireless product and receive a commission or margin for
doing so, and Aquis Wireless subsequently bills the subscriber for services sold
by its agent.
Additional marketing efforts include an inbound call center that
accepts orders for products and services. Calls may be generated by yellow page
advertisements or advertising campaigns. Aquis Wireless maintains field offices
in New York, New Jersey, Maryland, Virginia, and Illinois. These offices are
available for subscribers to walk in and purchase products and services. Aquis
Wireless also maintains an Internet site in which customers may purchase
products and services. The web site also allows Aquis Wireless resellers an
access point to maintain their accounts via web based technology.
The Company markets Internet based products and services through its
Aquis IP subsidiary. Aquis IP offers Internet dial up access and various web
hosting products and services. Aquis IP maintains offices in Florida and Arizona
and offers these products on a nationwide basis.
SOURCES OF EQUIPMENT
The Company does not manufacture any of the equipment used in its
operations, all of which is available from a variety of sources. Due to the high
degree of compatibility among different models of transmitters, computers and
other paging and voice mail equipment, the Company has been able to design its
paging networks so as not to be dependent upon any single source for such
equipment. The Company periodically evaluates its purchasing arrangements for
pagers to be sure that the equipment it is offering is current and is available
at appropriate prices.
The Company currently purchases its transmitters and paging network
equipment from Motorola and Glenayre. The Company's terminal equipment has a
modular design, which will allow significant future expansion by adding or
replacing modules rather than replacing the entire system. The Company believes
that its investment in technologically advanced transmission equipment reduces
its cost of maintenance and system expansion over the long term. The Company
believes that its paging system equipment is among the most technologically
sophisticated in the paging industry.
COMPETITION
The Company faces intense competition from operators of other wireless
transmission systems. Such competition is based upon price, the quality and
variety of services offered, and the geographic area covered. Competitors of the
Company
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include local, regional and national messaging companies. Certain competitors
offer wider coverage than does the Company and certain competitors follow a
low-price discounting strategy to expand market share.
A number of technologies, including cellular telephone service,
personal communications service ("PCS"), enhanced specialized mobile radio,
low-speed data networks and mobile satellite services are competitive forms of
technology used in, or projected to be used for, wireless one and two-way
communications. The Company believes that paging will remain one of the
lowest-cost forms of wireless messaging due to the low-cost infrastructure
associated with paging systems.
Future technological developments in the wireless communications
industry and the enhancement of current technologies will likely create new
products and services competitive with the paging services currently offered by
the Company. There can be no assurance that the Company will not be adversely
affected by such technological changes.
REGULATION
The Company's paging operations are subject to regulation by the
Federal Communications Commission ("FCC") under the Communications Act of 1934,
as amended (the "Communications Act") and the Telecommunications Act of 1996
("1996 Act"). The Company is required to obtain licenses from the FCC to use the
radio frequencies necessary for its paging operations. These authorizations
specify the particular locations and frequencies authorized for use by the
Company and set forth technical parameters such as power, tower height and
antenna specifications under which the Company is permitted to use its
frequencies.
The Company's current operations are governed under the Commission's
Rules covering commercial mobile radio services ("CMRS"). CMRS licensees must
provide interconnection upon reasonable request, must not engage in any
unreasonably discriminatory practices and are subject to complaints regarding
any unlawful practices. The Company is also subject to provisions that authorize
the FCC to provide remedial relief to an aggrieved party upon finding of a
violation of the Communications Act and related customer protection provisions.
The Company's FCC licenses are issued for ten years. At the end of the
ten-year term, the Company must file applications for renewal of its
authorizations. The Company can expect renewal if it has met minimum service
requirements. While there can be no assurance that any future renewal
applications filed by the Company will be approved, based upon its experience to
date, the Company knows of no reason to believe that such renewal applications
would not be routinely approved.
The Communications Act requires prior FCC approval for the transfer of
control of a Company that holds FCC radio licenses as well as prior consent to
the assignment of such licenses to another entity. Although there can be no
assurances that any such future applications filed by the Company will be
approved or acted upon in a timely manner by the FCC, the Company, based on its
past experience, knows of no reason to believe that any future transfer or
assignment applications would not be ultimately approved.
The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act")
imposed a structure of regulatory fees, which the Company is required to pay
with respect to its licenses. These fees are revised on an annual basis. The
Company believes that these regulatory fees will not have a material adverse
effect on the Company's business.
The Communications Act also limits foreign ownership in FCC licensed
CMRS entities to no more than twenty percent (20%) direct ownership and, without
Commission consent, no more than twenty-five (25%) indirect ownership. However,
as the result of the World Trade Organization ("WTO") Agreement on Basic
Telecommunications Service entered into February 15, 1997 and effective February
5, 1998, the Commission liberalized foreign participation in the U.S.
telecommunications market by action taken November 25, 1997. This action allows
for an expedited process of approving indirect ownership over the 25% level for
WTO signatories.
The FCC, under the Communications Act, has authority to revoke or
modify licenses issued by it. Any such revocation can only occur after notice
and opportunity for hearing based upon egregious misconduct by the licensee. No
license of the Company has ever been revoked or modified involuntarily.
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Paging authorizations, such as those held by the Company, have
traditionally been issued on a site-specific basis. However, the FCC, on
February 19, 1997, adopted an Order looking to fundamental changes in its
regulation of the paging industry. Specifically, the FCC will, in the future,
issue most paging licenses on a geographic basis. The FCC has defined these as
Economic Areas ("EAs"). The future licensees will be given operating authority
on particular frequencies within these geographic areas, subject only to
protection of incumbent operators from interference. The FCC proposes to award
these future paging licenses by competitive bidding (auctions). The Company, as
an incumbent licensee, will be entitled to interference protection from such
auction winners for its existing operations. However, the Company's ability to
expand its service territories will be affected by these new policies.
Because the auctions are new to paging, the Company cannot predict
their impact on its business, although at this time management believes that the
impact of such auctions on the Company will not be material. Initially, auctions
or competitive bidding may increase the Company's cost of obtaining
authorizations from the FCC. The FCC's new wide-area licensing and auction Rules
may also serve as a barrier to new participants to the paging industry. On the
other hand, the more flexible licensing requirements should save on application
costs associated with making changes to facilities within the wide area should
the Company be successful and bid for wide areas or within its incumbent
geographic areas. On the other hand, if the Company is not a winner in the
auctions for broad geographic areas, its ability to expand its service
territories will be affected by these new policies.
In the future, the Congress may modify or amend the Communications Act
and the FCC may modify its Rules or Policies in ways that could have a material
adverse effect on the Company's business. Such actions may affect the scope and
manner of the Company's operations and delivery of its service. As a result of
the enactment of the 1996 Act, the Company has incurred additional financial
obligations. In November 1996, in response to a directive in the 1996 Act, the
FCC adopted new rules that govern compensation to be paid to pay phone
providers. After these rules were vacated by the U.S. Court of Appeals for the
D.C. Circuit, the FCC released an order mandating that long distance carriers
compensate pay phone providers 28.4 cents for each 800 Number call during a
two-year interim period. The long distance carriers have either passed this cost
through to the paging companies that provide toll-free service to their
subscribers or have blocked payphone calls to toll-free Numbers. This has
increased the cost of providing certain toll-free messaging services and limited
the utility of toll-free Number service. Petitions for review and stay of this
order have been filed with a federal appellate court. Also, in response to
changes made by the 1996 Act, the FCC has adopted new rules regarding payments
by telecommunications firms into a revamped fund that will provide for the
widespread availability of telecommunications services, including to low-income
consumers ("Universal Service"). Prior to the implementation of the 1996 Act,
local telephone companies largely met Universal Service obligations. Under the
new rules, all telecommunications carriers, including paging companies, are
required to contribute to the Universal Service Fund. Payments into the fund
have increased the cost of doing business and could make the Company's service
less competitive with the other services. However, under the 1996 Act, local
exchange carriers are prohibited from charging paging carriers for the
"transport and termination" of local exchange carrier originated traffic. This
has already led to substantial savings for the Company. In addition, paging
carriers may be entitled to compensation from other telecommunications carriers
that terminate a call on a paging network. This could lead to additional revenue
for the Company. Of course, the Company cannot predict the final outcome of any
FCC proceedings, any court challenges to any FCC Rules or Policies or predict
what Congress may, in the future, propose in the way of changes to the
telecommunications laws.
In connection with state regulations, under the amendments to the
Communications Act included in the Budget Act, the Congress preempted state and
local rate and entry regulation of all CMRS providers. Entry regulation
typically refers to the process whereby an entity's right to provide service in
a particular market is subject to the prior approval by a regulatory body such
as the state public service commission. Rate regulation traditionally concerns
the amount, terms and conditions that an operator may charge for its services.
These items were usually included in tariffs subject to approval by the state
regulatory body. While state and local regulatory bodies have been preempted
from rate and entry regulation, they may still regulate other aspects of the
Company's service offerings. This apparently has not created any burdensome
state or local regulation since the enactment of the 1993 Budget Act. However,
there can be no assurances that state and local governments will not attempt in
the future to expand their regulatory scope.
The Company is subject to the state and local laws applicable to any
business enterprise. The 1996 Amendments to the Communications Act, however,
have limited the application of state and local zoning regulations requiring
that they not be
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unreasonably discriminatory among providers of functionally equivalent wireless
services and shall not have the effect of prohibiting the provision of wireless
services.
The foregoing description of certain regulatory considerations does not
purport to be a complete summary of all present federal and state regulatory
requirements nor of all proposed legislation and regulations pertaining to the
Company's present operations.
RISK FACTORS
The following factors, along with the other matters discussed or
incorporated by reference into this Annual Report on Form 10-K, could have a
material effect on the future operations, financial results and financial
condition of the Company and should be carefully reviewed and considered in
connection with the other matters discussed herein.
BUSINESS AND FINANCIAL RISKS
THE COMPANY EXPECTS TO REPORT OPERATING LOSSES FOR THE NEXT SEVERAL
YEARS.
The Company purchased the BA Paging Business in December 1998. The
purchase price of approximately $29,200,000, including transaction costs, was
substantially above the asset value recorded on the books of the sellers.
Although the BA Paging Business showed an operating profit in its most recent
three years of operation, incremental depreciation and amortization on the
Company's higher asset values are expected to result in operating losses. The
Company also merged with ACI at the end of March, 1999, purchased SunStar in
June, 1999 and purchased Source One Wireless in January, 2000. A significant
effect of the purchase accounting for these transactions will be to record a
substantial amount of intangible assets, which will result in substantial
amortization charges to its consolidated income over the next ten years. As a
result, the Company expects to incur operating losses for the next several
years.
The Company expects to continue to show earnings before interest,
taxes, depreciation and amortization ("EBITDA"), a financial measure commonly
used in the telecommunications industry in its future operations, just as Bell
Atlantic and Paging Partners did in their 1998 fiscal years. This is important,
as it represents a key financial test for it to preserve its credit with its
major lender, FINOVA Capital Corporation. Still, EBITDA is not derived from
generally accepted accounting principles ("GAAP") and therefore investors should
not consider it as indicative of operating income or cash flows from operating
activities, as determined in accordance with GAAP, or as a measure of liquidity.
Also, its calculation of EBITDA does not take into account its existing
commitments for capital expenditures or debt service requirements and should not
be seen as representative of the amount of funds generally available to it.
Although the Company anticipates that cost savings achieved through the
Aquis/Paging Partners merger, its recent Sun Star and Source One acquisitions
and continued revenue growth at rates consistent with its historical trends will
improve its EBITDA and narrow its operating losses, the Company cannot assure
investors that its operations will become profitable or that the Company will
continue to generate sufficient EBITDA to cover its debt service and capital
expenditures requirements, provide it with sufficient amounts of operating cash
and enable it to meet its lender's minimum liquidity tests. If the Company can
not achieve operating profitability or adequate EBITDA, its liquidity will be
impaired and its common stock could have little or no value.
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THE COMPANY'S REVENUES AND OPERATING RESULTS MAY FLUCTUATE.
The Company believes that future fluctuations in its revenues and
operating results may occur due to many factors, including competition,
subscriber turnover, new service developments and technological change. Its
current and planned debt repayment levels are, to a large extent, fixed in the
short term, and are based in part on its expectations as to future revenues and
cash flow growth. The Company may be unable to adjust spending in a timely
manner to compensate for any revenue or cash flow shortfall. It is possible
that, due to future fluctuations, its revenue, cash flow or operating results
may not meet the expectations of securities analysts or investors. This may have
a material adverse effect on the price of its common stock. If shortfalls were
to cause it not to meet the financial covenants contained in its debt
agreements, its lender could declare a default and seek immediate repayment.
THE RATE OF SUBSCRIBER DISCONNECTIONS COULD INCREASE IN THE FUTURE,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S
OPERATING RESULTS.
The Company's revenues are derived primarily from fixed periodic
subscription fees for services that are not generally dependent on level of
usage. Consequently, its ability to recoup initial selling and marketing costs,
cover its operating expenses and achieve profitability is dependent on the
average length of each customer's subscription period. Each month, some of its
existing customers have their service terminated for a variety of reasons,
including failure to pay, dissatisfaction with service and switching to a
competing service provider. Loss of those subscribers results in loss of the
recurring stream of revenues generated by payment of fixed fees without
additional selling expenses and adversely affects its operating results.
Company's average monthly disconnection rate for the fiscal year ended December
31, 1999 was 2.7%. Were the Company to experience an increase in its
disconnection rate, its business and future results of operations could be
materially and adversely affected.
THE TELECOMMUNICATIONS INDUSTRY IS EXTREMELY COMPETITIVE AND IS
UNDERGOING CONSOLIDATION.
The paging and telecommunications services industry is extremely
competitive. Some of its competitors, which include local, regional and national
paging companies, possess greater financial, technical and other resources than
the Company does. Moreover, some of its competitors offer broader network
coverage than that provided by its systems and some follow a low-price
discounting strategy to expand their market shares.
Furthermore, the Company believes that the paging industry has
experienced, and will continue to experience, consolidation due to factors that
favor larger, multi-market paging companies, including:
- the ability to obtain additional radio spectrum;
- greater access to capital markets and lower costs of
capital;
- broader geographic coverage of paging systems;
- economies of scale in the purchase of capital equipment;
- operating efficiencies; and
- better access to executive personnel.
This consolidation trend may further intensify competition in its industry. The
Company cannot assure investors that the Company will be able to compete
successfully.
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A HIGH AMOUNT OF DEBT BURDENS THE COMPANY'S OPERATIONS.
The Company has borrowed a large amount of money from its lender, and
the Company expects to continue to be highly leveraged. The following table
compares its total debt, total assets at or as of December 31, 1999.
<TABLE>
<CAPTION>
Year Ended
Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1999
(Dollars in Thousands)
-----------------------------------------------------------
<S> <C> <C> <C>
Total Long-Term Debt $ -- $18,535 $25,963
(net of current maturities)
Total Assets $13,547 $32,335 $39,324
EBITDA $ 3,799 $ 5,068 $ 2,974
</TABLE>
EBITDA is not a measure defined in GAAP and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with GAAP. EBITDA, as determined by the Company, may not necessarily be
comparable to similarly titled data of other paging companies. EBITDA for the
year ended December 31, 1999 was reduced by $1,692 for costs incurred with
abandoned business acquisitions and by $742 for costs related to a settlement
with the Company's former president. Excluding these non-recurring charges,
EBITDA for 1999 would have been $5,408.
The Company's high degree of debt may have adverse consequences for it.
These include the following:
- High amounts of debt may limit or eliminate its ability to obtain
additional financing necessary for acquisitions, working capital,
capital expenditures or other purposes on acceptable terms, if at
all.
- A substantial portion of its cash flow will be required to pay
interest expense; this will reduce the funds which would
otherwise be available for operations and future business
opportunities.
- Its credit agreement with its lender contains financial and
restrictive covenants; the failure to comply with these covenants
may result in an event of default which could have a material
adverse effect on it if not cured or waived.
- The Company may be more highly leveraged than its competitors,
which may place it at a competitive disadvantage.
- Its high degree of debt will make it more vulnerable to a
downturn in its business or the economy generally.
- Its high degree of debt may impair its ability to participate in
the future consolidation of the paging industry.
There can be no assurance that the Company will be able to reduce its
level of debt as the Company intends, nor that the Company will achieve an
appropriate balance between growth which the Company considers acceptable and
future reductions in borrowings. If the Company is not able to achieve continued
growth in EBITDA, the Company may be precluded from incurring additional
indebtedness due to cash flow coverage requirements under its existing credit
agreement.
FUNDING FOR THE COMPANY'S FUTURE CAPITAL NEEDS IS NOT ASSURED.
The Company's business strategy requires substantial funds to be
available to finance the continued development and future growth and expansion
of its operations, including possible acquisitions. Future amounts of capital
required by it will depend upon a number of factors. These factors include
subscriber growth, the type of paging devices and services demanded by
8
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customers, service revenues, technological developments, marketing and sales
expenses, competitive conditions and acquisition strategies and opportunities.
The Company cannot assure investors that additional equity or debt financing
will be available to it when needed on acceptable terms, if at all. If
sufficient financing is unavailable when needed, the Company may experience
material adverse effects.
THE COMPANY'S CREDIT AGREEMENT WITH ITS LENDER RESTRICTS THE WAY IT
OPERATES ITS BUSINESS.
The Company's agreement with its lender imposes operating and financial
restrictions on it. The Company's credit agreement requires it and its operating
subsidiaries to maintain specified financial ratios, including a maximum
leverage ratio and a minimum fixed charge coverage ratio. In addition, the
credit agreement limits or restricts, among other things, the operating
subsidiaries' ability to:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or purchase debt;
- incur liens and engage in sale/leaseback transactions;
- make loans and investments;
- incur indebtedness and contingent obligations;
- amend or otherwise alter debt instruments and other material
agreements;
- engage in mergers, consolidations, acquisitions and asset sales;
- engage in transactions with affiliates; and
- alter their lines of business or accounting methods.
The Company's ability to comply with such covenants may be affected by
events beyond its control, including prevailing economic and financial
conditions. A breach of any of these covenants could result in a default under
the credit agreement. Upon the occurrence of an event of default, the lender
could elect to declare all amounts outstanding to be immediately due and
payable, together with accrued and unpaid interest. If the Company were unable
to repay any such amounts, the lender could proceed against the collateral
securing a portion of the indebtedness. If the lender accelerated the payment of
such indebtedness, there can be no assurance that its assets would be sufficient
to repay in full such indebtedness and other indebtedness. In addition, because
the credit agreement limits its ability to engage in certain transactions except
under certain circumstances, the Company may be prohibited from entering into
transactions that could be beneficial to it.
THE COMPANY'S BUSINESS MAY BE ADVERSELY AFFECTED BY RAPID TECHNOLOGICAL
CHANGES.
The paging and telecommunications services industry is characterized by
rapid technological change and advancement which may produce new services or
products that are directly competitive with the paging and data transmission
services the Company provides. A variety of wireless one-way and two-way
communication technologies, including cellular telephone service, personal
communications services, enhanced specialized mobile radio, low-speed data
networks, mobile satellite services and advanced two-way paging services, are
currently in use or under development. Although those technologies are generally
higher-priced than one-way paging service or not yet commercially available,
technological improvements are creating increased capacity and demand for
wireless two-way communication. Increased availability of newer, more
technologically advanced products and services could result in decreased demand
for certain of its products and services. For this reason, a key element of its
growth strategy is to diversify its business and product lines through
acquisitions of companies with businesses that will complement and enhance its
own. However, the Company cannot assure investors that the Company will be able
to successfully diversify its business or incorporate new technologies so as to
keep its product and service offerings competitive.
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IF THE COMPANY DOES NOT MAKE ACQUISITIONS ON ECONOMICALLY ACCEPTABLE
TERMS AND INTEGRATE ACQUIRED BUSINESSES SUCCESSFULLY, ITS FUTURE GROWTH
AND FINANCIAL PERFORMANCE WILL BE LIMITED.
The Company has pursued, and intends to continue to pursue, a growth
strategy which relies in part upon acquisitions of telecommunications and other
data transmission businesses. However, the Company may not be able to identify,
finance and complete suitable acquisitions on acceptable terms, and any future
acquisitions that the Company completes may not be successful. In addition, the
process of integrating acquired businesses may involve unforeseen difficulties
and/or require a disproportionate amount of its time, attention and resources
from time to time. Although its goal will be to achieve operating synergies and
efficiencies and to expand and diversify its business, the Company may not
achieve some of the anticipated benefits of such acquisitions if the existing
operations of such companies are not successfully integrated with its own in a
timely manner. Any difficulties or problems encountered in the integration
process could have a material adverse effect on it. Even if integrated in a
timely manner, there can be no assurance that its operating performance after
acquisitions will be successful or will fulfill management's objectives.
The integration of businesses the Company acquires will require, among
other things, coordination of administrative, sales and marketing, distribution
and accounting and finance functions and expansion of information and management
systems. The integration process could cause the interruption of the activities
of the two businesses or the diversion of attention and resources from the
businesses' primary operational goals. The difficulties of such integration may
initially be increased by the necessity of coordinating geographically separate
organizations and integrating personnel with disparate business backgrounds and
corporate cultures. The Company may not be able to retain key employees. The
process of integrating newly acquired businesses may require a disproportionate
amount of time and attention of its management and financial and other resources
and may involve other, unforeseen difficulties.
The success of its growth strategy will also depend on numerous other
contingencies beyond its control, including national and regional economic
conditions, interest rates, competition, changes in regulation or technology and
its ability to attract and retain skilled employees. As a result, the Company
cannot assure investors that its growth and business strategies will prove
effective or that the Company will achieve its goals.
GOVERNMENT REGULATION MAY MAKE ITS OPERATIONS MORE DIFFICULT
THE COMPANY'S BUSINESS IS DEPENDENT ON FCC LICENSES THAT MAY NOT BE
RENEWED.
The Company's FCC licenses have varying terms of up to 10 years, at the
end of which renewal applications must be approved by the FCC. In the past,
paging license renewal applications generally have been granted by the FCC upon
a showing of compliance with FCC regulations and of adequate service to the
public. Although the Company is unaware of any circumstances which would prevent
the grant of any pending or future renewal applications, the Company cannot
assure investors that any of its renewal applications will be free of challenge.
There may be competition for the radio spectrum associated with its FCC licenses
at the time they expire, which could increase the chances of third party
interventions in the renewal proceedings. The Company cannot assure investors
that its applications for renewal of its FCC licenses will be granted.
FUTURE CHANGES IN REGULATORY ENVIRONMENT MAY ADVERSELY AFFECT THE
COMPANY'S BUSINESS.
The Company and the wireless communications industry are subject to
regulation by the FCC and various state regulatory agencies. From time to time,
legislation and regulations which could potentially adversely affect it are
proposed by federal and state legislators. The Company cannot assure investors
that federal or state legislation or regulations will not be adopted that would
adversely affect its business.
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RISKS RELATED TO THE COMPANY'S COMMON STOCK
THE COMPANY DOES NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE
FUTURE.
The Company currently intends to retain all of its earnings to finance
the growth of its business and therefore does not anticipate paying cash
dividends on its common stock at any time in the foreseeable future.
Furthermore, the Delaware General Corporation Law requires that dividends be
paid only out of capital and surplus, or out of certain enumerated "retained
earnings." Any future payments of dividends would be subject to the availability
of sufficient amounts of such funds to cover such payments. The Company cannot
assure investors that such funds will be legally available or that its Board of
Directors will authorize payment of dividends if and when such funds become
available.
THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS AND THE DELAWARE
GENERAL CORPORATION LAW CONTAIN PROVISIONS THAT MAY HAVE THE EFFECT OF
DISCOURAGING ATTEMPTS AT A CHANGE OF CONTROL OF THE COMPANY, WHICH MAY
ADVERSELY AFFECT THE VALUE OF ITS COMMON STOCK.
The Company has an authorized class of 1,000,000 shares of "blank
check" preferred stock which may be issued by the Board of Directors on such
terms and with such rights, preferences and designations as the Board may
determine. Issuance of such preferred stock, depending upon the rights,
preferences and designations assigned to it, could delay, deter or prevent a
change in control of the Company. In addition, its restated Certificate of
Incorporation provides for a classified board of directors, which may delay or
deter certain changes in its management.
Certain "anti-takeover" provisions of the Delaware General Corporation
Law restrict the ability of certain "interested" stockholders to acquire control
of the Company. These "anti-takeover" provisions might discourage prospective
acquirors from attempting to bid for its outstanding shares and therefore may be
considered disadvantageous by certain investors. The Company has no control
over, and therefore cannot predict, what effect these impediments to the ability
of third parties to acquire control of it might have on the market price of its
common stock.
THE PRICE AT WHICH THE COMPANY'S STOCK TRADES MAY BE VOLATILE.
The market price of the Company's common stock has been experiencing
significant fluctuation since its merger with ACI in March of 1999. The value of
the Company's common stock will likely be affected by numerous factors. These
include the risk factors set forth in this Report, as well as prevailing
economic and financial trends and conditions in the public securities markets.
Share prices of paging companies such as the Company have exhibited a high
degree of volatility during recent periods. Shortfalls in revenues or EBITDA
from the levels anticipated by the public markets could have an immediate and
significant adverse effect on the trading price of the Company's common stock in
any given period. Shortfalls may result from events that are beyond the
Company's immediate control and can be unpredictable. The trading price of its
shares may also be affected by developments which may not have any direct
relationship with its business or long-term prospects. These include reported
financial results and fluctuations in trading prices of the shares of other
publicly held companies in the paging industry generally.
ITEM 2. PROPERTIES
The Company's principal office is located in approximately 21,700
square feet of leased space at 1719A Route 10, Suite 300, Parsippany, New
Jersey. The fixed rent on the lease, which expires April 30, 2001, is currently
approximately $27,400 per month. In addition to fixed rent, the lease requires
the Company to pay its proportionate share of certain maintenance expenses and
any increase in real estate taxes and insurance costs. The Company has an option
to renew the lease for an additional five-year period at a monthly rental of
greater of the current rent or ninety-five percent of the fair market rent for
comparable space in the area.
As of February 29, 2000, the Company leases approximately 450 locations
for its transmitters on commercial broadcast towers, buildings and other fixed
structures. In addition, the Company leases space in New York, Pennsylvania,
Maryland, and Massachusetts, primarily to house equipment related to its paging
systems. The rental payable for such leases, together with those for the
Company's transmitter locations, aggregated approximately $275,000 per month, as
of February 29, 2000. The Company
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also maintains eight sales offices and two operating centers in various U.S.
locations, the aggregate monthly rental payable for such locations being
approximately $33,000.
ITEM 3. LEGAL PROCEEDINGS
1. FONE ZONE COMMUNICATION CORP. V. AQUIS COMMUNICATIONS, INC. -
Supreme Court of the State of New York, County of Queens, Index No. 3841/00. The
Company was sued by Fone Zone Communications Corp. in the Supreme Court of the
State of New York, Queens County, on February 18, 2000. The Company removed the
action to the U.S. District Court for the Eastern District of New York on March
23, 2000. The suit seeks $1,000,000 in alleged damages as a result of the
Company's alleged conduct with respect to the Company's termination of services
for plaintiff and the Company's alleged solicitation of plaintiff's customers.
The Company intends to vigorously defend this action.
2. FRANCIS COMMUNICATIONS TEXAS, INC. ET AL. V. AQUIS COMMUNICATIONS,
INC. ET AL.- U. S. District Court for the Western District of Texas, El Paso
Division, Cause No. EP 99 CA 0388. On November 24, 1999, Francis Communication
Texas, Inc. and Francis Communications I, Ltd. (collectively, the "Francis
Parties") commenced an action arising out of a letter of intent between the
Francis Parties and the Company dated June 10, 1999. The letter of intent called
for the Company to acquire the Francis Parties' assets for a purchase price of
$4,000,000. The Company terminated the letter of intent as a result of the
failure of the Francis Parties to comply with certain conditions contained in
the letter of intent. The Francis Parties allege that the Company breached the
letter of the intent and the Company's duty of good faith and fair dealing in
failing to conclude the transaction described in the letter of intent. The suit
seeks economic and other damages as a result of the Company's alleged conduct.
This matter is at an early procedural stage. The Company strenuously denies the
Francis Parties' allegations and intends to vigorously defend this action.
3. IN THE MATTER OF ARBITRATION BETWEEN JOHN X. ADILETTA AND AQUIS
COMMUNICATIONS GROUP, INC.- On December 23, 1999, John X. Adiletta, a former
director and chief executive officer of the Company, commenced an arbitration
proceeding under the Rules of the American Arbitration Association by way of a
"Demand for Arbitration and Statement of Claim" (hereinafter the "Demand"). The
Demand set forth three claims for relief. The first claim alleged breach of an
employment agreement between the Company and Mr. Adiletta and sought damages in
"an amount to be proved at trial" but "in no event less than $762,500." The
second claim alleged wrongful discharge and sought damages in "an amount to be
proved at trial" but "in no event less than $1,000,000," plus unspecified
punitive damages. The third claim for relief sought monetary remedies, as well
as an equitable remedy by way of a request for a preliminary and permanent
injunction for the alleged wrongful termination of health and welfare benefits
including incentive stock options. The third claim also sought compensatory and
punitive damages in unspecified amounts. The parties had selected an arbitrator,
and a discovery and hearing schedule was entered. Thereafter, the parties
entered into a settlement agreement, the terms of which provide for a payment of
$25,000, a credit of $75,000 against existing indebtedness owed to the Company
by Mr. Adiletta, stock valued at $400,000, forgiveness of $115,000 of debt under
an existing promissory note secured by common stock owned by Mr. Adiletta, and
the reinstatement of 55,000 stock options with an exercise price of $1.12 each
under a previous Incentive Stock Option Agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded over the counter on the NASDAQ
SmallCap Market under the symbol "AQIS". Over the counter market quotations
reflect inter-dealer prices without mark-up, mark-down or commissions, and may
not represent actual transactions. The quarterly high and low closing bid prices
for the Company's Common Stock for the past two years as reported by the
National Association of Securities Dealers, Inc., are as follows:
<TABLE>
<CAPTION>
1998 1999
COMMON STOCK COMMON STOCK
QUARTER HIGH LOW QUARTER HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 1.81 0.69 First Quarter 1.63 1.06
Second Quarter 1.75 1.00 Second Quarter 1.56 0.81
Third Quarter 1.50 0.88 Third Quarter 1.88 1.25
Fourth Quarter 3.19 0.69 Fourth Quarter 1.91 0.47
</TABLE>
On April 12, 2000, the closing price of the Company's Common Stock was
$2.25. As of this date, there were approximately 125 record holders of the
Company's Common Stock. The number of record holders does not reflect the number
of beneficial owners of the Company's Common Stock for whom shares are held by
banks, brokerage firms and others. Based on information requests received from
representatives of such beneficial owners, management believes that there are at
least 1,000 beneficial holders of the Company's Common Stock.
DIVIDENDS
The payment of dividends is contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition. The
payment of dividends is currently prohibited by the Company's Credit Agreement
with Finova Capital Corporation. It is the present intention of the Company's
Board of Directors to retain its earnings, if any, for use in the Company's
business.
RECENT SALES OF UNREGISTERED SECURITIES
On December 15, 1999, the Company issued to each of Patrick M. Egan,
Michael E. Salerno and John B. Frieling, directors of the Company, 60,000 shares
of the Company's common stock in consideration of those directors' expanded
scope of service to the Company during the interim period following the
departure of John X. Adiletta as Chief Executive Officer in November 1999. The
shares of the Company's stock issued to Messers. Egan, Salerno and Frieling were
issued without registration under the Securities Act of 1933 pursuant to the
exemption therefrom provided by Section 4(2) of the Securities Act on the basis
that such issuances did not involve a public offering.
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PART II
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table, as it relates to the 1999 and 1998 consolidated
balance sheets and the statement of operations for 1999, has been derived from
the historical financial data of Aquis Communications Group, Inc. The operating
data for 1998 through 1995 has been derived from the annual financial statements
of Bell Atlantic Paging, Inc. ("BAPCO" or the "Predecessor Company"). Similarly,
the balance sheet data for 1997 through1995 has also been derived from BAPCO's
financial statements. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes thereto
included elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------------
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE NUMBERS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ......................... $ 31,159 $ 26,432 $ 20,689 $ 17,057 $ 15,821
Depreciation and amortization .......... 10,878 4,323 3,378 2,066 1,253
Costs of abandoned business combinations 1,692 -- -- -- --
Operating expenses ..................... 26,493 21,364 16,890 13,065 13,380
-------- -------- -------- -------- --------
Operating (loss) income ................ (7,904) 745 421 1,926 1,188
Other expenses, net .................... (2,975) -- -- -- (858)
Provision for income taxes ............. -- (296) (168) (770) (543)
Extraordinary item, net of taxes ....... -- 682 -- -- --
-------- -------- -------- -------- --------
Net (loss) income ...................... (10,879) 1,131 253 1,156 (213)
--------
Net loss per common share .............. $ (0.76)
--------
BALANCE SHEET DATA (at year end):
Total assets ........................... $ 39,324 $ 32,335 13,547 $ 13,015 $ 9,345
Long-term debt, less current
maturities ......................... $ 25,963 $ 18,535 $ -- $ 2 $ 887
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 Notes to the consolidated financial statements). At such time,
Paging Partners changed its name to Aquis Communications Group, Inc. (the
"Company" or "Aquis"). ACI had no operating activities prior to the acquisition
of the paging assets of Bell Atlantic Paging, Inc. and certain affiliates
("BAPCO" or the "Predecessor Company"), on December 31, 1998. The results of
operations prior to March 31, 1999 are those of Aquis. The financial statements
for the years ended December 31, 1998 and 1997 have been derived from the
financial statements of the Predecessor Company for such period, and include
certain reclassifications to enable uniform accounting presentations for the
periods presented.
The results of operations of the Predecessor Company for the years ended
December 31, 1998 and 1997 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. This discussion should be read
in conjunction with the consolidated financial statements of the Company and the
notes thereto.
On December 31, 1998, Aquis acquired the Bell Atlantic paging business for
approximately $29,200, including transaction costs. The Bell Atlantic paging
business acquired included BAPCO's (or the Predecessor Company's) sales and
marketing operation and the paging network operation infrastructure owned and
operated by the Bell Atlantic Operating Telephone Companies (the "OTC's"). The
acquisition was accounted for as a purchase in accordance with Accounting
Principles Board Opinion No, 16, "Business Combinations." The acquisition was
financed primarily through a $20,000 loan from FINOVA Capital Corporation
("FINOVA"), a $4,150 note retained by the seller (the "Seller Note"), and cash
proceeds of $5,661 from a sale of preferred stock. The Seller Note was paid in
full on June 30, 1999, net of a negotiated discount.
GENERAL
The Company is a leading provider of paging and other wireless messaging
services and 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 Notes to the consolidated
financial statements), the Company began offering both secure and general
dial-up internet access services effective July 1, 1999. For periods prior to
1999, the Predecessor Company acted as a reseller for the OTC's of Bell Atlantic
and provided one-way paging services and equipment to consumers directly and
through other resellers.
During the year ended December 31, 1999, the Company generated approximately 97%
of its total revenue from fixed periodic fees for paging services that are not
generally dependent on usage. Other sources of revenue include certain
usage-based services provided primarily to resellers and from sales of pagers.
Consequently, the ability to recover initial operating, selling and marketing
costs and to achieve profitability is dependent on the average duration of each
customer's subscription period. For as long as a subscriber continues to utilize
the service, operating results benefit from the recurring fixed fee payments
without the requirement of any incremental selling expenses. Conversely,
customer disconnections adversely affect operating results. Each month a
percentage of existing customers have their service terminated for reasons
including failure to pay, dissatisfaction with service or coverage limitations,
and switching to competing service providers. The average of the monthly
disconnection or churn rates (not weighted and excluding the effects from the
Paging Partners subscriber base) for the years ended December 31, 1999 and 1998,
were 3.1% and 2.9%, respectively. Including the stabilizing effects of the
Paging Partners reseller base added April 1, the churn rate was 2.7% for
calendar year 1999.
RESULTS OF OPERATIONS - 1999 TO 1998
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Some of the following financial data is presented on a per subscriber unit
basis. Management believes that such a presentation is useful in understanding
year-to-year comparative results by providing a meaningful basis for comparison,
given the differences in business management and in the number of subscribers of
other paging companies.
UNITS IN SERVICE
Units in service totaled 415,000 and 257,000, a 61.5% increase, on a comparative
basis as of December 31, 1999 and 1998, respectively, before adjustment for
certain units (the "BAM Reseller Units") transferred to Bell Atlantic Mobile
("BAM") effective December 1, 1999. Aquis and BAM entered into a reseller
agreement for these units in connection with the purchase of the assets of
BAPCO. Aquis had the option to cancel the reseller agreement for the BAM
Reseller Units and did so in December, 1999 because these units were not
profitable to the Company. Net of the transfer, units in service totaled 375,000
and 226,000, respectively, and represent a net growth rate of nearly 66%. This
growth was achieved through the merger with Paging Partners Corporation on March
31, 1999, and was partially offset by customer disconnections at a rate of 2.7%
per month.
REVENUES
Paging service revenues for the years ended December 31, 1999 and 1998,
respectively, were $30,368 and $23,309, an increase of approximately $7,059 or
more than 30%. The increase in service revenues was attributable to the increase
in the number of subscribers resulting primarily from the March 31, 1999 Paging
Partners merger, and, to a smaller extent, to an increase in demand for such
value-added services as alpha dispatch, sports, news and business data
messaging. Average revenue per unit, or "ARPU", was $6.84 during 1999, compared
to $7.18 during 1998. This change in ARPU was primarily the result of the
Company's addition of reseller units through the Paging Partners merger and to a
lesser extent was the result of pricing pressures in a highly competitive
marketplace. Resellers purchase the Company's services in bulk and are therefore
provided rates lower than those made available to the Company's direct
subscribers. The relative weight of reseller revenues to total service revenues
has increased from about 11% of service revenues during the first quarter of
1999, to about 28% for subsequent quarters as the result of the merger.
Revenues from sales of paging equipment declined from $3,123 in 1998 to $791 in
1999. This was the result of two factors. First, sales to Bell Atlantic Mobile
and the OTC's, entities that were significant resellers of paging equipment and
services in years prior to 1999, were substantially eliminated as a result of
Aquis' purchase of the business at December 31, 1998. Second, in response to
consumer demand for less costly equipment, Aquis began marketing lower-cost
units at reduced sales prices in 1999, representing a departure from the
Predecessor Company's high-end, high-cost strategy.
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 the Company's service area,
and are most commonly used to provide nationwide coverage. The costs of such
services increased from $4,968 in 1998 to $7,753 in 1999. The increases are
attributable primarily to growth of the subscriber base, and to an increase in
customer demand for services such as wide-area, nationwide, alpha dispatch, and
other message dispatch services.
COST OF EQUIPMENT SALES
The cost of equipment sold during fiscal year 1999 was $947, a decline of $1,762
from the prior year level of $2,709. The previously-described reduction of sales
to Bell Atlantic Mobile and the OTC's contributed to the decrease, as did the
Company's move toward lower-cost pagers and an increase in demand for rental
units. Declines in average pager costs also contributed to the reduction.
TECHNICAL OPERATIONS
Technical operating expenses include transmission site rentals, telephone
interconnect services and the costs of network maintenance and engineering.
These expenses totaled $5,317 and $3,482 during the years ended December 31,
1999 and 1998, respectively. Additional costs were incurred to operate and
maintain the Company's expanded network resulting from the merger with Paging
Partners on March 31, 1999. In addition, the elimination of certain expenses
allocated by BAPCO was offset by greater external unsubsidized third party costs
for transmitter and terminal site rents, telephone company access charges, and
personnel costs in the current year.
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SALES AND MARKETING
Selling and marketing expenses include the cost to acquire and retain
subscribers, operating costs associated with the sales and marketing
organization, and other advertising and marketing expenses. These costs
increased from $3,394 in 1998 to $3,881 in 1999, or approximately 14.3% from
1998 to 1999, resulting from the opening of additional sales offices and a
corresponding increase in sales and support staff and related administrative
operations and selling costs. These increases were partially offset by a
reduction of sales commissions resulting from a revised commission plan
implemented in 1999 and a decrease in print advertising expenses.
GENERAL AND ADMINISTRATIVE
General and administrative expenses include costs associated with customer
service, field administration and corporate headquarters. As a percentage of
service revenue, these costs increased as a percentage of service revenues from
about 24.3% in 1998 to 25.3% in 1999. The increase was largely attributable to a
settlement of certain employment claims made by the Company's former President,
settled in the approximate amount of $742 and charged against 1999 results of
operations. The increase was also attributable to higher office occupancy and
customer service and call center support costs that were partially offset by
reductions in billing and data processing expenses. Also contributing to the
increase were costs associated with the transition to a public reporting entity.
However, Predecessor Company amounts were lower due its existence as a
subsidiary of Bell Atlantic rather than operating as an independent entity.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased to $10,878 in 1999 from $4,323 during
the prior year. 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 such costs to operations. The
increases in depreciation and amortization are also attributable to the
allocation of the purchase price of tangible and intangible assets, which
exceeded their historical costs, acquired from the Bell Atlantic companies and
through the merger with Paging Partners.
ABANDONED BUSINESS COMBINATIONS
On November 8, 1999, the Company announced the termination of discussions
concerning the June 21, 1999 Memorandum of Understanding to merge with
Intelispan, Inc. In addition, the Company also terminated its efforts to acquire
Francis Communications and certain additional telecommunications services
providers and resellers. Earnings for 1999 have been charged $1,692 for the
write off of related capitalized costs.
INTEREST EXPENSE
Net interest expense was $3,004 for the year ended December 31, 1999 and none
for 1998. The 1999 expenses include interest costs related to the senior debt
and the five year term loan due to FINOVA, and additional fees and
first-quarter charges of $299 related to letters of credit used in connection
with the Company's mergers and acquisitions. In years prior to 1999, BAPCO
carried no external debt.
PROVISION FOR INCOME TAXES
The provision for income taxes decreased in the current periods as a result of
the Company'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.
RESULTS OF OPERATIONS - 1998 TO 1997
17
<PAGE>
UNITS IN SERVICE
Units in service totaled 257,000 and 218,000 as of December 31, 1998 and 1997.
This increase represents an annual net growth rate of 18%. Unit growth resulted
primarily from the overall industry growth in numeric and alphanumeric wireless
messaging and was partially offset by monthly customer disconnection rates of
2.9% in 1998 and 2.4% in 1997.
REVENUES
Paging service revenues for the years ended December 31, 1998 and 1997,
respectively, were $23,309 and $17,894, an increase of approximately $5,415 or
more than 30%. The increase in service revenues was attributable to the increase
in the number of subscribers and, to a smaller extent, to an increase in demand
for such value-added services as alpha dispatch, sports, news and business data
messaging, which in turn produced an increase in ARPU from year to year. Average
revenue per unit was $7.18 during 1998, compared to $6.84 in 1997.
Revenues from sales of paging equipment increased from $2,795 in 1997 to $3,123
in 1998. This was the result of several factors, including new product
introductions by the Company's major supplier, increased productivity from its
telemarketing channel, and higher sales to the Company's affiliates.
COST OF PAGING SERVICES
The costs of paging services were $4,968 and $4,401 in 1998 and 1997,
respectively. The increase is attributable primarily to growth of the subscriber
base, and to an increase in customer demand for services such as, nationwide,
alpha dispatch, and other message dispatch services.
COST OF EQUIPMENT SALES
The cost of equipment sold during fiscal years 1998 and 1997 was $2,709 and
$2,873, respectively, representing a decline of $164. Declines in supply costs
available from vendors were partially offset by an increase in the number of
units sold. In addition, the cost of sales for 1997 included higher charges for
obsolescence than required for 1998.
TECHNICAL OPERATIONS
These expenses totaled $3,482 and $2,023 during the years ended December 31,
1998 and 1997, respectively. Additional trunking, labor and other costs were
incurred to operate and maintain the Company's growing network.
SALES AND MARKETING
Costs incurred were $3,394 in 1998 and $2,844 in 1997. The increase resulted
from an increase in the size of the sales team and the change in the commission
structure to encourage revenue growth and sales of value-added, higher-margined
services. The previous commission plan was unit-volume oriented. Print
advertising remained consistent for both years.
GENERAL AND ADMINISTRATIVE
These costs totaled $5,657 and $4,211 in 1998 and 1997, respectively. As a
percentage of revenue, these costs were about 24% of service revenues for both
1998 and 1997. Approximately $1,000 of the increase was attributed to the
expansion of the Company's customer service call centers, information systems
and administrative capabilities to support the growing subscriber base.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization in 1998 and 1997 was $4,323 and $3,378,
respectively. The increase was primarily due to the growth of the Company's
rental pager pool.
PROVISION FOR INCOME TAXES
The provision for income taxes was $296 and $168 in 1998 and 1997, respectively.
Excluding the interest and certain other minor administrative expenses incurred
by Aquis during its start-up activities in 1998, the effective tax rates for
1998 and 1997 approximated 41%. During these two years, 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 provisions for income
taxes have been calculated on a separate return basis herein. See the footnotes
to the consolidated financial statements.
18
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In December, 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS,
amended in March, 2000, which provides guidance on the application of generally
accepted accounting principles to revenue recognition in financial statements.
The Company will adopt SAB 101 in the second quarter of 2000 and believes that
adoption will not have a significant effect on its consolidated results of
operations or its financial position.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial funds to finance the growth of its existing
operations and customer base, expansion into new markets and strategic
acquisitions. Additional cash is required for debt service, working capital and
general corporate purposes.
The Company's net cash provided from operating activities was $4,643 and $2,456
as of December 31, 1999 and 1998, respectively. The increase in operating cash
flows is primarily due to the Company's ability to defer payments to vendors and
suppliers during 1999. The Company does not anticipate that this trend will
continue as such deferment was required due to working capital deficiencies
experienced in 1999. However, the Company does not believe that such trends will
reverse in the 2000. There are several other factors that have impacted the
operations of the Company and the industry during 1999:
- - The paging industry experienced substantial and continued consolidation
during 1999. As a result, there has been concern about profitability and
liquidity with respect to many companies in the industry. In response to
investor concerns, the management of several major paging companies
announced their intention to shift from a price competitive strategy
designed to increase subscriber count, to a strategy intended to focus on
operating margins. This strategic shift is expected to slow the decline in
ARPU experienced by the industry. Increased penetration of higher priced
alphanumeric service, as well as value-added services, are also expected to
strengthen ARPU.
In response to these trends, management has developed and implemented
several strategic initiatives. Management's original plan of growth through
strategic acquisitions has been refined to focus on service providers in
the telecommunications and internet related industries. Acquisitions
meeting the Company's growth and value objectives will be targeted as third
party financing becomes available or in circumstances that will permit such
business combinations to be completed using equity. The Company has also
renewed its focus on growth of its core business and improvement in
utilization of its paging system capacity. The Company has developed
alternative sales initiatives and additional strategic alliances; these
combine paging, email and the internet, include advertising programs in
which cost is based primarily on completed sales, and call for the use of
its paging network to broadcast information for content providers on a
metered basis.
Capital expenditures for the core business are not expected to increase in
2000. However, the Company plans to expand its two-way messaging business
and to focus on the development of its internet subsidiary, Aquis IP.
Current plans estimate that $3,000 would be required for the year 2000 to
fund the expected growth in these areas, primarily for internet licensing
and working capital requirements and such funds are anticipated to be
provided by third party financing. In the event that such financing is not
obtained the Company is prepared to sell Aquis IP.
- - During 1999 revenues significantly exceeded those of 1998 primarily due
to the Paging Partners acquisition. The Company experienced continued
pricing pressure from competition in its markets, resulting in
decreasing ARPU, increased subscriber churn rates and lower operating
margins. The units in service increased primarily due to the Paging
Partners merger. The Company plans on improving its customer retention
efforts and to continue its marketing efforts to expand its units in
service and will consider strategic acquisitions to increase the
customer base.
- - Certain integration issues connected with the Paging Partners merger
contributed to a decline in total reseller units during 1999. The Company
did not support the reseller operations to the level of service previously
provided by Paging Partners. The Company has started a significant
marketing effort to regain some of the lost resellers.
19
<PAGE>
- - During the fourth quarter, as a result of a lack of working capital to
purchase a sufficient number of new units, the Company was unable to meet
sales demand and to service the needs of the existing subscriber base.
The Company's plan to offset these trends include ( i ) negotiating more
favorable terms from paging equipment manufacturers and vendors, ( ii )
obtaining third party financing and ( iii ) the possible sale of non-core assets
and businesses. The Company believes that cash from operations combined with
current cash and cash equivalents will be adequate to finance the existing
business but will require additional sources of funding to expand the business.
During 1999, the Company used cash of $23,300 in connection with business
acquisitions and for the purchase of property plant and equipment. This
represents an increase of $19,319 over the 1998 net cash used in investing
activities. The increase is primarily related to the $21,200 of cash used
related to various business combinations offset by a decrease in capital
expenditures in 1999 as compared to 1998.
For the years ended December 31, 1999 and 1998 net cash provided from
financing activities was $19,630 and $1,564, respectively. The increase is
related to borrowings under the Company's senior credit facility and an
installment loan. The Company received $26,615 in connection with such
borrowings and used such amounts to finance the acquisitions noted above and
to pay off existing notes and obligations. The Company borrowed an additional
$2,450 in January 2000 for an acquisition and concurrently agreed with its
lender to forego any further borrowings under this facility. On April 12,
2000, the Company made a payment of $1,250 towards such amount and the
balance is payable over the same term as the existing senior facility. The
Company was not in compliance with a certain debt covenant at December 31,
1999 with respect to their senior facility and the lender issued a waiver of
the covenant in default and amended the agreement for future periods.
Including the additional funds borrowed in January 2000, quarterly principal
payments to the lender will begin on July 1, 2000, with a total of $520 due
in 2000.
On April 10, 2000, Aquis entered into an agreement to obtain a $2 million
bridge loan as interim funding pending completion of additional prospective
financing. The debt is subordinate to the Company's senior debt and is
unsecured. This agreement provides for an interest rate of 11%, a scheduled
maturity date in September, 2001 and also provides for interest to accrue
until the earlier of its maturity date or conversion. At the lender's
election not earlier than 120 days from the date of funding, this loan is
convertible into the Company's common stock at 90% of the then-current market
value. At the Company's election, the loan is redeemable at 105% of face
value if such election is made within the initial 90 days subsequent to
funding, or at 110% of face value if redemption is elected within 91 to 118
days, or, if elected thereafter, at 115% of face value. Proceeds from this
loan were used to make the $1,250 payment in connection with the January 2000
borrowings. The proceeds were used to pay certain fees incurred in connection
with the lender loan modifications arranged during 2000, to pay certain costs
incurred in connection with this bridge loan, and the balance will provide
about $400 to be used for general corporate purposes.
At December 31, 1999 the Company had a working capital deficit of about $3,900.
The Company's working capital was impacted by the use of cash to finance
acquisitions and by costs incurred in connection with the abandoned acquisitions
and the costs accrued to settle certain employment-related claims made by the
Company's former President. The Company anticipates that its working capital
position will improve in 2000. The Company believes that it will generate
sufficient cash flows from operations to fund estimated working capital
requirements and will have the ability to obtain third party financing if such
working capital requirements exceed management's estimates. In January 2000, the
Company settled liabilities of about $850 through the issuance of debt and
stock.
The Company's principal source of liquidity at December 31, 1999 included cash
and cash equivalents of about $1,000 and its ability to generate cash from
operations, which totaled $4,643 during 1999. The Company believes that its
current cash and equivalents and the cash it expects to generate from operations
will be sufficient to meet its anticipated working capital and capital
expenditure requirements through at least the end of 2000. However, if cash from
operations is not sufficient to fund the planned growth of the core business and
the internet business or if the Company experiences further subscriber and ARPU
deterioration or if certain contingencies are resolved unfavorably, the Company
is prepared to implement an alternative business plan (the "Alternative Plan").
The Alternative Plan calls for the sale of the internet subsidiary and other
assets and for a reduction of planned marketing expenditures and capital
expenditures. Cash requirements of the paging business may vary materially from
those now planned as a result of unforeseen changes that could consume a
significant portion of available resources or as a result of an increased rate
of attrition of the customer base.
20
<PAGE>
YEAR 2000
The Company's Year 2000 initiatives have been successful to date. Aquis'
approach to this issue was to subdivide its Year 2000 remediation program into
four distinct segments: 1) create a prioritized inventory of items to be
assessed, 2) assess their readiness through testing, 3) plan and implement
corrective actions, and 4) develop contingency plans. The Company has
transitioned all of its significant systems to the new millennium without
experiencing significant problems in any areas.
The Company's contingency planning has provided for plans to respond to any
known Year 2000 concerns that may affect its day-to-day operations or its
infrastructure. Aquis is not currently aware of any significant Year 2000 or
similar problems that have arisen for its customers or suppliers. Therefore,
management believes it has minimized its risk related to future exposure
concerning year 2000 issues. The Company intends to continue to monitor Year
2000 issues and does not believe such future costs will be material to the
Company's results of operations, financial position or liquidity.
SEASONALITY
Pager usage is slightly higher during the spring and summer months, which is
reflected in higher incremental usage fees. Retail sales were subject to
seasonal fluctuations that affect retail sales generally. Otherwise, the results
were generally not significantly affected by seasonal factors.
FORWARD-LOOKING STATEMENTS
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors that 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 that 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 1999, the Company had approximately $26,460 of
floating-rate debt outstanding. The Company's management believes the
interest rate risk represented by this debt is not material. The Company has
not, and does not plan to, enter into any derivative financial instruments
for trading or speculative purposes. As of December 31, 1999, the Company had
no other significant material exposure to market risk.
ITEM 8. FINANCIAL STATEMENTS
See Index to Financial Statements, Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
21
<PAGE>
Not Applicable.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Item 9 is set forth in the Company's Proxy
Statement for its 2000 Annual Meeting of Stockholders (the "2000 Proxy
Statement") and is incorporated herein by reference
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Item 10 is set forth in the 2000 Proxy
Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Item 11 is set forth in the 2000 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Item 12 is set forth in the 2000 Proxy
Statement and is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS
See page F-1.
B. FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted since they are either not applicable
or not required, or because the information required is included in the
financial statements and notes thereto.
C. EXHIBITS
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger with BAP Acquisition Corp. (1)
2.2 Asset Purchase Agreement dated as of August 2, 1999 by and
among Aquis Communications, Inc., SourceOne Wireless, Inc.,
SourceOne Wireless, L.L.C. and SourceOne Wireless II, L.L.C.
(2)
2.2 Amendment to Asset Purchase Agreement dated as of November 15,
1999. (2)
2.3 Agreement Pending Purchase Closing dated as of August 2, 1999
by and among Aquis Communications, Inc., SourceOne Wireless,
Inc., SourceOne Wireless, L.L.C. and SourceOne Wireless II,
L.L.C. (2)
2.4 Order of the United States Bankruptcy Court of the Northern
District of Illinois (Eastern District) (A) Authorizing and
Approving the Sale of Certain of the Debtors' Assets Pursuant
to the Asset Purchase Agreement with Aquis Communications,
Inc., (B) Authorizing and Approving Procedures for Assumption
and Assignment or Rejection of Unexpired Leases and Executory
Contracts and (C) Granting Related Relief dated as of November
18, 1999. (2)
2.5 Stock Purchase Agreement dated June 15, 1999, by and among
Aquis Communications, Inc., SunStar Communications, Inc.,
SunStar Communications, Inc. and SunStar One, LLC. (3)
2.6 Asset Purchase Agreement, dated as of July 2, 1998, 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 BAP Acquisition
Corp. (4)
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
2.7 Consent and Amendment No. 1 to Asset Purchase Agreement, dated
as of November 3, 1998 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. (4)
3.1 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant (5)
3.2 Bylaws of the Registrant. (6)
4.1 Form of Common Stock Certificate. (6)
4.2 Form of Warrant Certificate. (6)
4.3 Certificate of Designation, Preferences and Rights of 7 1/2%
Redeemable Preferred Stock of Aquis Communications Group, Inc.
(2)
10.9 Amended and Restated 1994 Incentive Stock Option Plan, as
amended. (9)
10.10 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. (3)
10.11 Indemnity Escrow Agreement dated June 30, 1999 by and among
SunStar One, LLC, Aquis Communications, Inc. and Phillips
Nizer Benjamin Krim and Ballon, LLC. (3)
10.12 Registration Rights Agreement dated June 15, 1999 by and
between Aquis Communications, Inc. and SunStar One, LLC. (3)
10.13 Asset Purchase Agreement dated June 10, 1999 by and among
Aquis Communications Group, Inc., Aquis Communications, Inc.,
Francis Communications Texas, Inc. and Francis Communications
I, LTD. (3)
10.14 Pre-Closing Escrow Agreement dated June 10, 1999 by and
between Francis Communications I, LTD, Aquis Communications,
Inc. and Chase Bank of Texas, NA. (3)
10.15 Asset Purchase Agreement dated September 28, 1999 by and among
Aquis Wireless Communications, Inc., Aquis Communications
Group, Inc., ABC Cellular Corporation and ABC Paging, Inc. (7)
10.16 Loan Agreement, dated as of December 31, 1998, by and between
Aquis Communications, Inc. and FINOVA Capital Corporation as
Agent. (8)
10.17 Note, dated December 31, 1998, of Aquis Communications, Inc.
in the original principal amount of $30,000,000. (8)
10.18 First Amendment to Loan Instruments, dated as of March 31,
1999, by and between Aquis Communications, Inc. and FINOVA
Capital Corporation. (8)
10.19 Guaranty (Equipment Lease), dated as of March 31, 1999, of
Aquis Communications Group, Inc. (8)
10.20 Guaranty, dated as of March 31, 1999, of Aquis Communications
Group, Inc. (8)
10.21 Security Agreement, dated as of March 31, 1999, executed by
Aquis Communications Group, Inc. (8)
10.22 Pledge Agreement, dated as of March 31, 1999, executed by
Aquis Communications Group, Inc. (8)
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
10.23 Equipment Lease, dated as of March 31, 1999, between Aquis
Communications, Inc. and FINOVA Capital Corporation. (8)
10.24 Employment Agreement dated as of July 7, 1998 between BAP
Acquisition Corp and John X. Adiletta. (9)
10.25 Letter Agreement amending Employment Agreement dated July
7, 1998 between BAP Acquisition Corp and John X. Adiletta.
(9)
10.26 Employment Agreement between D. Brian Plunkett and BAP
Acquisition Corp. (9)
10.27 Letter Agreement amending Employment Agreement dated July
7, 1998, as amended, between John X. Adiletta and BAP
Acquisition Corp. and Employment Agreement between D. Brian
Plunkett and BAP Acquisition Corp. (9)
10.28 Employment Agreement dated as of January 4, 2000 between the
Company and Nick T. Catania (9)
10.29 Amendment dated April 7, 2000 to Employment Agreement dated
January 4, 2000 between the Company and Nick T. Catania (9)
10.30 Option Agreement dated as of January 4, 2000 between the
Company and Nick T. Catania (9)
10.31 Amended and Restated Loan Agreement dated as of January 31,
2000 between the Company and Finova Capital Corporation. (9)
10.32 First Amendment to Loan Instruments dated as of April 10, 2000
between the Company and Finova, Capital Corporation. (9)
10.33 Loan Agreement dated as of March 31, 2000 between the Company
and AMRO International, S.A. (9)
10.34 Common Stock Purchase Agreement dated as of April 9, 2000
between the Company and Coxton, Limited. (9)
10.35 Settlement Agreement and Release and Waiver of Claims between
the Company and John X. Adiletta. (9)
23 Consent of Independent Accountants (9)
27 Financial Data Schedule (9)
</TABLE>
- ------------------------------
(1) Incorporated by reference to the Company's Current Report on Form 8-K
dated November 6, 1998
(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated February 15, 2000
(3) Incorporated by reference to the Company's Current Report on Form 10-Q
for the quarter ended June 30, 1999
(4) Incorporated by reference to the Company's Quarterly Report Form 10-Q
for the quarter ended March 31, 1999.
(5) Incorporated by reference to the Company's Proxy Statement, dated March
11, 1999, filed with the Commission.
(6) Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration No. 33-76744).
(7) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
(8) Incorporated by reference to the Company's Current Report on Form 8-K
dated April 15, 1999.
25
<PAGE>
(9) Filed herewith.
C. REPORTS ON FORM 8-K
None.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 14, 2000
AQUIS COMMUNICATIONS GROUP, INC.
(Registrant)
By: /s/ Nick T. Catania
--------------------------
Nick T. Catania, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Patrick M. Egan Chairman of the Board of Directors April 14, 2000
- ------------------------------
Patrick Egan
/s/Nick T. Catania President and Chief April 14, 2000
- ------------------------------ Executive Officer
Nick T. Catania
/s/D. Brian Plunkett Vice President, Treasurer, Secretary, and April 14, 2000
- ------------------------------ Principal Financial and Accounting Officer
D. Brian Plunkett
/s/Robert Davidoff Director April 14, 2000
- ------------------------------
Robert Davidoff
/s/John B. Frieling Director April 14, 2000
- ------------------------------
John Frieling
/s/Michael Salerno Director April 14, 2000
- ------------------------------
Michael Salerno
</TABLE>
27
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Reports of Independent Certified Public Accountants................. F-2
Consolidated Balance Sheets......................................... F-4
Consolidated Statements of Operations............................... F-5
Consolidated Statements of Changes in Stockholders' Equity.......... F-6
Consolidated Statements of Cash Flows............................... F-7
Notes to Consolidated Financial Statements.......................... F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Aquis Communications Group, Inc:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity, and cash flows
of Aquis Communications Group, Inc. and Subsidiaries ("Company") present
fairly, in all material respects, the financial position of the Company at
December 31, 1999 and December 31, 1998, and the results of its operations
and cash flows for the year ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of management; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 28, 2000, except for
Note 22 for which the date is
April 12, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Aquis Communications Group, Inc:
In our opinion, the accompanying statements of operations and cash flows of Bell
Atlantic Paging, Inc. (the "Predecessor Company") present fairly, in all
material respects, the results of its operations and cash flows for the two
years in the period ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 973 $ --
Accounts receivable (net of allowances of
$939 and $490, respectively) ......................................... 4,933 2,061
Inventory, net ......................................................... 228 2,076
Acquisition escrow deposits ............................................ 200 --
Prepaid expenses and other current assets .............................. 1,072 1,012
-------- --------
Total current assets ................................................. 7,406 5,149
Property and equipment, net ............................................... 10,461 10,107
Intangible assets, net .................................................... 20,092 16,749
Deferred charges and other assets ......................................... 1,365 330
-------- --------
Total Assets .............................................................. $ 39,324 $ 32,335
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt ................................... $ 508 $ --
Accounts payable ....................................................... 6,750 1,769
Accrued expenses ....................................................... 2,535 236
Deferred revenue ....................................................... 930 1,033
Customer deposits ...................................................... 577 577
Notes payable to stockholders .......................................... -- 520
-------- --------
Total current liabilities ........................................... 11,300 4,135
Long term debt ............................................................ 25,963 --
Note payable .............................................................. -- 4,150
Payable to Bell Atlantic Corp. and affiliates ............................. -- 18,535
-------- --------
Total liabilities ......................................................... 37,263 26,820
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 and 80,000 shares authorized in
1999 and 1998, respectively; none issued 1999,
78,000 issued and outstanding at December 31, 1998 ..................... -- 5,830
Common stock, $0.01 par value, 75,000,000
shares authorized, 16,551,000 and 22,000 issued and
outstanding at December 31, 1999 and 1998, respectively ................ 166 --
Additional paid-in capital ................................................ 13,195 221
Accumulated deficit ....................................................... (11,175) (296)
Note receivable from stockholder .......................................... (125) (240)
-------- --------
Total stockholders' equity ................................................ 2,061 5,515
-------- --------
Total liabilities and stockholders' equity ................................ $ 39,324 $ 32,335
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
PREDECESSOR PREDECESSOR
<S> <C> <C> <C>
Revenues:
Paging services ............................. $ 30,368 $ 23,309 $ 17,894
Equipment sales ............................. 791 3,123 2,795
------------ ------------ ------------
Total revenues ........................ 31,159 26,432 20,689
------------ ------------ ------------
Operating expenses:
Paging services ............................. 7,753 4,968 4,401
Technical ................................... 5,317 3,482 2,023
Cost of equipment sold ...................... 947 2,709 2,873
Selling and marketing ....................... 3,881 3,394 2,844
General and administrative .................. 7,676 5,657 4,211
Depreciation and amortization ............... 10,878 4,323 3,378
Provision for doubtful accounts ............. 919 1,154 538
Costs of abandoned acquisitions ............. 1,692 -- --
------------ ------------ ------------
Total operating expenses .............. 39,063 25,687 20,268
------------ ------------ ------------
Operating (loss) income ........................ (7,904) 745 421
Interest expense, net .......................... (3,004) -- --
Gain on sale of equipment ...................... 29 -- --
------------ ------------ ------------
(Loss) Income before income taxes and
extraordinary item .......................... (10,879) 745 421
Provision for income taxes ..................... -- (296) (168)
------------ ------------ ------------
Income before extraordinary item ............... (10,879) 449 253
Extraordinary item, net of income taxes of $454 -- 682 --
------------ ------------ ------------
NET (LOSS) INCOME .............................. $ (10,879) $ 1,131 $ 253
============ ============ ============
NET LOSS PER COMMON SHARE:
Basic and diluted ........................ $ ($.76)
============
Weighted average common shares outstanding 14,233,000
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNTS SHARES AMOUNTS CAPITAL DEFICIT
------ ------- ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1998 99 $ -- -- $ -- $-- $ --
(date capitalized)
Issuance of shares to the
Founders of Aquis in
connection with their 7,991 -- -- -- -- --
individual stock
subscriptions in January 1998
Value ascribed to the issuance
of shares to the Founders of
Aquis In July 1998 2,910 -- -- -- 39 --
Value ascribed to the issuance
of shares in connection with
the issuance of promissory 7,500 -- -- -- 108 --
notes in July 1998
Value ascribed to the issuance
of shares to one of the 2,000 -- -- (54) 54 --
purchasers of preferred stock
in November 1998
Value ascribed to the issuance
of shares to one of the note
holders in July 1998 1,500 -- -- -- 20 --
Issuance of preferred stock -- -- 78,000 5,884 -- --
Net loss -- -- -- -- -- (296)
Notes received from
stockholder in connection -- -- -- -- -- --
with the purchase of
preferred stock
------------- -------------- --------- ----------- ---------- -------------
Balance as of December 31, 1998 22,0000 -- 78,000 5,830 221 (296)
Recapitalization completed in
connection with the merger
with Paging Partners March 31, 15,199,000 152 (78,000) (5,830) 11,313 --
1999
Shares issued in SunStar 1,150,000 12 -- -- 1,550 --
acquisition
Reduction of note due from
stockholder in connection with
settlement of claim
Shares issued to Directors on
December 15, 1999 180,000 2 -- -- 111 --
Net loss -- -- -- -- -- (10,879)
------------- -------------- --------- ----------- ---------- -------------
Balance as of December 31, 1999 16,551,000 166 -- -- 13,195 (11,175)
============= ============== ========= =========== ========== =============
</TABLE>
<TABLE>
<CAPTION>
NOTES TOTAL
RECEIVABLE- STOCKHOLDERS
STOCKHOLDER EQUITY
------------ ------------
<S> <C> <C>
Balance as of January 1, 1998 $ -- $ --
(date capitalized)
Issuance of shares to the
Founders of Aquis in
connection with their -- --
individual stock
subscriptions in January 1998
Value ascribed to the issuance
of shares to the Founders of
Aquis In July 1998 -- 39
Value ascribed to the issuance
of shares in connection with
the issuance of promissory -- 108
notes in July 1998
Value ascribed to the issuance
of shares to one of the -- --
purchasers of preferred stock
in November 1998
Value ascribed to the issuance
of shares to one of the note
holders in July 1998 -- 20
Issuance of preferred stock -- 5,884
Net loss -- (296)
Notes received from
stockholder in connection (240) (240)
with the purchase of
preferred stock
------------ -------------
Balance as of December 31, 1998 (240) 5,515
Recapitalization completed in
connection with the merger
with Paging Partners March 31, -- 5,635
1999
Shares issued in SunStar -- 1,562
acquisition
Reduction of note due from
stockholder in connection with 115
settlement of claim 115
Shares issued to Directors on
December 15, 1999 -- 113
Net loss -- (10,879)
------------ ---------
Balance as of December 31, 1999 (125) 2,061
============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
PREDECESSOR PREDECESSOR
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................................... $(10,879) $ 1,131 $ 253
Adjustments to reconcile net loss to net
cash provided by operating activities:
Gain on sale of business ........................................... -- (1,136) --
Depreciation and amortization ...................................... 10,878 4,323 3,378
Costs of abandoned business combinations ........................... 1,692 -- --
Amortization of deferred financing costs ........................... 141 -- --
Stock-based compensation ........................................... 113 -- --
Reduction of note due from stockholder ............................. 115 -- --
Deferred income taxes .............................................. -- (590) (552)
Provision for doubtful accounts .................................... 919 1,154 538
Provision for inventory obsolescence ............................... -- (136) 316
(Gain) loss on sale of property and equipment ...................... (29) 232 49
Changes in operating assets and liabilities, before effects of
business acquisitions:
Accounts receivable ................................................ (3,479) (1,238) (699)
Due from affiliates for trade ...................................... -- (1,821) (793)
Inventory .......................................................... (135) (394) 1,416
Prepaid expenses and other current assets .......................... 15 (543) (5)
Other assets ....................................................... -- -- 7
Accounts payable and accrued expenses .............................. 5,579 1,160 (11)
Income taxes payable ............................................... -- 848 247
Intercompany payable ............................................... -- (569) (581)
Deferred revenues and customer deposits ............................ (287) 35 (186)
-------- -------- --------
Net cash provided by operating activities .......................... 4,643 2,456 3,377
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
PREDECESSOR PREDECESSOR
<S> <C> <C> <C>
Cash flows from investing activities:
Business acquisitions ........................... (18,940) -- --
Acquisition of property, equipment and licenses . (2,275) (4,217) (4,930)
Deferred business acquisition costs ............. (2,230) -- --
Acquisition escrow deposits ..................... (200) -- --
Sale of property and equipment .................. 345 236 200
-------- -------- --------
Net cash used by investing activities ........ (23,300) (3,981) (4,730)
-------- -------- --------
Cash flows from financing activities:
Issuance of long term debt ...................... 26,615 -- --
Repayment of notes payable to stockholders ...... (520) -- --
Repayment of notes payable ...................... (4,150) -- --
Repayment of long term debt ..................... (144) -- --
Repayment of capital lease obligation ........... (1,506) -- --
Deferred financing costs ........................ (665) -- --
Due to affiliates ............................... -- 1,564 1,339
-------- -------- --------
Net cash provided by financing activities .... 19,630 1,564 1,339
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 973 39 (14)
Cash and cash equivalents - beginning of year ...... -- 31 45
-------- -------- --------
Cash and cash equivalents - end of year ............ $ 973 $ 70 $ 31
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS:
Aquis Communications Group, Inc. (the "Company") is a holding company,
incorporated in the State of Delaware. Through its operating companies, it
operates two regional paging systems providing one-way wireless alpha and
numeric messaging services in portions of thirteen states principally in the
Northeast and Mid-Atlantic regions of the United States, as well as the District
of Columbia. The Company has recently entered the Midwestern region through a
purchase of certain assets completed on January 31, 2000, the Company has
expanded its geographical reach to six additional states in the mid-west. The
Company, resells nationwide and regional services, offers alpha dispatch, news
and other messaging enhancements, and sells internet access services through a
wholly-owned subsidiary. Its customers include individuals, businesses,
government agencies, hospitals and resellers.
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. At that time, Paging Partners changed its name to Aquis Communications
Group, Inc. (the "Company"). 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 years ended December 31, 1998 and 1997 represent the
financial statements of the Predecessor Company for such periods. 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 revenues and expenses
that would have been earned or incurred if the Predecessor Company had performed
or procured these functions as a separate entity.
On June 15, 1999, a wholly-owned subsidiary of the Company entered into a stock
purchase agreement with SunStar Communications, Inc. in a transaction that was
accounted for as a purchase.
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, and reflect the merger with Paging Partners, as
well as the acquisition of SunStar Communications, Inc., and the acquisition of
the net assets of Bell Atlantic Paging, Inc. ("BAPCO" or the "Predecessor
Company") on December 31, 1998. All material intercompany accounts and
transactions have been eliminated in consolidation.
The Company's principal source of liquidity at December 31, 1999 included
cash and cash equivalents of about $1,000 and its ability to generate cash
from operations, which totaled $4,643 during 1999. The Company believes that
its current cash and equivalents and the cash it expects to generate from
operations will be sufficient to meet its anticipated working capital and
capital expenditure requirements through at least the end of 2000. However,
if cash from operations is not sufficient to fund the planned growth of the
core business and the internet business or if the Company experiences further
deterioration of its average revenue per unit ("ARPU") or if certain
contingencies are resolved unfavorably, the Company is prepared to implement
an alternative business plan (the "Alternative Plan"). The Alternative Plan
calls for the sale of the internet subsidiary and other assets and for a
reduction of planned marketing expenditures and capital expenditures. Cash
requirements of the paging business may vary materially from those now
planned as a result of unforeseen changes that could consume a significant
portion of available resources or as a result of an increased rate of
attrition of the customer base.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION:
<PAGE>
Paging service revenues include airtime for paging services, rental fees for
leased paging equipment, and various other fees for such enhanced features as
alpha dispatch services, loss protection and maintenance, and voice mail. These
revenues are recognized as the services are performed or ratably over time in
the case of rental fees. Revenues related to pre-billed services are deferred
until earned. Equipment revenue is recognized when the equipment is delivered to
the customer.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities. These estimates and
assumptions also affect the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates are used for such reported
amounts as the allowance for doubtful accounts, allowances for asset
obsolescence or impairment, the tax benefit valuation allowance, and useful
lives of fixed assets or amortization periods for intangible assets. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of 90 days or less are
considered to be cash equivalents.
INVENTORY
Inventory consists primarily of new pagers held for sale or lease. Inventories
are stated at the lower of cost or market, with cost determined on a first-in,
first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, net of depreciation and amortization.
The property and equipment acquired through merger or business combination is
recorded at estimated fair value. Included are the Company's rental pagers,
paging network assets, data processing equipment, office furniture and
equipment, and leasehold improvements. These assets are depreciated over their
estimated useful lives using the straight-line method. Leasehold improvements
are amortized over the shorter of their estimated useful lives or the term of
the related lease. Costs to repair or maintain assets without adding to their
lives or improving their value are expensed as incurred. Upon the sale or other
disposal of property or equipment, the cost and related accumulated depreciation
or amortization is eliminated from the accounts and any related gain or loss is
reflected in the Company's results of operations.
DEFERRED CHARGES
Certain costs directly related to pending business acquisitions are deferred
until the acquisition is completed or abandoned. If completed, such costs are
considered part of the cost to acquire the business. Costs associated with
abandoned acquisition efforts are written off. Costs and fees related to
financing activities are amortized over the term of the related loan.
CAPITALIZED SOFTWARE
The cost to acquire computer software used in the Company's operations is
capitalized and amortized over three years. Accumulated amortization totaled $45
at December 31, 1999.
INCOME TAXES
Income taxes are provided based on the liability method of accounting pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Accordingly, the balance sheet will reflect anticipated tax
impacts of future taxable income or deductions implicit in the balance sheet in
the form of
<PAGE>
temporary differences. These temporary differences will reflect the difference
between the basis in assets and liabilities as measured in the financial
statements and as measured by tax laws using enacted tax rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Aquis' financial instruments include cash and cash equivalents, accounts and
notes receivable. The fair value of these instruments approximate their
carrying values due to their short-term nature. Because the Company has
floating rate debt, the carrying amount of long-term borrowings also
approximates fair value.
CONCENTRATION OF RISK
The Company utilizes one provider of nationwide paging services to fulfill the
majority of its requirements for this service. Although there are a limited
number of other nationwide carriers, Management believes that other carriers
could provide similar services under comparable terms. However, a change in
vendor or carrier could cause a delay in service provisioning or a possible loss
of revenue, which could adversely effect operating results. The Company
maintains its cash and cash equivalents in one commercial bank and one money
market fund which invests primarily in high quality money market instruments,
including securities issued by the US government. No single customer is large
enough to present a significant financial risk to Aquis.
ADVERTISING COSTS
Costs associated with advertising in Yellow Pages or similar directories are
amortized ratably over the periods during which the directories are in current
circulation. Other costs for such items as direct mail ads or promotional items
are expensed as incurred. Total advertising expenses totaled $118, $71, and $82
in 1999, 1998 and 1997, respectively.
LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the
estimated fair value and the carrying value of the asset.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations in accounting for its
stock plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for performance-based awards issued to
non-employees. Compensation costs charged against earnings totaled $127 in 1999.
Further, Aquis has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation."
RECENT ACCOUNTING PRONOUNCEMENT
In December, 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "REVENUE RECOGNITION IN FINANCIAL STATEMENTS",
amended in March, 2000, which provides guidance on the application of generally
accepted accounting principles to revenue recognition in financial statements.
The Company will adopt SAB 101 in the second quarter of 2000 and believes that
adoption will not have a significant effect on its consolidated results of
operations or its financial position.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
<PAGE>
3. 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 $6,124, 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. The
assets and liabilities recorded in connection with the purchase price allocation
are based on estimated fair value. Intangible assets of approximately $5,038
(principally customer lists and FCC licenses are being amortized over three to
ten years on a straight-line basis.
The following unaudited pro forma information presents a summary of the
results of operations as if the Paging Partners merger occurred on January 1,
1998.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
- ----------- ------------ ----------
FOR THE YEARS ENDED
DECEMBER 31,
1999 1998
------------ ----------
<S> <C> <C>
Revenue $ 33,433 $ 36,334
Net loss $(11,309) $ (7,427)
Net loss per common share $ (0.72)
</TABLE>
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.
4. 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 11. This settlement did not have a material effect on the Company's
financial position or the results of its operations or cash flows.
5. MERGERS AND ACQUISITIONS:
<PAGE>
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. Total consideration paid for all of the outstanding stock of
SunStar 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 $2,066 are being amortized on a straight-line basis over
three to 10 years.
6. BUSINESS DEVELOPMENTS:
SOURCEONE WIRELESS:
On January 31, 2000, the Company completed the acquisition of certain assets of
SouceOne Wireless, a facilities-based provider of one-way paging services to
subscribers in certain Midwestern states. Previously, on August 2, 1999, the
Company entered into an Asset Purchase Agreement (the "Purchase Agreement") and
Agreement Pending Purchase Closing (the "Agreement") with SourceOne Wireless,
Inc. and two of its affiliates ("SOWI"). SOWI and its affiliates filed voluntary
petitions for relief under Chapter 11 with the United States Bankruptcy Court in
the Northern District of Illinois between April 29 and July 2, 1999. Pursuant to
the Agreement, the Company managed the day-to-day operations of certain SOWI
businesses pending the closing of the associated Purchase Agreement. This
closing was subject to various approvals, including that of the Bankruptcy Court
and the FCC. During the management period, a reduction of the purchase price was
negotiated, and resulted in a reduced price of $2,250 in cash and 15,000 shares
of the Company's 7.5% cumulative preferred stock valued at $1,500. Acquisition
costs totaling about $502 were deferred at December 31, 1999, and will be
treated as a cost of the assets acquired on January 31, 2000. Costs to acquire
the assets of SourceOne Wireless were capitalized at December 31, 1999,
including an escrow deposit of $200, since this transaction was closed on
January 31, 2000.
The Company had entered into various negotiations and agreements related to
potential value-driven acquisitions or mergers in 1999 with candidates including
ABC Paging, Inc, Francis Communications Texas, Inc. Intelispan, Inc., COMAV
Corporation, SourceOne Wireless, Inc. and related entities holding economic
interests in these entities. Several of these negotiations were terminated as
the business development requirements or the underlying businesses of the
potential acquiree and the Company changed during the course of the discussions.
Acquisition costs and deposits totaling $1,692 related to uncompleted
transactions were charged against earnings in 1999.
7. PROPERTY AND EQUIPMENT:
As of December 31, 1999 and 1998, property and equipment consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Rental pagers (3 years) .......................... $ 7,605 $ 4,847
Paging network equipment (7 years) ............... 8,082 4,441
Data processing equipment (2-5 years) ............ 1,096 508
Furniture, fixtures and office equipment (5 years) 326 --
Leasehold improvements (various) ................. 435 311
Other ............................................ 17 --
------- -------
17,561 10,107
Less accumulated depreciation ........... 7,100 --
------- -------
$10,461 $ 10,107
======= ========
</TABLE>
<PAGE>
8. INTANGIBLE ASSETS:
Intangible assets consist of the following as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
FCC licenses and State certificates (10 years) $15,854 $12,238
Customer lists (3 years) ..................... 5,681 4,511
Goodwill (10 years) .......................... 1,996 --
------- -------
23,531 16,749
Less accumulated amortization ....... 3,439 --
------- -------
$20,092 $16,749
======= =======
</TABLE>
9. DEFERRED CHARGES:
At December 31, 1999 and 1998, deferred charges consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Deferred financing costs ........... $ 633 $ 110
Deferred acquisition costs ......... 502 220
Unamortized software and other costs 230 --
------ ------
$1,365 $ 330
====== ======
</TABLE>
10. COMMITMENTS AND CONTINGENCIES:
The Company leases facilities and equipment used in its operations. Many lease
agreements include renewal options with Consumer Price Index related rent
escalations. At December 31, 1999, the aggregate future minimum rental
commitments under non-cancelable operating leases were as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
2000................................ $ 2,013
2001................................ 1,137
2002................................ 780
2003................................ 352
2004................................ 152
Thereafter.......................... 97
--------------
$ 4,531
==============
</TABLE>
Rent expense was $2,874, $551 and $515 for 1999, 1998, and 1997, respectively.
Pursuant to a certain obligation assumed through the Paging Partners merger, the
Company is committed to a significant supplier of telephony services for a
minimum annual usage and services volume valued at $240. Thereunder, and subject
to attainment of the minimum volume, the Company receives certain significant
discount pricing from this provider. The Company has historically exceeded, and
is currently exceeding, that minimum commitment level. Commitments under this
contract expire during the third quarter of 2000.
<PAGE>
The Company has also provisioned some of its communications circuits and other
facilities from another provider. Under terms of this agreement, the Company has
obtained certain volume pricing discounts in exchange for an agreement to
utilize these facilities for a minimum period of three years beginning on
December 31, 1998. Monthly fees incurred under this agreement totaled about $48
as of December 31, 1999.
Various legal proceedings, claims and investigations related to services,
contracts and other matters are pending against the Company. The most
significant of these are discussed below:
FRANCIS COMMUNICATIONS
The Company has retained local counsel in Texas to represent it in a suit
brought by Francis Communications Texas, Inc. and related interests ("Francis")
in the U.S. District Court for the Western District of Texas. Francis alleges a
breach of agreement to purchase its radio paging business and is seeking the
original purchase price of $4,000 and additional monetary relief. Aquis
terminated this agreement due to the failure of Francis to comply with certain
conditions precedent to closing. Discovery is proceeding at this time. The
Company believes that its termination of this agreement was within the terms of
the purchase agreement and that the allegations made by Francis are without
merit. Management does not expect the outcome of this lawsuit to have a material
effect on its results of operations, cash flows or financial position.
FONE ZONE COMMUNICATION CORP
On February 18, 2000, Fone Zone Communication Corp. ("Fone") filed a lawsuit in
the Supreme Court of the State of New York in Queens County. Aquis, on March 23,
2000, had the venue of this action moved to the U.S. District Court for the
Eastern District of New York. Fone, a former reseller of Aquis paging services
and of the service of Paging Partners before its merger with Aquis, is seeking
$1,000 in alleged damages as a result of the termination of its service and
solicitation of its customers by Aquis. The Company discontinued service to Fone
as the result of Fone's severe delinquency and ultimate failure to pay for such
services. Management believes it will be able to recover the fully-reserved
unpaid charges from Fone through its counterclaim and that the claims initiated
by Fone are without sufficient grounds to support its claims. Management does
not expect the outcome of this lawsuit to have a material effect on its results
of operations, cash flows or financial position.
ARBITRATION OF EMPLOYMENT AND OTHER CLAIMS
On December 23, 1999, the Company's former President, who was also a Director
and a Founder of the Company, filed for arbitration under the Rules of the
American Arbitration Association. This former officer's claims were related to
an alleged breach of an employment agreement, to wrongful discharge and to
wrongful termination of health and welfare benefits including incentive stock
options. A claim was filed for an amount to be proven at trial but in no event
less than $1,762 plus compensatory and punitive damages. On April 4, 2000, the
parties settled these claims before this matter proceeded to arbitration.
Accordingly, Aquis has agreed provide this individual a payment of $25, a credit
of $75 against his existing indebtedness to the Company, shares of the Company's
common stock valued at $400, forgiveness of $115 of a note receivable from him,
and agreed to replace 55,000 of the 485,000 options previously held by him,
valued at $127. The Company continues to hold the balance of the note receivable
in the reduced amount of $125, which is expected to be paid in full , net of
applicable credits, during 2000. Accordingly, $742 has been charges against
earning in the accompanying financial statements the period ended December 31,
1999.
11. LONG-TERM DEBT:
On October 23, 1998, ACI entered into a five-year term loan agreement (the
"Senior Loan Agreement") with FINOVA Capital Corporation ("FINOVA") which
provides a $30,000 credit facility. The FINOVA loan has a term of five years,
and requires graduated increasing quarterly principal repayments ranging from
.5% to 3.5% of outstanding principal beginning on July 1, 2000, with the balance
due on December 31, 2003. The loan bears interest at a rate based on Citibank,
N.A.'s corporate base rate plus 175 basis points. The Company may also elect to
have interest on a part of the FINOVA loan based on a London Inter-Bank Official
Overnight Rate plus 450 basis points. This term loan is collateralized by all of
the Company's assets, presently owned and acquired subsequently, and all
<PAGE>
issued and outstanding equity interests in the Company's operating subsidiaries.
The loan agreement also contains various covenants, including restrictions on
capital expenditures and compliance with certain financial ratios. At December
31, 1999, the Company was not in compliance with certain ratios under this loan
agreement.
In November 1999, in connection with the termination of negotiations related
to various potential mergers, costs that were previously capitalized have
been written off in 1999. During the third quarter of 1999, FINOVA modified
certain financial covenants contained in the loan agreement to exclude the
costs written off in connection with these abandoned business acquisitions
and other specified charges when computing "Net Income" as defined in the
amended loan agreement.
On January 26, 2000, the FINOVA loan was amended in connection with the
SourceOne Wireless acquisition. The Company borrowed an additional $2,450 from
FINOVA on January 31, 2000 to consummate the acquisition (the "SourceOne
Portion"). The effect of the amendment was to limit the facility to the amount
outstanding after the SourceOne transaction, or a total of $27,765, to modify
certain financial ratios and to set the interest rate on the SourceOne Portion
to Citibank, N.A.'s corporate base rate plus 400 basis points. Additionally, a
prepayment of principal of $1,250 (the "Special Prepayment") was defined that is
to be applied to the SourceOne Portion. If the Special Prepayment is not made by
June 8, 2000, the interest rate on the balance of the loan, excluding the
SourceOne Portion, increases to Citibank, N.A.'s corporate base rate plus 225
basis points. Similar increases are scheduled for July 8 and August 8, with a
final increase to 375 basis points over that base rate if the payment is not
made by September 8, 2000.
During the second quarter of 1999, the Company refinanced the capital lease
obligations that were assumed as a result of the merger with Paging Partners.
Terms of the new obligation (the "Installment Loan") 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 is collateralized by the underlying equipment.
The balance outstanding at December 31, 1999 under borrowings of the Senior Debt
Agreement was $25,315. The remaining balance of long term debt outstanding
consisted principally of borrowings made pursuant to the Installment Loan.
Principal maturities of the senior debt and the Installment Loan are as follows:
<TABLE>
<S> <C>
2000.................................. $ 508
2001.................................. 2,215
2002.................................. 3,447
2003.................................. 20,236
2004.................................. 65
--------------
$ 26,471
==============
</TABLE>
The Seller Note in the amount of $4,150 due as a result of the acquisition of
the paging assets from BAPCO was settled and paid in full on June 30, 1999.
12. RELATED PARTY TRANSACTIONS:
The Company was provided with various investment banking services by a firm with
which a certain member of the Board of Directors was affiliated. During 1999,
fees incurred under this arrangement totaled approximately $411, of which $45
was payable at December 31, 1999.
The Company was also provided with legal services by a firm in which a member of
the Board of Directors was a partner. During 1999, fees incurred under this
arrangement totaled approximately $1,935, of which $1,052 was payable at
December 31, 1999. In January, 2000, this outstanding amount was settled through
cash payments totaling $205, the issuance of a note payable in the face amount
of $350 payable in 20 equal monthly installments bearing interest at the rate of
8.5%, and the issuance of 275,000 shares of the Company's common stock valued at
$380.
<PAGE>
During 1999, Aquis received $500 from a limited liability company in which a
minority member is a partnership whose managing partner is also a member of the
Company's Board of Directors. These funds represent earnest money for a
potential sale of one of the Company's subsidiaries. This advance has been
included as a current liability in the accompanying balance sheet at December
31, 1999.
Three stockholders and members of the Board of Directors were each granted
60,000 shares of the Company's common stock on December 15, 1999 as compensation
for interim management services rendered during the Company's search for a
President and CEO in the later part of 1999. Based on the fair value of the
Company's common stock on the date of grant, current year earnings were charged
$112,500 for these services.
In 1998 and 1997, BAPCO was allocated certain costs from its parent organization
for certain administrative, management and other services. These allocated costs
were based on relative staff size or on relative revenues, and totaled $215 and
$161, respectively. The management of BAPCO believes that these allocated costs
were reasonable. However, the costs for the services provided are not
necessarily indicative of the costs that would have been incurred if the
services had been provided by unaffiliated entities.
Significant transactions with affiliates in 1998 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues from affiliates.............................................. $ 3,622 $ 2,406
Revenues from BAM as a reseller of BAPCO services..................... 2,724 2,114
Network charges....................................................... 3,933 3,750
Telecommunications expenses........................................... 194 247
Data processing charges............................................... 216 181
</TABLE>
13. NOTES PAYABLE TO STOCKHOLDERS:
On July 7, 1998, Aquis completed an offering in which it issued $750 face
amount, 15% promissory notes due on December 31, 1998, and 7,500 shares of
common stock at $1 per share to the note holders. Further, one of the note
holders purchased 1,500 shares of common stock at par value ($.001). In addition
to the $7 of cash proceeds received, a value of $121 was ascribed to the
issuance of these shares and was recorded as an original issue discount on the
notes payable, and amortized over the life of the notes. The proceeds from the
offering were used for working capital , acquisitions, and general corporate
purposes. In connection with the acquisition of BAPCO, these notes and related
interest were paid on December 31, 1998 concurrent with the closing of the
acquisition of BAPCO. Pursuant to the note agreements, as amended, a 10% premium
on the promissory notes was also paid upon maturity and was recorded as
additional interest over the life of the notes.
Concurrent with the repayment of these notes, Aquis issued an additional $520 of
notes to stockholders for working capital purposes. Those notes provided
interest at 15%, and were paid at the time of closing of the Paging Partners
merger.
14. INCOME TAXES:
At December 31, 1999, the Company had Federal net operating loss carryforwards
for tax purposes of approximately $13,000 that expire between 2009 and 2014.
Approximately $8,550 of this total consists of pre-acquisition losses that are
subject to restrictions imposed by Section 382 of the Internal Revenue Code that
limit utilization of such carryforwards to about $300 annually. 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.
The provision for income taxes is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal:
Current ..................... $ -- $ 1,235 $ 564
Deferred (benefit), net ..... (3,756) (647) (433)
Valuation allowance ......... 3,756 -- --
------- ------- -------
Total Federal ............ -- 588 131
------- ------- -------
State:
Current ..................... $ -- $ 337 $ 157
Deferred (benefit), net ..... (898) (179) (120)
Valuation allowance ......... 898 -- --
------- ------- -------
Total State .............. -- 158 37
------- ------- -------
Total provision for income taxes $ -- $ 746 $ 168
======= ======= =======
</TABLE>
Significant components of deferred tax assets and liabilities as of December 31,
1999 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts .................... $ 396 $ --
Seller note ........................................ -- 1,646
Depreciation ....................................... 815 --
Net operating loss carryforwards ................... 5,487 --
Settlement reserve ................................. 264 --
Other - net ........................................ 33 --
------- -------
Total deferred tax assets ..................... 6,995 1,646
Deferred tax liabilities - amortization of intangibles (1,029) --
------- -------
Net deferred tax assets before valuation allowance . 5,966 1,646
Valuation allowance ................................ (5,966) --
------- -------
Net deferred tax asset ............................... $ -- $ 1,646
======= =======
</TABLE>
A reconciliation from the Federal income tax provision at the statutory rate to
the effective rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Tax (benefit) at Federal statutory rate ...... (34.0)% 34.0% 34.0%
State income taxes, net of Federal tax benefit -- 6.0% 6.0%
Permanent differences ........................ 0.4% -- --
Valuation allowance .......................... 33.6% -- --
------ ------ ------
Effective tax rate ........................... -- 40.0% 40.0%
====== ====== ======
</TABLE>
As of December 31, 1999, the Company recorded no deferred tax asset. The future
expected benefit from the realization of the net operating losses was fully
offset by a related valuation allowance. A full valuation allowance was recorded
due to management's uncertainty about the realizability of the related tax
benefits as of December 31, 1999. However, the amount of the deferred tax assets
considered realizable could be adjusted in the future if estimates of taxable
income are revised.
15. STOCK SUBSCRIPTIONS:
<PAGE>
On January 30, 1998, Aquis entered into three stock subscription agreements with
the Founders and issued 7,991 shares of common stock at par value. On July 7,
1998, the Founders purchased 2,910 additional shares at par value. Aquis
recognized a compensation charge of $22 for 1,635 of the shares that were issued
to an officer of Aquis. In addition, a value of $17 was ascribed to the 1,275
shares issued to the other two Founders and was netted against the proceeds from
the issuance of the Series A Convertible Preferred Stock.
16. PREFERRED STOCK:
On October 16, 1998, the Board of Directors authorized up to 80,000 shares of
preferred stock to be designated as Series A Convertible Preferred Stock
("Series A Preferred Stock") at $80 per share ("Original Issue Price"). Each
holder of these shares shall be entitled to the number of votes equal to the
number of whole shares of common stock into which the shares of Series A
Preferred Stock held by each holder are convertible. Each share of Series A
Preferred Stock may be converted at the election of the holder at any time into
a number of shares of common stock determined by dividing the Original Issue
Price by the Applicable Conversion Price ("Applicable Conversion Price"). The
initial Applicable Conversion Price is $80 per share. Adjustments to the
Applicable Conversion Price are based upon a formula noted in the Preferred
Stock Purchase Agreement. A mandatory conversion of the Series A Preferred Stock
into common stock may occur in the event of any one of the following
circumstances: (1) the request of at least two-thirds of the holders of the
outstanding Series A Preferred Stock, (2) the consummation of the Paging
Partners transaction, or (3) the closing of the sale of shares of common stock
in a public offering pursuant to the Securities Act of 1933, at a price in
excess of 200% of the Applicable Conversion Price then in effect and resulting
in at least $20,000 of gross proceeds to Aquis.
In the event of any voluntary or involuntary liquidation of Aquis, the holders
of shares of Series A Preferred Stock shall be entitled to be paid out of the
assets of Aquis available for distribution to its stockholders before any
payment shall be made to the holders of common stock or any other series of
stock. The holders of Series A Preferred Stock are entitled to receive, when and
if declared by the Board of Directors of Aquis, a dividend (the "Accruing
Dividend") at the annual rate of 8% of the Original Issue Price (appropriately
adjusted in the event of any stock dividend, stock split or combination or
similar recapitalization). The Accruing Dividend will accrue, whether or not
earned or declared, on each issued and outstanding share of Series A Preferred
Stock and shall be cumulative.
On November 6, 1998, Aquis approved the sale and issuance of 78,000 shares of
its series A Preferred Stock at a purchase price of $80 per share. An individual
who purchased shares of the Series A Preferred Stock also was issued 2,000
shares of common stock, and a value of $54 was ascribed to these shares and was
netted against the proceeds from the issuance of the Series A Preferred Stock.
As part of a purchase of a portion of the Series A Preferred Stock, an officer
of the Company signed a note for $240 that was to be repaid in four equal annual
installments commencing on May 15, 2000. The note provided interest at a rate of
8%, and all interest was due with the final payment on May 15, 2003. On April 4,
2000, in connection with the settlement of certain claims made by this officer
in relation to the end of his relationship with the Company, an agreement was
reached under which the face amount of this $240 note was reduced to $125.
17. STOCK OPTIONS:
Through the merger with Paging Partners, the Company has a stock option plan
(the "Plan") as amended, pursuant to which options to purchase shares of the
Company's common stock, intended to qualify as "incentive stock options". These
options may be granted to employees, directors of the Company and independent
contractors providing services to the Company. A total of 1,500,000 shares of
common stock had been reserved for issuance under the amended Plan. Options are
exercisable for terms of six months to ten years from the date granted. Details
are as follows (shares and prices are stated at original amounts before effect
of the share conversion effected through the merger):
<PAGE>
<TABLE>
<CAPTION>
NUMBER OPTION
OF SHARES PRICE RANGE
--------- -----------
<S> <C> <C>
1997
Outstanding, January 1 . 260,600 $ 1.38 - 6.25
Granted ................ 128,500 $ 0.88 - 1.38
Exercised .............. (10,000) $ 0.88
Cancelled .............. (37,150) $ 1.38 - 6.25
------------
Outstanding, December 31 341,950 $ 0.88 - 6.25
-------------
Exercisable, December 31 254,050 $ 0.88 - 6.25
-------------
1998
Outstanding, January 1 . 341,950 $ 0.88 - 6.25
Granted ................ 216,100 $ 1.38 - 4.38
Exercised .............. (25,750) $ 0.88 - 1.00
Cancelled .............. (180,150) $ 0.88 - 6.25
------------
Outstanding, December 31 352,150 $ 0.88 - 4.19
------------
Exercisable, December 31 342,150 $ 0.88 - 4.19
------------
1999
Outstanding, January 1 . 352,150 $ 0.88 - 4.19
Granted ................ 1,209,946 $ 1.00 - 1.38
Exercised .............. (2,500) $ 0.88
Cancelled .............. (523,683) $ 0.88 - 1.38
------------
Outstanding, December 31 1,035,913 $ 0.88 - 4.19
------------
Exercisable, December 31 460,150 $ 0.88 - 4.19
------------
</TABLE>
In consideration of the merger, exercisable options as of December 31, 1998
include options that actually become exercisable on February 13, 1999 and
options that become exercisable upon a change in control.
As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation,"
Aquis has elected to apply APB No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for options granted.
Accordingly, no compensation cost has been recognized for the grant of these
options in the accompanying financial statements.
The weighted average fair value of options granted in 1998 was $0 per share. The
fair value is based on the minimum value method with the following assumptions:
the price of the stock at the time of grant, risk free interest rates ranging
from 4.57% to 5.81%, no dividend yield, and a weighted average expected life of
the options of nine to ten years. Had compensation cost been determined on the
basis of FASB Statement No. 123, net loss and loss per share would have been
reduced as follows:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Net Loss:
As reported .............. $ (10,879)
Pro forma ................ $ (11,679)
Net Loss per Common Share:
As reported .............. $ (0.76)
Pro Forma ................ $ (0.82)
</TABLE>
In connection with the employment of its President and CEO, and pursuant to his
employment agreement dated January 4, 2000, the Company issued an option to
purchase 900,000 shares of the Company's common stock. The option vests ratably
on, or around, June 30, 2000, January 2, 2002 and January 2, 2003. The exercise
price of the
<PAGE>
options is $0.75 for the shares initially vested, and is set at the closing
price of the common stock on January 2, 2001 and January 2, 2002 for the two
subsequently vested entitlements. As of December 31, 1999, none of the options
were vested.
18. 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.
19. SUPPLEMENTAL CASH FLOW DATA:
The tables below provides supplemental information to the consolidated
statements of cash flows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 2,586 $ - $ -
Cash paid for taxes $ 570 $ 492
Note receivable accepted as partial $ 4,150
consideration
Receivable from affiliate $ 4,835
Receivable from Aquis $ 4,565
</TABLE>
BUSINESS ACQUISITIONS
In 1999, the Company used cash of $18,940 for business acquisitions in
connection with the final cash payment made for the December 31,1998 BAPCO
assets purchase and for Paging Partners and SunStar transactions:
<TABLE>
<CAPTION>
BAPCO acquisition
<S> <C>
Purchase price $ 29,200
Transaction costs (1,149)
Note issued to Bell Atlantic Mobile (4,150)
Cash paid at closing (5,366)
---------------
Net cash paid during 1999 $ 18,535
=============
</TABLE>
<TABLE>
<CAPTION>
Paging Partners and SunStar Acquisition
<S> <C>
Fair value of assets acquired $ 11,420
Liabilities assumed (3,262)
Exchange of common stock (7,197)
Accrued transaction costs (386)
---------------
Cash paid 575
Less: cash acquired 170
---------------
Net Cash paid during 1999 $ 405
=============
</TABLE>
<PAGE>
20. QUARTERLY FINANCIAL RESULTS (UNAUDITED):
Quarterly financial information for the years ended December 31, 1999 and 1998
is summarized below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Total revenues ................................... $ 6,294 $ 8,056 $ 8,717 $ 8,092
Operating loss ................................... (413) (1,145) (1,970) (4,376) (a)
Net loss ......................................... (1,342) (1,790) (2,702) (5,045)
Net loss per share (basic and diluted) ........... (0.15) (0.12) (0.17) (0.31)
Year ended December 31, 1998, Predecessor Company:
Total revenues ................................... $ 6,143 $ 6,636 $ 6,925 $ 6,728
Operating income (loss) .......................... 207 254 364 (80)
Net income (loss) ................................ 125 87 137 782
</TABLE>
(a) Operating loss for the fourth quarter of 1999 includes a non-recurring
charge of $1,692 for costs incurred in connection with certain abandoned
business acquisitions. The loss also includes the costs incurred to settle
a dispute with a former officer of the Company in the amount of $742.
21. VALUATION AND QUALIFYING ACCOUNTS:
All information for 1999 is that of the Company, as is the balance at the end of
1998. All other information is that of the Predecessor Company.
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND AND OTHER END
OF YEAR EXPENSES ADJUSTMENTS OF YEAR
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1997 ............................ $ 386 $ 538 $ 620 $ 304
1998 ............................ 304 1,154 968 490
1999 ............................ 490 919 470 939
Allowance for inventory obsolescence:
1997 ............................ $ 5 $ 316 $ -- $ 321
1998 ............................ 321 (136) -- 185
1999 ............................ 185 -- 185 --
</TABLE>
22. SUBSEQUENT EVENTS:
On April 10, 2000, Aquis entered into an agreement to obtain a $2 million bridge
loan as interim funding pending completion of additional prospective financing.
The debt is subordinate to the Company's senior debt and is unsecured. This
agreement provides for an interest rate of 11%, a scheduled maturity date in
September, 2001 and also provides for interest to accrue until the earlier of
its maturity date or conversion. At the lender's election not earlier than 120
days from the date of funding, this loan is convertible into the Company's
common stock at 90% of the then-current market value. At the Company's election,
the loan is redeemable at 105% of face value if such election is made within the
initial 90 days subsequent to funding, or at 110% of face value if redemption is
elected within 91 to 118 days, or, if elected thereafter, at 115% of face value.
Proceeds from this loan will be used to make the Special Prepayment of $1,250 to
<PAGE>
FINOVA. The proceeds were used to pay certain fees incurred in connection
with the FINOVA loan modifications arranged during 2000, to pay certain costs
incurred in connection with this bridge loan, and the balance will provide
about $400 to be used for general corporate purposes.
At December 31, 1999, the Company was not in compliance with a covenant in
the FINOVA Senior Loan. On April 12, 2000, FINOVA waived the non-compliance
and amended the loan agreement to redefine certain financial ratios specified
in the loan covenants for future periods and to ensure that the Special
Payment of $1.250 was paid before April 15, 2000.
<PAGE>
Exhibit 10.9
AMENDED AND RESTATED PAGING PARTNERS CORPORATION
1994 INCENTIVE STOCK OPTION PLAN
1. PURPOSE OF THE 1994 INCENTIVE STOCK OPTION PLAN.
Paging Partners Corporation (the "Corporation") desires to attract and
retain the best available talent and to encourage the highest level of
performance. The 1994 Incentive Stock Option Plan (the "Stock Option Plan") is
intended to contribute significantly to the attainment of these objectives, by
(i) providing long-term incentives and rewards to all key employees of the
Corporation (including officers and directors who are key employees of the
Corporation and also including key employees of any subsidiary of the
Corporation which may include officers or directors of any subsidiary of the
Corporation who are also key employees of said subsidiary), and those directors
and officers, consultants, advisers, agents or independent representatives of
the Corporation or of any subsidiary (together, "Eligible Individuals"), who are
contributing or in a position to contribute to the long-term success and growth
of the Corporation or of any subsidiary, (ii) assisting the Corporation and any
subsidiary in attracting and retaining Eligible Individuals with experience and
ability, and (iii) associating more closely the interests of such Eligible
Individuals with those of the Corporation's stockholders.
2. SCOPE AND DURATION OF THE STOCK OPTION PLAN.
Under the Stock Option Plan, options ("Options") to purchase common
stock, par value $.01 per share ("Common Stock"), may be granted to Eligible
Individuals. Options granted to employees (including officers and directors who
are employees) of the Corporation or a subsidiary corporation thereof, may, at
the time of grant, be designated by the Corporation's Board of Directors as
incentive stock options ("ISOs"), with the attendant tax benefits as provided
for under Sections 421 and 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The aggregate number of shares of Common Stock reserved for grant
from time to time under the Stock Option Plan is 1,500,000 shares of Common
Stock (after giving effect to the amendment of the Certificate of Incorporation
of the Corporation to authorize 29,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock), which shares of Common Stock may be authorized but
unissued shares of Common Stock or shares of Common Stock, which shall have been
or which may be reacquired by the Corporation, as the Board of Directors of the
Corporation shall from time to time determine. Such aggregate numbers shall be
subject to adjustment as provided in Paragraph 11. If an Option shall expire or
terminate for any reason without having been exercised in full, the shares of
Common Stock represented by the portion thereof not so exercised or surrendered
shall (unless the Stock Option Plan shall have been terminated) become available
for other options under the Stock Option Plan. Subject to Paragraph 13, no
Option shall be granted under the Stock Option Plan after March 31, 2004. The
grant of an Option and/or a Right is sometimes referred to herein as an Award
thereof.
3. ADMINISTRATION OF THE STOCK OPTION PLAN.
This Stock Option Plan will be administered by the Board of Directors
of the Corporation (the "Board of Directors"). The Board of Directors, in its
discretion, may designate an option committee (the "Option Committee" or
"Committee") composed of at least two members of the
<PAGE>
Board of Directors to administer this Stock Option Plan. Subject to the express
provisions of this Plan, the Board of Directors or the Committee (hereinafter,
the terms "Option Committee" or "Committee" shall mean the Board of Directors
whenever no such Option Committee has been designated) shall have authority in
its discretion, subject to and not inconsistent with the express provisions of
this Stock Option Plan, to direct the grant of Options, to determine the
purchase price of the Common Stock covered by each Option, the Eligible
Individuals to whom, and the time or times at which, Options shall be granted
and subject to the maximum set forth in Paragraph 4 hereof, the number of shares
of Common Stock to be covered by each Option; to designate Options as ISOs; to
interpret the Stock Option Plan; to determine the time or times at which Options
may be exercised; to prescribe, amend and rescind rules and regulations relating
to the Stock Option Plan, including, without limitation, such rules and
regulations as it shall deem advisable, so that transactions involving Options
may qualify for exemption under such rules and regulations as the Securities and
Exchange Commission may promulgate from time to time exempting transactions from
Section 16(b) of the Securities and Exchange Act of 1934; to determine the terms
and provisions of and to cause the Corporation to enter into agreements with
Eligible Individuals in connection with (Awards) Options granted under the Stock
Option Plan (the "Agreements"), which Agreements may vary from one another as
the Committee shall deem appropriate; and to make all other determinations it
may deem necessary or advisable for the administration of the Stock Option Plan.
Members of the Committee shall serve at the pleasure of the Board of
Directors. The Committee shall have and may exercise all of the powers of the
Board of Directors under the Stock Option Plan, other than the power to appoint
a director to committee membership. A majority of the Committee shall constitute
a quorum, and acts of a majority of the members present at any meeting at which
a quorum is present shall be deemed the acts of the Committee. The Committee may
also act by instrument signed by a majority of the members of the Committee.
Every action, decision, interpretation or determination by the
Committee with respect to the application or administration of this Stock Option
Plan shall be final and binding upon the Corporation and each person holding any
Option granted under this Stock Option Plan.
4. ELIGIBILITY: FACTORS TO BE CONSIDERED IN GRANTING OPTIONS
AND DESIGNATING ISOS (AWARDS).
(a) Options may be granted only to (i) key employees (including
officers and directors who are employees) of the Corporation or any subsidiary
corporation thereof on the date of grant (Options so granted may be designated
as ISOs), and (ii) directors or officers of the Corporation or a subsidiary
corporation thereof on the date of grant, without regard to whether they are
employees, and (iii) consultants or advisers to or agents or independent
representatives of the Corporation or a subsidiary thereof. In determining the
persons to whom Options (Awards) shall be granted and the number of shares of
Common Stock to be covered by each Award, the Committee shall take into account
the nature of the duties of the respective persons, their present and potential
contributions to the Corporation's (including subsidiaries) successful operation
and such other factors as the Board of Directors in its discretion shall deem
relevant. Subject to the provisions of Paragraph 2, an Eligible Individual may
receive Options (Awards) on more than one occasion under the Stock Option Plan.
No person shall be eligible for an
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Option grant if he shall have filed with the Secretary of the Corporation an
instrument waiving such eligibility; provided that any such waiver may be
revoked by filing with the Secretary of the Corporation an instrument of
evocation, which revocation will be effective upon such filing.
(b) In the case of each ISO granted to an employee, the aggregate fair
market value (determined at the time the ISO is granted) of the Common Stock
with respect to which the ISO is exercisable for the first time by such employee
during any calendar year (under all plans of the Corporation and any subsidiary
corporation thereof) may not exceed $100,000.
5. OPTION PRICE.
(a) The purchase price per share of the Common Stock covered by each
Option shall be established by the Committee, but in, in the case of each ISO
granted to an employee in no event shall it be less than the fair market value
of a share of the Common Stock on the date the Option is granted. If, at the
time an Option is granted, the Common Stock is publicly traded, such fair market
value shall be the closing price (or the mean of the latest bid and asked
prices) of a share of Common Stock on such date as reported in The Wall Street
Journal (or a publication or reporting service deemed equivalent to The Wall
Street Journal for such purpose by the Board of Directors) for any national
securities exchange or other securities market which at the time is included in
the stock price quotations of such publication. In the event that the Committee
shall determine such stock price quotation is not representative of fair market
value by reason of the lack of a significant number of recent transactions or
otherwise, the Committee may determine fair market value in such a manner as it
shall deem appropriate under the circumstances. If, at the time an Option is
granted, the Common Stock is not publicly traded, the Committee shall make a
good faith attempt to determine such fair market value.
(b) In the case of an employee who at the time an ISO is granted owns
stock possessing more than 10% of the total combined voting power of all classes
of the stock of the employer corporation or of its parent or a subsidiary
corporation thereof (a "10% Holder"), the purchase price of the Common Stock
covered by any ISO shall in no event be less than 110% of the fair market value
of the Common Stock at the time the ISO is granted.
6. TERM OF OPTIONS.
The term of each Option shall be fixed by the Committee, but in no
event shall it be exercisable more than 10 years from the date of grant, subject
to earlier termination as provided in Paragraphs 9 and 10. An ISO granted to a
10% Holder shall not be exercisable more than 5 years from the date of grant.
7. EXERCISE OF OPTIONS.
(a) Subject to the provisions of the Stock Option Plan, an Option
granted to an employee under the Stock Option Plan shall become fully
exercisable at the earlier of (A) employee's actual retirement date, unless such
retirement is without the consent of the Board of Directors and is prior to the
employee's normal retirement date as determined under any qualified retirement
plan maintained by the Corporation at such time or, if no such plan is than in
effect, age 65 (but in no event prior to the first anniversary of the date of
grant), or (B) at such time or times as the Committee in its sole discretion
shall determine at the time of the granting of the Option, except that in no
event shall any such Option be exercisable later than 10 years after
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its grant. Notwithstanding anything in this Stock Option Plan to the contrary,
Options that are not designated as ISOs may be exercised in such manner and at
such time or times as the Committee in its sole discretion shall determine,
except that in no event shall any such Option be exercisable earlier than six
months or later than 10 years after its grant.
(b) An Option may be exercised as to any or all full shares of Common
Stock as to which the Option is then exercisable.
(c) The purchase price of the shares of Common Stock as to which an
Option is exercised shall be paid in full in cash at the time of exercise;
provided that, if permitted by the related Option Agreement or by the Committee,
the purchase price may be paid, in whole or in part, by surrender or delivery to
the Corporation of securities of the Corporation having a fair market value on
the date of the exercise equal to the portion of the purchase price being so
paid. Fair market value shall be determined as provided in Paragraph 5 for the
determination of such value on the date of the grant. In addition, the holder
shall, upon notification of the amount due and prior to or concurrently with
delivery to the holder of a certificate representing such shares of Common
Stock, pay promptly any amount necessary to satisfy applicable federal, state or
local tax requirements.
(d) Except as provided in Paragraphs 9 and 10, no Option may be
exercised unless the original grantee thereof is then an Eligible Individual.
(e) The Option holder shall have the rights of a stockholder with
respect to shares of Common Stock covered by an Option only upon becoming the
holder of record of such shares of Common Stock.
(f) Notwithstanding any other provision of this Stock Option Plan, the
Corporation shall not be required to issue or deliver any share of stock upon
the exercise of an Option prior to the admission of such share to listing on any
stock exchange or automated quotation system on which the Corporation's Common
Stock may then be listed.
8. NON-TRANSFERABILITY OF OPTIONS.
No Options granted under the Stock Option Plan shall be transferable
other than by will or by the laws of descent and distribution ("Permitted
Transferee"). With respect to ISOs, Options may be exercised, during the
lifetime of the holder, only by the holder, or by his guardian or legal
representative.
9. TERMINATION OF RELATIONSHIP TO THE CORPORATION.
(a) In the event that any original grantee shall cease to be an
Eligible Individual of the Corporation (or any subsidiary thereof), except as
set forth in Paragraph 10, such Option may (subject to the provisions of the
Stock Option Plan) be exercised (to the extent that the original grantee was
entitled to exercise such Option at the termination of his employment or service
as a director, officer, consultant, adviser, agent or independent
representative, as the case may be) at any time within (i) three months in the
case of ISOs, or (ii) two years after such termination in the case of any other
Option granted under the Stock Option Plan. Notwithstanding the foregoing, if
the position of an original grantee shall be terminated by the Corporation or
any subsidiary thereof for cause or if the original grantee terminates his
employment or position voluntarily and without the consent of the Corporation or
any subsidiary corporation thereof, as
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the case may be (which consent shall be presumed in the case of normal
retirement or termination of employment following the Merger of Paging Partners
Merger Corporation and Aquis Communications, Inc.), the Options granted to such
person, whether held by such person or by a Permitted Transferee shall, to the
extent not theretofore exercised, forthwith terminate immediately upon such
termination. The holder of any ISO may not exercise such Option unless at all
times during the period beginning with the date of grant of the ISO and ending
three months before the date of exercise he is an employee of the Corporation
granting such Option, a subsidiary thereof, or a corporation or a subsidiary
corporation issuing or assuming a stock option in a transaction to which Section
424(a) of the Code applies.
(b) Other than as provided in Paragraph 9(a), Options granted under the
Stock Option Plan shall not be affected by any change of duties or position so
long as the holder remains an Eligible Individual.
(c) Any Option Agreement may contain such provisions as the Committee
shall approve with reference to the determination of the date employment
terminates or the date other positions or relationships terminate for purposes
of the Stock Option Plan and the effect of leaves of absence, which provisions
may vary from one another.
(d) Nothing in the Stock Option Plan or in any Option granted pursuant
to the Stock Option Plan shall confer upon any Eligible Individual or other
person any right to continue in the employ of the Corporation or any subsidiary
corporation (or the right to be retained by, or have any continued relationship
with the Corporation or any subsidiary corporation thereof), or affect the right
of the Corporation or any such subsidiary corporation, as the case may be, to
terminate his employment, retention or relationship at any time. The grant of
any option pursuant to the Stock Option Plan shall be entirely in the discretion
of the Committee and nothing in the Stock Option Plan shall be construed to
confer on any Eligible Individual any right to receive any Option under the
Stock Option Plan.
10. DEATH OR DISABILITY OF HOLDER.
(a) If a person to whom an Option has been granted under the Stock
Option Plan shall die (and the conditions in sub-paragraph (b) below are met) or
become permanently and totally disabled (as such term is defined below) while
serving as an Eligible Individual and if the Option was otherwise exercisable
immediately prior to the happening of such event, then the period for exercise
provided in Paragraph 9 shall be extended to one year after the date of death of
the original grantee, or in the case of the permanent and total disability of
the original grantee, to one year after the date of permanent and total
disability of the original grantee, but, in either case, not more than 10 years
(five years in the case of a 10% Holder) after the date such Option was granted,
or the expiration of the Option, if earlier, as shall be prescribed in the
original grantee's Option Agreement. An Option may be exercised as set forth
herein in the event of the original grantee's death, by a Permitted Transferee
or the person or persons to whom the holder's rights under the Option pass by
will or applicable law, or if no such person has the right, by his executors or
administrators; or in the event of the original grantee's permanent and total
disability, by the holder or his guardian.
(b) In the case of death of a person to whom an Option was originally
granted, the provisions of subparagraph (a) apply if such person dies (i) while
in the employ of the Corporation or a subsidiary corporation thereof or while
serving as an Eligible Individual of the
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Corporation or a subsidiary corporation thereof or (ii) within three months
after the termination of such position other than termination for cause, or
voluntarily on the original grantee's part and without the consent of the
Corporation or a subsidiary corporation thereof, which consent shall be presumed
in the case of normal retirement.
(c) The term "permanent and total disability" as used above shall have
the meaning set forth in Section 22(e)(3) of the Code.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provision of the Stock Option Plan, each
Agreement may contain such provisions as the Committee shall determine to be
appropriate for the adjustment of the number and class of shares of Common Stock
covered by such Option, the Option prices and the number of shares of Common
Stock as to which Options shall be exercisable at any time, in the event of
changes in the outstanding Common Stock of the Corporation by reason of stock
dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, spin-offs, reorganizations,
liquidations and the like. In the event of any such change in the outstanding
Common Stock of the Corporation, the aggregate number of shares of Common Stock
as to which Options may be granted under the Stock Option Plan to any Eligible
Individual shall be appropriately adjusted by the Committee whose determination
shall be conclusive. In the event of (i) the dissolution, liquidation, merger or
consolidation of the Corporation or a sale of all or substantially all of the
assets of the Corporation, or (ii) the disposition by the Corporation of
substantially all of the assets or stock of a subsidiary of which the original
grantee is then an employee, officer or director, consultant, adviser, agent or
independent representative or (iii) a change in control (as hereinafter defined)
of the Corporation has occurred or is about to occur, then, if the Committee
shall so determine, each Option under the Stock Option Plan, if such event shall
occur with respect to the Corporation, or each Option granted to an employee,
officer, director, consultant, adviser, agent or independent representative of a
subsidiary respecting which such event shall occur, shall (x) become immediately
and fully exercisable or (y) terminate simultaneously with the happening of such
event, and the Corporation shall pay the optionee in lieu thereof an amount
equal to (a) the excess of the fair market value over the exercise price of one
share on the date on which such event occurs, multiplied by (b) the number of
shares subject to the Option, without regard to whether the Option is then
otherwise exercisable.
12. EFFECTIVENESS OF THE STOCK OPTION PLAN.
Options may be granted under the Stock Option Plan, subject to its
authorization and adoption by stockholders of the Corporation, at any time or
from time to time after its adoption by the Committee, but no Option shall be
exercised under the Stock Option Plan until the Stock Option Plan shall have
been authorized and adopted by a majority of the votes properly cast thereon at
a meeting of stockholders of the Corporation duly called and held within 12
months from the date of adoption of the Stock Option Plan by the Board of
Directors. If so adopted, the Stock Option Plan shall become effective as of the
date of its adoption by the Board of Directors. The exercise of the Options
shall also be expressly subject to the condition that at the time of exercise a
registration statement under the Securities Act of 1933, as amended (the "Act")
shall be effective, or other provisions satisfactory to the Committee shall have
been made to ensure that such exercise will not result in a violation of such
Act, and such other qualification under
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any state or federal law, rule or regulation as the Corporation shall determine
to be necessary or advisable shall have been effected. If the shares of Common
Stock issuable upon exercise of an Option are not registered under such Act, and
if the Committee shall deem it advisable, the Optionee may be required to
represent and agree in writing (i) that any shares of Common Stock acquired
pursuant to the Stock Option Plan will not be sold except pursuant to an
effective registration statement under such Act or an exemption from the
registration provisions of the Act and (ii) that such Optionee will be acquiring
such shares of Common Stock for his own account and not with a view to the
distribution thereof and (iii) that the holder accepts such restrictions on
transfer of such shares, including, without limitation, the affixing to any
certificate representing such shares of an appropriate legend restricting
transfer as the Corporation may reasonably impose.
13. TERMINATION AND AMENDMENT OF THE STOCK OPTION PLAN.
The Board of Directors of the Corporation may, at any time prior to the
termination of the Stock Option Plan, suspend, terminate, modify or amend the
Stock Option Plan; provided that any increase in the aggregate number of shares
of Common Stock reserved for issue upon the exercise of Options, any amendment
which would materially increase the benefits accruing to participants under the
Stock Option Plan, or any material modification in the requirements as to
eligibility for participation in the Stock Option Plan, shall be subject to the
approval of stockholders in the manner provided in Paragraph 12, except that any
such increase, amendment or change that may result from adjustments authorized
by Paragraph 11 or adjustments based on revisions to the Code or regulations
promulgated thereunder (to the extent permitted by such authorities) shall not
require such approval. No suspension, termination, modification or amendment of
the Stock Option Plan may, without the express written consent of the Eligible
Individual (or his Permitted Transferee) to whom an Option shall theretofore
have been granted, adversely affect the rights of such Eligible Individual (or
his Permitted Transferee) under such Option.
14. FINANCING FOR INVESTMENT IN STOCK OF THE CORPORATION.
The Committee may cause the Corporation or any subsidiary to give or
arrange for financing, including direct loans, secured or unsecured, or
guaranties of loans by banks which loans may be secured in whole or in part by
assets of the Corporation or any subsidiary, to any Eligible Individual under
the Stock Option Plan who shall have been so employed or so served for a period
of at least six months at the end of the fiscal year ended immediately prior to
arranging such financing; but the Committee may, in any specific case, authorize
financing for an Eligible Individual who shall not have served for such a
period. Such financing shall be for the purpose of providing funds for the
purchase by the Eligible Individual of shares of Common Stock pursuant to the
exercise of an Option and/or for payment of taxes incurred in connection with
such exercise, and/or for the purpose of otherwise purchasing or carrying a
stock investment in the Corporation. The maximum amount of liability incurred by
the Corporation and its subsidiaries in connection with all such financing
outstanding shall be determined from time to time in the discretion of the Board
of Directors. Each loan shall bear interest at a rate not less than that
provided by the Code and other applicable law, rules, and regulations in order
to avoid the imputation of interest. Each recipient of such financing shall be
personally liable for the full amount of all financing extended to him. Such
financing shall be based upon the judgment of the
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Committee that such financing may reasonably be expected to benefit the
Corporation, and that such financing as may be granted shall be consistent with
the Certificate of Incorporation and By-Laws of the Corporation or such
subsidiary, and applicable laws.
If any such financing is authorized by the Board of Directors, such
financing shall be administered by the Committee.
15. SEVERABILITY.
In the event that any one or more provisions of the Stock Option Plan
or any Agreement, or any action taken pursuant to the Stock Option Plan or such
Agreement, should, for any reason, be unenforceable or invalid in any respect
under the laws of the United States, any state or the United States or any other
government, such unenforceability or invalidity shall not affect any other
provision of the Stock Option Plan or of such or any other Agreement, but in
such particular jurisdiction and instance the Stock Option Plan and the affected
Agreement shall be construed as if such unenforceable or invalid provision had
not been contained therein or if the action in question had not been taken
thereunder.
16. APPLICABLE LAW.
The Stock Option Plan shall be governed and interpreted, construed and
applied in accordance with the laws of the State of Delaware.
17. WITHHOLDING.
A holder shall, upon notification of the amount due and prior to or
concurrently with delivery to such holder of a certificate representing such
shares of Common Stock, pay promptly any amount necessary to satisfy applicable
federal, state, local or other tax requirements.
18. MISCELLANEOUS.
1. The terms "parent," "subsidiary" and "subsidiary corporation" shall
have the meanings set forth in Sections 424(e) and (f) of the Code,
respectively.
2. The term "disinterested person" shall mean a person who is not at
the time he exercises discretion in administering the Stock Option Plan eligible
and has not at any time within one year prior thereto been eligible for
selection as a person to whom stock may be allocated or to whom stock options
may be granted pursuant to the Stock Option Plan or any other plan of the
Corporation or any of its affiliates entitling the participants therein to
acquire stock or stock options of the Corporation or any of its affiliates.
3. The term "terminated for cause" shall mean termination by the
Corporation (or a subsidiary thereof) of the employment of or other relationship
with, the original grantee by reason of the grantee's (i) willful refusal to
perform his obligations to the Corporation (or a subsidiary thereof), (ii)
willful misconduct, contrary to the interests of the Corporation (or a
subsidiary thereof), or (iii) commission of a serious criminal act, whether
denominated a felony, misdemeanor or otherwise. In the event of any dispute
regarding whether a termination for cause
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has occurred, the Board of Directors may by resolution resolve such dispute and
such resolution shall be final and conclusive on all parties.
4. The term "change in control" shall mean an event or series of events
that would be required to be described as a change in control of the Corporation
in a proxy or information statement distributed by the Corporation pursuant to
Section 14 of the Securities Exchange Act of 1934 in response to Item 6(e) of
Schedule 14A promulgated thereunder, or any substitute provision which may
hereafter be promulgated thereunder or otherwise adopted. The determination of
whether and when a change in control has occurred or is about to occur shall be
made by the Board of Directors in office immediately prior to the occurrence of
the event or series of events constituting such change in control.
5. Notwithstanding anything to the contrary contained herein, all
options previously granted to persons who were officers of Aquis Communications,
Inc. ("Aquis") shall, upon the effectiveness of the merger between Aquis and
Paging Partners Merger Corporation, be converted into options under this Stock
Option Plan.
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Exhibit 10.24
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of July 7, 1998, between BAP Acquisition
Corp., a Delaware corporation (the "CORPORATION"), and John X. Adiletta (the
"EMPLOYEE").
INTRODUCTION
The Corporation wishes to retain the services of the Employee and the
Employee wishes to be employed by the Corporation. The Employee has detailed
knowledge of various aspects of the Corporation's business and is in possession
of proprietary and confidential information concerning the business. The
disclosure of such information or the engaging in competitive activities would
cause substantial harm to the Corporation.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Employee currently is employed by the Corporation
and the Employee hereby accepts his continued employment upon the terms and
conditions hereinafter set forth.
2. TERM. Unless earlier terminated in accordance with the terms hereof,
the term of this Agreement shall be for the period commencing as of the closing
of the Corporation's acquisition of the Bell Atlantic Paging business, and
ending September 30, 2001; PROVIDED, HOWEVER, that on September 30, 2001 and on
September 30th of each year thereafter, this Agreement shall automatically be
extended for a successive one-year period unless the Corporation or the Employee
shall have given the other written notice of its intention to terminate this
Agreement at least two (2) months prior to the anniversary date of any such
year. Such notice by the Corporation to terminate this Agreement shall be deemed
a termination without cause under Section 12 hereof. Any failure by the
Corporation or the Employee to give timely notice of termination shall cause the
term of employment of the Employee to be automatically renewed hereunder for an
additional one-year period.
3. DUTIES. The Employee shall serve as President and Chief Executive
Officer of the Corporation, in which capacities he shall be responsible for
directing the day-to-day operations of the Corporation and its subsidiaries and
such other duties consistent with such position as the Board of Directors of the
Corporation (the "BOARD") shall determine from time to time. In addition, in the
event Employee does not possess the right as a shareholder to appoint a
Director, Employee shall serve as a Director of the Corporation. Without
limiting the foregoing, the Employee shall consult with the Board with respect
to determining the Corporation's business strategies. The Employee shall receive
no additional compensation for any services rendered as a Director in the event
he is simultaneously employed by the Corporation and serving as a director of
the Corporation or any of its subsidiaries.
<PAGE>
4. COMPENSATION.
(a) For all services rendered by the Employee pursuant to this
Agreement, during the term of this Agreement the Corporation shall pay the
Employee a salary at the annual rate of $225,000, (which amount shall
automatically increase to $250,000 when and if the Corporation's number of units
in service exceeds 300,000), which salary shall be cumulatively increased by no
less than 5% upon each anniversary date of this Agreement. Said salary may be
further increased from time to time by the Board in its sole discretion.
Payments hereunder shall be made at the same frequency as payments made to other
employees of the Corporation. In exercising such discretion, the Board of
Directors shall, not less than once each year, assess the Employee's performance
relative to performance criteria discussed by the Board with the Employee and
adopted by the Board at the beginning of such year.
(b) At any time, at the sole discretion of the Board, the Corporation
may grant to the Employee a bonus in such amount and in such form as it is
deemed appropriate, PROVIDED THAT during fiscal years 1999 and 2000 the Employee
may earn a bonus of up to seventy-five percent (75%) of his annual salary as
follows: the Employee shall be entitled to a bonus for fiscal year 1999 equal to
(i) ten percent (10%) of the amount that the Corporation's EBITDA for 1999
(calculated in accordance with GAAP and adjusted to reflect any pro-forma
acquired EBITDA as agreed by the Employee and Board of Directors) exceeds
$6,600,000 in fiscal year 1999 (the "1999 BONUS"), PROVIDED that in no event
shall the 1999 Bonus exceed seventy-five percent (75%) of the Employee's base
salary in such year. For fiscal year 2000 the Employee shall be entitled to a
bonus equal to ten percent (10%) of the amount that the Corporation's EBITDA for
2000 (calculated as set forth above) exceeds $6,600,000, less the 1999 Bonus
(the "2000 BONUS"), PROVIDED that in no event shall the 2000 Bonus exceed
seventy-five percent (75%) of the Employee's base salary in such year.
For purposes of determining the amount of the Employee's bonus, the
Corporation's EBITDA shall be as set forth in the Corporation's audited
financial statements (adjusted for acquired EBITDA).
4A. TRANSACTION FEE. In exchange for the Employee's assistance
arranging the Corporation's acquisition of Bell Atlantic Paging Systems (the
"ACQUISITION"), the Corporation shall pay the Employee, at the closing of the
Acquisition, in cash, a transaction fee of $225,000.
5. FULL TIME; BEST EFFORTS. During the term of this Agreement, the
Employee shall use his best efforts to promote the interests of the Corporation
and shall devote his full time and efforts to its business and affairs. The
Employee shall not engage in any other activity which could reasonably be
expected to interfere with the performance of his duties, responsibilities and
services hereunder.
6. EXPENSES. The Employee is authorized to incur reasonable expenses
for promoting the business of the Corporation, including expenses for
entertainment, travel and similar items. The Corporation will reimburse the
Employee for appropriate expenses upon the Employee's presentation of an
itemized account of such expenditures. The Corporation shall at all times retain
access to the records maintained by Employee relative to reimbursable expenses.
In recognition of Employee's need for an automobile for business purposes, the
Corporation will provide Employee with an automobile allowance equal to
$1,000.00 per month.
<PAGE>
7. RESTRICTIVE COVENANTS. During the term of this Agreement and for a
period of one (1) year after the termination of Employee's employment with the
Corporation pursuant to the terms of this Agreement, regardless of the reason
for such termination, the Employee will not, directly or indirectly,
individually or as a consultant to, or as an officer, director, employee, equity
owner or agent of, or otherwise participate in the ownership or operation of any
business providing similar products and services as the Corporation in the
geographical areas served by the Corporation and its subsidiaries at the time of
such termination, but nothing contained herein shall be deemed to prohibit the
Employee from investing in any company engaged in such business, the stock of
which is available in a public securities market; PROVIDED, HOWEVER, that the
Employee shall not own in excess of 5% of the total issued and outstanding stock
of such company.
During the term of this Agreement and for a period of one (1) year
after the termination of such employment, regardless of the reason for such
termination, the Employee will not, directly or indirectly, solicit or endeavor
to entice away from the Corporation or any of its subsidiaries, or otherwise
materially interfere with the business relationship of the Corporation or any
subsidiary with, (I) any person who is, or was within the one (1) year period
immediately prior to the termination of the Employee's employment with the
Corporation, employed by or associated with the Corporation or any subsidiary or
(II) any person or entity who is, or was within such one (1) year period, a
customer or client of, supplier to or other party having material business
relations with the Corporation or any subsidiary.
The Employee acknowledges that a breach of any of the covenants
contained in this paragraph 7 and paragraph 7A would result in irreparable
injury to the Corporation for which there may be no adequate remedy at law and
that, in the event of an actual or threatened breach by the Employee of the
provisions of this paragraph 7 and paragraph 7A, the Corporation shall be
entitled to pursue and obtain injunctive relief restraining the Employee from
doing any act prohibited hereunder. Nothing contained herein shall be construed
as prohibiting the Corporation from pursuing any other remedies available to it
for such breach or threatened breach, including the recovery of any monetary
damages to which it would be entitled under the law. In the event that any
provision of this paragraph 7 and paragraph 7A is held to be unenforceable as a
result of it being too broad, either in terms of time or geographical extent,
the Employee agrees that the court can adapt and limit this paragraph 7 and
paragraph 7A so as to make the provisions hereof enforceable to the fullest
extent permissible.
7A. BELL ATLANTIC TRANSACTION. In the event the Corporation fails to
consummate its acquisition of Bell Atlantic Paging Systems, the Employee agrees,
for a period of twelve months beginning as of the date that the Corporation
discontinues negotiations with Bell Atlantic Paging Systems, not to directly or
indirectly enter into any transaction relating to the acquisition of Bell
Atlantic Paging Systems or any part thereof; PROVIDED that, if the Corporation
fails to consummate the acquisition through no act or omission of the Employee,
this sub-section shall not apply.
8. DISCLOSURE OF INFORMATION. The Employee recognizes and acknowledges
that the Corporation's trade secrets and all other confidential and proprietary
information of a business, financial or other nature, including without
limitation, lists of the Corporation's actual and prospective customers, as they
exist from time to time (collectively, the "CONFIDENTIAL INFORMATION"), are a
valuable and unique asset of the Corporation and therefore agrees that he will
not, either during or after the term of his employment, disclose any
Confidential Information concerning the Corporation and/or its subsidiaries, to
any person,
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firm, corporation, association or other entity, for any reason whatsoever,
unless previously authorized to do so by the Corporation's Board. It is
understood that the term "Confidential Information" shall not include any
information that has entered or enters the public domain through no fault of the
Employee. The Employee shall not make any use whatsoever, directly or
indirectly, of the Confidential Information, except as required in connection
with the performance of his duties for the Corporation. For the purpose of
enforcing this provision, the Corporation may resort to any remedy available to
it under the law.
9. MEDICAL AND VACATION BENEFITS; EQUITY. The Employee shall be
entitled to receive medical (including disability) and vacation benefits at the
expense of the Corporation, consistent with those generally available to any
other officer or employee of the Corporation.
Simultaneously with the closing of the Bell Atlantic Paging Systems
acquisition, the Corporation and the Employee are entering into a stock option
and restriction agreement in the form attached hereto as EXHIBIT A pursuant to
which the Corporation is granting to the Employee incentive stock options to
acquire 2,500 shares of the Corporation's common stock, such options to vest
ratably over three years and to have an exercise price per share equal to the
initial conversion price of the Corporation's Series A Convertible Preferred
Stock.
10. DISABILITY AND DEATH
(a) In the event that Employee is absent from employment by reason of
illness or other incapacity by which Employee is unable to perform the essential
functions of his position for more than six (6) consecutive months during the
term of this Agreement, the Corporation may at its option terminate this
Agreement. If the Corporation elects not to terminate, the Corporation shall be
obligated to continue to pay the Employee compensation hereunder.
(b) If the Employee dies during the term of this Agreement, the
Corporation shall pay to the Employee's estate in a lump sum within 30 days
after the date of death an amount equal to 25% of the Employee's annual salary
rate then payable to the Employee pursuant to paragraph 4 of this Agreement.
11. INSURANCE. For so long as the Employee remains employed by the
Corporation, the Corporation shall either (a) at its cost and expense maintain
term life insurance on the Employee's life in the amount of $1,000,000 so long
as such amount is obtainable, or (b) upon Employee's presentation of proof of
such expenditure, reimburse Employee for the cost and expense of such life
insurance obtained by Employee. Employee shall have the right to designate the
beneficiary of such insurance. The Employee shall cooperate with the Corporation
in maintaining such insurance policy and obtaining any key man life insurance
which the Corporation may elect to obtain for its own benefit.
12. TERMINATION. The Corporation shall have the right, on written
notice to the Employee, by action of its Board to terminate the Employee's
employment immediately at any time for cause or without cause. For purposes of
this Agreement, "CAUSE" shall mean (i) conviction of a crime involving
dishonesty or (ii) willfully engaging in conduct materially injurious to the
Corporation or (iii) the material breach of this Agreement or any other
agreement between the Employee and the Corporation, which material breach has
not been cured by Employee within ten days after Employee's receipt of written
notice from the Corporation of such material breach. In the event of termination
of employment by the Corporation pursuant to this paragraph 12 without cause,
the Corporation shall (x) continue for a period equal to the greater of (x) the
balance of the
4
<PAGE>
original term of this Agreement (in no event to exceed one and one-half years)
or (y) one year (a) pay to Employee his salary at the then annual rate and (b)
provide to Employee the benefits under paragraphs 4, 9 and 11 of this Agreement
and (y) within 3 months of termination pay to the Employee an amount equal to
the bonus paid to the Employee in the preceding year under this Agreement.
Employee shall not be required to mitigate the amount of any payment provided
for in this paragraph 12 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this paragraph 12 be reduced by
any compensation earned by Employee as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by Employee to the Corporation or otherwise. In the event of termination of
this Agreement for any other reason (including death or disability), the
Corporation shall have no further obligation to make any payments or provide any
benefits hereunder (except, where applicable, the payments required under
paragraph 10) or under paragraph 12A below.
12A. CHANGE IN CONTROL.
(a) In the event that (i) the duties and responsibilities of Employee
are at any time significantly changed (by diminution, increase, or other
significant alteration) from the duties and responsibilities presently exercised
by him or (ii) there is a "Change in Control" (as hereinafter defined) of the
Corporation, Employee may at his election, at any time within one year after
either of such events, terminate this Agreement with 60 days prior written
notice and Employee shall be entitled to the following compensation, in lieu of
the other compensation and bonuses provided herein:
(A) In lieu of any further salary and bonus payments to
Employee for periods subsequent to the termination,
the Corporation shall pay as severance pay to
Employee, no later than the thirtieth day following
the effective date of termination, (x) a lump-sum
severance payment equal to 150% of Employee's annual
salary rate in effect as of the termination, or if
greater, such rate in effect immediately prior to the
Change in Control of the Corporation and (y) an
amount equal to 150% of his bonus for the previous
year.
(B) For a twelve (12) month period after such
termination, the Corporation shall arrange to provide
Employee with life, disability, accident and group
health insurance benefits substantially similar to
those which Employee was receiving immediately prior
to the termination. Benefits otherwise receivable by
Employee pursuant to this paragraph (B) shall be
reduced to the extent comparable benefits are
actually received by Employee during twelve (12)
month period following Employee's termination, and
any such benefits actually received by Employee shall
be reported to the Corporation.
(b) Employee shall not be required to mitigate the amount of any
payment provided for in this paragraph 12A by seeking other employment or
otherwise.
(c) For purposes of this Agreement, a "CHANGE IN CONTROL" shall be
deemed to have occurred if (i) any "person" or group of "persons" (as the term
"person" is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934) (other than persons (A) holding equity interests or (B) with whom the
Corporation has entered into definitive agreements regarding the purchase of
equity interests, as of the first day of the term of this Agreement and their
affiliates, other than the Employee) becomes the beneficial owner, directly or
5
<PAGE>
indirectly, of securities of the Corporation representing 50% or more of the
combined voting power of the then outstanding securities of the Corporation;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new director
whose election or nomination was approved by the directors in office who either
were directors at the beginning of the period or whose election or nomination
was previously so approved, cease for any reason to constitute at least a
majority thereof; or (iii) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other entity, OTHER THAN a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation, PROVIDED that if as of the first day of the
term of this Agreement the Corporation has entered into a definitive agreement
regarding a merger or consolidation of the Corporation, (A) and such merger or
consolidation of the Corporation closes within thirty (30) days of the first day
of the term of this Agreement and (B) all of the capital used to purchase Bell
Atlantic Paging Systems is simultaneously returned to the Corporation's
investors, any shareholder vote regarding the same shall not constitute a Change
of Control hereunder. Notwithstanding the foregoing, a "Change of Control" shall
not be deemed to have occurred and no payments shall be owed under this
paragraph 12A with respect to any merger or other transaction in which the
Corporation is acquired if the merger or transaction is approved by the Employee
in his capacity as a stockholder of the Corporation.
12B. EFFECTIVE DATE. This Agreement shall become effective as of the
date of the closing of the Bell Atlantic Paging Systems acquisition, PROVIDED
that the provisions set forth in paragraph 7A shall be effective as of the date
of this Agreement.
13. ENFORCEABILITY, ETC. This Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited or invalid under any such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provisions shall be
construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law.
13A. ARBITRATION. Any and all claims arising from, or relating to, this
Agreement, its interpretation, or its alleged breach or enforcement, shall be
resolved by binding arbitration according to the rules of the American
Arbitration Association ("AAA") for commercial disputes then in effect, but
without submission to the AAA. The arbitration shall occur in New York, New York
and the parties waive any objection to this choice of alternative dispute
resolution, procedures or venue. The arbitrator shall be agreed upon by the
parties or, if no agreement can be reached within ten (10) days after either
party requests in writing the appointment of an arbitrator, the arbitrator shall
be appointed upon petition by either party to the presiding civil judge of the
applicable jurisdiction. Any arbitration hereunder shall be completed within one
hundred and twenty (120) days after appointment of an arbitrator. The arbitrator
selected to resolve the dispute shall be authorized to award reasonable
attorneys' fees and costs to the prevailing party in the arbitration, and to
include such sum in the final arbitration award. The arbitration award may be
6
<PAGE>
confirmed as a judgment in any court having jurisdiction of the subject matter
and parties.
14. NOTICES. Any notice or other communication given pursuant to this
Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested to the parties at
their respective addresses set forth on the signature page hereof, or to such
other address as the parties shall have designated by notice to the other
parties.
15. WAIVER. The waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach.
16. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Corporation, its successors and assigns, and the
Employee, his heirs and legal representatives.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. It may be changed
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought. This
Agreement shall be construed in accordance with and governed by the laws of the
State of New Jersey without giving effect to principles of conflicts of laws.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.
* * * * * * * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BAP ACQUISITION CORP.
By:______________________________
(Title)
_________________________________
JOHN X. ADILETTA
Address:
_________________________________
_________________________________
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EXHIBIT 10.25
John X. Adiletta
August __, 1998
Page
BAP Acquisition Corp.
42 Timber Rock Trail
Bernardsville, NJ 07924
As of August __, 1998
John X. Adiletta
42 Timber Rock Trail
Bernardsville, NJ 07924
Re: EMPLOYMENT AGREEMENT
Gentlemen:
Reference is made to the Employment Agreement between BAP Acquisition
Corp. (the "COMPANY") and John X. Adiletta (the "EMPLOYEE") dated July 7, 1998
(the "EMPLOYMENT AGREEMENT").
This letter agreement (this "AGREEMENT") confirms the understanding
between the Company and the Employee regarding certain provisions contained in
the Employment Agreement. Capitalized terms used but not otherwise defined have
the meanings ascribed to such terms in the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Employee, intending to be legally
bound, do hereby agree as follows:
In the event of termination of the Employee's employment by the
Corporation in Fiscal Year 1999 pursuant to paragraph 12 of the Employment
Agreement without cause, the Corporation shall (x) continue for a period equal
to the greater of (x) the balance of the original term of the Employment
Agreement (in no event to exceed one and one-half years) or (y) one year, (a)
pay to Employee his salary at the then annual rate and (b) provide to Employee
the benefits under paragraphs 4, 9 and 11 of the Employment Agreement and (y)
within sixty (60) days of the determination of the same, pay to the Employee an
amount equal to the maximum allowable bonus payable to the Employee pursuant to
Section 4(b) of the Employment Agreement.
1
<PAGE>
John X. Adiletta
August __, 1998
Page
Furthermore, if during Fiscal Year 1999 of the Company either (i) the
duties and responsibilities of the Employee are at any time significantly
changed (by diminution, increase, or other significant alteration) from the
duties and responsibilities presently exercised by him or (ii) a "Change of
Control" (as defined in the Employment Agreement) occurs, Employee may at his
election, at any time within 60 days after either of such events, terminate the
Employment Agreement and then in place of those payments specified in Section
12A(a)(A) of the Employment Agreement, the Company shall pay the Employee the
following amounts:
In lieu of any further salary and bonus payments to Employee for
periods subsequent to the termination, the Corporation shall pay as
severance pay to Employee, no later than the thirtieth day following
the effective date of termination, (x) a lump-sum severance payment
equal to 150% of Employee's annual salary rate in effect as of the
termination, or if greater, such rate in effect immediately prior to
the Change in Control of the Corporation and (y) an amount equal to
150% of the maximum allowable bonus payable to the Employee pursuant to
Section 4(b) of the Employment Agreement.
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of The Commonwealth of Massachusetts (without
giving effect to conflicts of laws principles) and shall take effect as a sealed
instrument.
Please confirm that the foregoing is acceptable by signing below. This
letter will constitute our binding agreement.
Very truly yours,
BAP ACQUISITION CORP.
By:______________________________________
John B. Frieling, Vice Chairman
Accepted and Agreed to:
_______________________________
John X. Adiletta
2
<PAGE>
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of November __, 1998, between BAP Acquisition
Corp., a Delaware corporation (the "CORPORATION"), and Brian Plunkett (the
"EMPLOYEE").
INTRODUCTION
The Corporation wishes to retain the services of the Employee and the
Employee wishes to be employed by the Corporation. The Employee has detailed
knowledge of various aspects of the Corporation's business and is in possession
of proprietary and confidential information concerning the business. The
disclosure of such information or the engaging in competitive activities would
cause substantial harm to the Corporation.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Employee currently is employed by the Corporation
and the Employee hereby accepts his continued employment upon the terms and
conditions hereinafter set forth.
2. TERM. Unless earlier terminated in accordance with the terms hereof,
the term of this Agreement shall be for the period commencing as of the closing
of the Corporation's acquisition of the Bell Atlantic Paging Systems business,
and ending December 31, 2001; PROVIDED, HOWEVER, that on December 31, 2001 and
on December 31st of each year thereafter, this Agreement shall automatically be
extended for a successive one-year period unless the Corporation or the Employee
shall have given the other written notice of its intention to terminate this
Agreement at least two (2) months prior to the anniversary date of any such
year. Such notice by the Corporation to terminate this Agreement shall be deemed
a termination without cause under Section 11 hereof. Any failure by the
Corporation or the Employee to give timely notice of termination shall cause the
term of employment of the Employee to be automatically renewed hereunder for an
additional one-year period.
3. DUTIES. The Employee shall serve as Chief Financial Officer of the
Corporation, in which capacities he shall be responsible for directing the
day-to-day financial operations of the Corporation and its subsidiaries and such
other duties consistent with such position as the Board of Directors of the
Corporation (the "BOARD") shall determine from time to time.
4. COMPENSATION.
(a) For all services rendered by the Employee pursuant to this
Agreement, during the term of this Agreement the Corporation shall pay the
Employee a salary at the annual rate of $125,000, which salary shall be
cumulatively increased by no less than 5% upon each anniversary date of this
Agreement. Said salary may be further increased from time to time by the Board
in its sole discretion. Payments hereunder shall be made at the same frequency
as payments made to other employees of the Corporation. In exercising such
discretion, the Board of Directors shall, not less than once each year, assess
the Employee's performance relative to performance criteria
<PAGE>
discussed by the Board with the Employee and adopted by the Board at the
beginning of such year.
(b) At any time, at the sole discretion of the Board, the Corporation
may grant to the Employee a bonus in such amount and in such form as it is
deemed appropriate, PROVIDED THAT during fiscal years 1999 and 2000 the Employee
may earn a bonus of up to forty percent (40%) of his annual salary if the
Company achieves certain operating objectives set for each such fiscal year by
the Board at least thirty days prior to the beginning of each fiscal year.
For purposes of determining the amount of the Employee's bonus, the
Corporation's operating performance shall be as set forth in the Corporation's
audited financial statements.
5. FULL TIME; BEST EFFORTS. During the term of this Agreement, the
Employee shall use his best efforts to promote the interests of the Corporation
and shall devote his full time and efforts to its business and affairs. The
Employee shall not engage in any other activity which could reasonably be
expected to interfere with the performance of his duties, responsibilities and
services hereunder.
6. EXPENSES. The Employee is authorized to incur reasonable expenses
for promoting the business of the Corporation, including expenses for
entertainment, travel and similar items. The Corporation will reimburse the
Employee for appropriate expenses upon the Employee's presentation of an
itemized account of such expenditures. The Corporation shall at all times retain
access to the records maintained by Employee relative to reimbursable expenses.
In recognition of Employee's need for an automobile for business purposes, the
Corporation will provide Employee with an automobile allowance equal to
$1,000.00 per month.
7. RESTRICTIVE COVENANTS. During the term of this Agreement and for a
period of one (1) year after the termination of Employee's employment with the
Corporation pursuant to the terms of this Agreement, regardless of the reason
for such termination, the Employee will not, directly or indirectly,
individually or as a consultant to, or as an officer, director, employee, equity
owner or agent of, or otherwise participate in the ownership or operation of any
business providing similar products and services as the Corporation in the
geographical areas served by the Corporation and its subsidiaries at the time of
such termination, but nothing contained herein shall be deemed to prohibit the
Employee from investing in any company engaged in such business, the stock of
which is available in a public securities market; PROVIDED, HOWEVER, that the
Employee shall not own in excess of 5% of the total issued and outstanding stock
of such company.
During the term of this Agreement and for a period of one (1) year
after the termination of such employment, regardless of the reason for such
termination, the Employee will not, directly or indirectly, solicit or endeavor
to entice away from the Corporation or any of its subsidiaries, or otherwise
materially interfere with the business relationship of the Corporation or any
subsidiary with, (I) any person who is, or was within the one (1) year period
immediately prior to the termination of the Employee's employment with the
Corporation, employed by or associated with the Corporation or any subsidiary or
(II) any person or entity who is, or was within such one (1) year period, a
customer or client of, supplier to or other
<PAGE>
party having material business relations with the Corporation or any subsidiary.
The Employee acknowledges that a breach of any of the covenants
contained in this paragraph 7 and paragraph 7A would result in irreparable
injury to the Corporation for which there may be no adequate remedy at law and
that, in the event of an actual or threatened breach by the Employee of the
provisions of this paragraph 7 and paragraph 7A, the Corporation shall be
entitled to pursue and obtain injunctive relief restraining the Employee from
doing any act prohibited hereunder. Nothing contained herein shall be construed
as prohibiting the Corporation from pursuing any other remedies available to it
for such breach or threatened breach, including the recovery of any monetary
damages to which it would be entitled under the law. In the event that any
provision of this paragraph 7 and paragraph 7A is held to be unenforceable as a
result of it being too broad, either in terms of time or geographical extent,
the Employee agrees that the court can adapt and limit this paragraph 7 and
paragraph 7A so as to make the provisions hereof enforceable to the fullest
extent permissible.
7A. BELL ATLANTIC TRANSACTION. In the event the Corporation fails to
consummate its acquisition of Bell Atlantic Paging Systems, the Employee agrees,
for a period of twelve months beginning as of the date that the Corporation
discontinues negotiations with Bell Atlantic Paging Systems, not to directly or
indirectly enter into any transaction relating to the acquisition of Bell
Atlantic Paging Systems or any part thereof.
8. DISCLOSURE OF INFORMATION. The Employee recognizes and acknowledges
that the Corporation's trade secrets and all other confidential and proprietary
information of a business, financial or other nature, including without
limitation, lists of the Corporation's actual and prospective customers, as they
exist from time to time (collectively, the "CONFIDENTIAL INFORMATION"), are a
valuable and unique asset of the Corporation and therefore agrees that he will
not, either during or after the term of his employment, disclose any
Confidential Information concerning the Corporation and/or its subsidiaries, to
any person, firm, corporation, association or other entity, for any reason
whatsoever, unless previously authorized to do so by the Corporation's Board. It
is understood that the term "Confidential Information" shall not include any
information that has entered or enters the public domain through no fault of the
Employee. The Employee shall not make any use whatsoever, directly or
indirectly, of the Confidential Information, except as required in connection
with the performance of his duties for the Corporation. For the purpose of
enforcing this provision, the Corporation may resort to any remedy available to
it under the law.
9. MEDICAL AND VACATION BENEFITS; EQUITY. The Employee shall be
entitled to receive medical (including disability) and vacation benefits at the
expense of the Corporation, consistent with those generally available to any
other employee of the Corporation.
Simultaneously with the closing of the Bell Atlantic Paging Systems
acquisition, the Corporation and the Employee are entering into a stock option
and restriction agreement in the form attached hereto as EXHIBIT A pursuant to
which the Corporation is granting to the Employee incentive stock options to
acquire 3,000 shares of the Corporation's common stock, such options to vest
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<PAGE>
ratably over three years and to have an exercise price per share equal to the
initial conversion price of the Corporation's Series A Convertible Preferred
Stock.
10. DISABILITY AND DEATH
(a) In the event that Employee is absent from employment by reason of
illness or other incapacity by which Employee is unable to perform the essential
functions of his position for more than six (6) consecutive months during the
term of this Agreement, the Corporation may at its option terminate this
Agreement. If the Corporation elects not to terminate, the Corporation shall be
obligated to continue to pay the Employee compensation hereunder.
(b) If the Employee dies during the term of this Agreement, the
Corporation shall pay to the Employee's estate in a lump sum within 30 days
after the date of death an amount equal to 25% of the Employee's annual salary
rate then payable to the Employee pursuant to paragraph 4 of this Agreement.
11. TERMINATION. The Corporation shall have the right, on written
notice to the Employee, by action of its Board to terminate the Employee's
employment immediately at any time for cause or without cause. For purposes of
this Agreement, "CAUSE" shall mean (I) conviction of a crime involving
dishonesty or (ii) willfully engaging in conduct materially injurious to the
Corporation or (III) the material breach of this Agreement or any other
agreement between the Employee and the Corporation, which material breach has
not been cured by Employee within ten days after Employee's receipt of written
notice from the Corporation of such material breach. In the event of termination
of employment by the Corporation pursuant to this paragraph 11 without cause,
the Corporation shall (X) continue for a period equal to the greater of (x) the
balance of the original term of this Agreement (in no event to exceed one and
one-half years) or (y) one year (A) pay to Employee his salary at the then
annual rate and (B) provide to Employee the benefits under paragraphs 4 and 9 of
this Agreement and (Y) within 3 months of termination pay to the Employee an
amount equal to the bonus paid to the Employee in the preceding year under this
Agreement. Employee shall not be required to mitigate the amount of any payment
provided for in this paragraph 11 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this paragraph 11 be
reduced by any compensation earned by Employee as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by Employee to the Corporation or otherwise. In the event of
termination of this Agreement for any other reason (including death or
disability), the Corporation shall have no further obligation to make any
payments or provide any benefits hereunder (except, where applicable, the
payments required under paragraph 10) or under paragraph 12 below.
12. CHANGE IN CONTROL.
(a) In the event that there is a "Change in Control" (as hereinafter
defined) of the Corporation, Employee may at his election, at any time within
one year after either of such events, terminate this Agreement with 60 days
prior written notice and Employee shall be entitled to the following
compensation, in lieu of the other compensation and bonuses provided herein:
4
<PAGE>
(A) In lieu of any further salary and bonus payments to
Employee for periods subsequent to the termination,
the Corporation shall pay as severance pay to
Employee, no later than the thirtieth day following
the effective date of termination, (x) a lump-sum
severance payment equal to 100% of Employee's annual
salary rate in effect as of the termination, or if
greater, such rate in effect immediately prior to the
Change in Control of the Corporation and (y) an
amount equal to 100% of his bonus for the previous
year.
(B) For a twelve (12) month period after such
termination, the Corporation shall arrange to provide
Employee with disability, accident and group health
insurance benefits substantially similar to those
which Employee was receiving immediately prior to the
termination. Benefits otherwise receivable by
Employee pursuant to this paragraph (B) shall be
reduced to the extent comparable benefits are
actually received by Employee during the twelve (12)
month period following Employee's termination, and
any such benefits actually received by Employee shall
be reported to the Corporation.
(b) Employee shall not be required to mitigate the amount of any
payment provided for in this paragraph 12 by seeking other employment or
otherwise.
(c) For purposes of this Agreement, a "CHANGE IN CONTROL" shall be
deemed to have occurred if (i) any "person" or group of "persons" (as the term
"person" is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934) (other than persons (A) holding equity interests or (B) with whom the
Corporation has entered into definitive agreements regarding the purchase of
equity interests, as of the first day of the term of this Agreement and their
affiliates, other than the Employee) becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing 50% or more of the
combined voting power of the then outstanding securities of the Corporation;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new director
whose election or nomination was approved by the directors in office who either
were directors at the beginning of the period or whose election or nomination
was previously so approved, cease for any reason to constitute at least a
majority thereof; or (iii) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other entity, OTHER THAN a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation, PROVIDED that if as of the first day of the
term of this Agreement the Corporation has entered into a definitive agreement
regarding a merger or consolidation of the Corporation, (A) and such merger or
consolidation of the Corporation closes within thirty (30) days of the first day
of the term of this Agreement and (B) all of the capital used to purchase Bell
Atlantic Paging Systems is simultaneously returned to the Corporation's
investors, any shareholder vote regarding the same shall not constitute a Change
of Control hereunder. Notwithstanding the
5
<PAGE>
foregoing, a "Change of Control" shall not be deemed to have occurred and no
payments shall be owed under this paragraph 12 with respect to any merger or
other transaction in which the Corporation is acquired if the merger or
transaction is approved by the Employee in his capacity as a stockholder of the
Corporation.
12A. EFFECTIVE DATE. This Agreement shall become effective as of the
date of the closing of the Bell Atlantic Paging Systems acquisition, PROVIDED
that the provisions set forth in paragraph 7A shall be effective as of the date
of this Agreement.
13. ENFORCEABILITY, ETC. This Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited or invalid under any such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provisions shall be
construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by applicable law.
13A. ARBITRATION. Any and all claims arising from, or relating to, this
Agreement, its interpretation, or its alleged breach or enforcement, shall be
resolved by binding arbitration according to the rules of the American
Arbitration Association ("AAA") for commercial disputes then in effect, but
without submission to the AAA. The arbitration shall occur in New York, New York
and the parties waive any objection to this choice of alternative dispute
resolution, procedures or venue. The arbitrator shall be agreed upon by the
parties or, if no agreement can be reached within ten (10) days after either
party requests in writing the appointment of an arbitrator, the arbitrator shall
be appointed upon petition by either party to the presiding civil judge of the
applicable jurisdiction. Any arbitration hereunder shall be completed within one
hundred and twenty (120) days after appointment of an arbitrator. The arbitrator
selected to resolve the dispute shall be authorized to award reasonable
attorneys' fees and costs to the prevailing party in the arbitration, and to
include such sum in the final arbitration award. The arbitration award may be
confirmed as a judgment in any court having jurisdiction of the subject matter
and parties.
14. NOTICES. Any notice or other communication given pursuant to this
Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested to the parties at
their respective addresses set forth on the signature page hereof, or to such
other address as the parties shall have designated by notice to the other
parties.
15. WAIVER. The waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach.
16. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Corporation, its successors and assigns, and the
Employee, his heirs and legal representatives.
6
<PAGE>
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. It may be changed
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought. This
Agreement shall be construed in accordance with and governed by the laws of the
State of New Jersey without giving effect to principles of conflicts of laws.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.
* * * * * * * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BAP ACQUISITION CORP.
By:______________________________
John X. Adiletta, President
_________________________________
BRIAN PLUNKETT
Address:
_________________________________
_________________________________
8
<PAGE>
Exhibit 10.27
January __, 1999
Aquis Communications, Inc.
1719A, Route 10
Suite 300
Parsippany, NJ 07054
Re: AQUIS COMMUNICATIONS, INC. EMPLOYMENT AGREEMENTS
Gentlemen:
Reference is made to the Employment Agreement dated as of July 7, 1998
between Aquis Communications, Inc. (formerly known as BAP Acquisition Corp.)
(the "COMPANY") and John X. Adiletta, as amended (the "ADILETTA AGREEMENT"), and
the Employment Agreement dated as of November __, 1998 between the Company and
Brian Plunkett (the "PLUNKETT AGREEMENT," and together with the Adiletta
Agreement, the "EMPLOYMENT AGREEMENTS"). Messrs. Adiletta and Plunkett are
sometimes hereinafter referred to individually as an "Employee," or collectively
as the "Employees". In connection with the Employment Agreements, the
undersigned Employees wish to amend the Employment Agreements as set forth
below.
Pursuant to Section 12A of the Adiletta Agreement and Section 12 of the
Plunkett Agreement, each of the Employment Agreements are terminable at the
option of the Employee who is a party thereto upon a "Change of Control" (as
that term is defined in the Employment Agreements) of the Company. Under each of
the Employment Agreements, a Change of Control is deemed to have occurred upon,
among other things, the approval by the stockholders of the Company of a merger
or consolidation of the Company with any other entity. On November 5, 1998, the
stockholders of the Company unanimously approved the merger of the Company with
and into a wholly-owned subsidiary of Paging Partners Corporation, a Delaware
corporation, substantially upon the terms of an Agreement and Plan of Merger
(the "PAGING PARTNERS MERGER").
By signing below, the undersigned Employees hereby amend, and the
Company hereby consents to the amendment of, the respective Employment Agreement
to which each undersigned Employee is a party by adding the following sentence
immediately following the last sentence of subsection (c) of paragraph of
Section 12A of the Adiletta Agreement and immediately following the last
sentence of subsection (c) of Section 12 of the Plunkett Agreement:
"Notwithstanding the foregoing, the merger of the Corporation with and
into a wholly-owned subsidiary of Paging Partners Corporation, a
Delaware corporation, pursuant to the terms of an Agreement and Plan of
Merger dated as of November 6, 1998, as the same may be amended from
time to time, shall not be deemed to constitute a `Change of Control'
of the Company, and no payments shall be owed the Employee under this
paragraph by reason thereof."
Except as specifically set forth herein, the Employment Agreements shall remain
in full force and effect.
<PAGE>
Executed as of the date first above written.
Very truly yours,
______________________________
John X. Adiletta
______________________________
Brian Plunkett
AGREED AND ACKNOWLEDGED
AQUIS COMMUNICATIONS, INC.
By:________________________________
(Title)
2
<PAGE>
Exhibit 10.28
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made as of this 4th day of January, 2000, by
and between AQUIS COMMUNICATIONS GROUP, INC. 1719A Route 10, Suite 300,
Parsippany, NJ 07054 (the "Company"), and NICK T. CATANIA, 3200 S. Stonegate
Circle #204, New Berlin, WI 53151 ("Employee").
WITNESSETH:
BACKGROUND:
Company desires to employ Employee, and Employee desires to accept
employment with Company, subject to the terms and conditions of this Employment
Agreement.
NOW THEREFORE, in consideration of the above premises and of the
Agreement herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Employee and
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth herein. Employee shall have the position/title of President/CEO, with
his office at the corporate headquarters of Company which are currently in
Parsippany, NJ. Employee shall perform such duties and have such
responsibilities consistent with the position/title as shall be assigned him
from time to time by the board of directors of the Company or its designated
representative. The employment hereunder shall be exclusive, and during the
period of his employment hereunder Employee shall devote his full time,
attention, energy, skill and best efforts to the promotion of the business and
affairs of the Company and shall perform faithfully and to the fullest extent of
his ability all duties which relate to his position of employment by the
Company. Employee shall not directly or indirectly render a service of a
business, commercial or professional nature for his own account or for any other
person, whether for compensation or otherwise, without the prior written consent
of Company, except for normal investments in which Employee does not have more
than a nominal interest as compared to other investors.
2. TERM OF EMPLOYMENT / TERMS OF AGREEMENT.
A. The initial term of employment under this Agreement shall be a
one-year period commencing on January 1, 2000 and terminating December 31, 2000,
unless terminated by the first to occur of the following:
(1) The death of Employee.
(2) The Complete Disability of Employee. "Complete
Disability," as used herein, shall mean the inability of Employee by reason of
any physical or mental impairment to fully and effectively perform services for
a period of more than ninety (90)
<PAGE>
consecutive days or for more than ninety (90) days in any one hundred eighty
(180) day period after January 1, 2000.
(3) The discharge of Employee by Company for Cause.
"Cause" shall mean (a) the material failure after notice on a recurring basis by
Employee to diligently and competently perform his duties (as defined from time
to time by the board of directors) on behalf of Company, (b) conviction of or
plea of nolo contender or equivalent plea to a felony or other crime involving
fraud or misrepresentation, or (c) Employee's engaging in any dishonesty or
fraud in connection with his employment hereunder or misappropriation of the
assets of Company.
(4) The voluntary resignation of Employee from his
employment hereunder.
(5) The termination by Company of Employee's
employment hereunder without Cause.
B. This Agreement shall automatically renew for additional one-year
terms on the same terms and conditions until terminated at the expiration of the
then-current term by sixty (60) days' advance written notice given by either
party to the other.
C. Termination of Employee's employment hereunder pursuant to
subparagraphs 2.A.(2), (3) or (5) shall be effected by written notice from
Company to Employee, and termination of Employee's employment hereunder pursuant
to subparagraph 2.A.(4) shall be effected by written notice from Employee to
Company, and in all such cases, such termination shall be effective immediately
upon delivery of such notice and Employee thereafter shall not be entitled to
receive any benefits hereunder except reimbursement for reasonable expenses
incurred on behalf of Company in the ordinary course of business prior to his
termination and, in the event of termination under subparagraph 2.A.(5) payment
of salary as provided in subparagraph 3.A. for the remainder of the then-current
calendar year. Furthermore, in the event of termination under subparagraph
2.A.(3) or (4) prior to December 31, 2000, Employee agrees that he shall
reimburse Company on the last day worked for a portion of the relocation
expenses; the expenses shall be prorated over twelve (12) months and the portion
for which Employee must reimburse Company will be payable in full upon the last
day of employment, and Employee agrees that Company may deduct such
reimbursement from any compensation or benefit owed to Employee.
3. COMPENSATION AND BENEFITS; RELOCATION ASSISTANCE
A. Employee shall be compensated by payment of an annual salary of Two
Hundred Thousand Dollars ($200,000.00) payable in regular payments in accordance
with the standard payroll practices of the Company.
<PAGE>
B. In addition to his salary, Employee shall be entitled to three weeks
of annual paid vacation time and paid sick leave, health insurance,
participation in 401(k) deferred compensation plan, and other employee benefits
accrued according to Company policy.
C. The Company shall have the unlimited right to change or terminate
its benefit packages from time to time so long as any such change does not
unlawfully discriminate against Employee, and this Agreement shall be deemed
automatically amended upon the effectiveness of such change.
D. Employee agrees to relocate to the Parsippany, NJ area. Employee
shall be reimbursed for relocation expenses as follows:
(1) Reasonable expenses incurred in moving furniture, normal household
goods and personal belongings from New Berlin, Wisconsin to the Parsippany, NJ
area, including packing, loading, delivery, and unloading. Employee shall obtain
a minimum of two bids for the moving contract and selection of the carrier shall
be coordinated with Company's designated representative.
(2) Reimbursement of incidental expenses associated with moving, up to
a maximum of $5,000.00.
(3) Reasonable relocation travel expenses for Employee's family by
ground or air transportation.
(4) Temporary living expenses in the Parsippany, NJ area, to wit,
temporary living quarters and utilities, for a period not to exceed 60 days, and
arrangements shall be coordinated with Company's designated representative.
(5) Expenses for which reimbursement is sought under subparagraph
3.D.(1)-(4) above must be preapproved by the Company, and Employee must provide
receipts or other documentation satisfactory to Company as a condition of
reimbursement. In Company's sole discretion, Company may advance or make
arrangements for direct payment of some or all of the relocation expenses.
Relocation assistance may be taxable to Employee.
E. All compensation, benefits, and relocation reimbursements are
subject to all applicable federal, state and local taxes and other laws or
ordinances requiring withholding of monies by Company.
4. STOCK OPTIONS. In addition to those benefits described in Section 3
above, Employee is granted certain stock options according to the vesting
schedule and at the option (strike) prices set forth below. Company and Employee
acknowledge and agree that Employee will not be a participant in the Amended and
Restated Aquis Communications Group, Inc. 1994 Incentive Stock Option Plan and
that this Agreement is a nonqualified plan. A Stock Option Agreement shall be
executed as of January 1, 2000, including the following terms:
<PAGE>
A. The Option shall continue in force through December 31, 2009 unless
sooner terminated as provided herein or in the Plan.
B. The Option shall grant Employee the right to purchase a total of
900,000 shares of Company common stock, according to the following vesting
schedule and at the following option price: (i) 300,000 shares on the first
business day of 2001 at the price of $.75 per share, (ii) 300,000 shares on the
first business day of 2002 at the closing price on the first business day of
2001, and (iii) 300,000 shares on the first business day of 2003 at the closing
price on the first business day of 2002.
C. Notwithstanding anything else herein to the contrary, Employee must
be employed by Company on December 31st of the year preceding vesting, i.e.,
Employee must be so employed on December 31, 2000 to be vested under
subparagraph 4.B.(i), on December 21, 2001 to be vested under subparagraph
4.B.(ii), and on December 31, 2002 to be vested under subparagraph 4.B.(iii),
provided, however, that if the term of employment is terminated under
subparagraphs 2.A.(1), (2) or (5), then Employee shall be vested at the rate of
25,000 shares for each full month of employment during the calendar year of
termination, e.g., for example, if Employee were terminated under subparagraph
2.A.(5) on April 15, 2001, then Employee would automatically be vested in 75,000
shares in addition to the shares vested under subparagraph 4.B.(i).
D. In the event of a Change of Control as defined hereinafter, the
vesting schedule set forth above in subparagraph 4.B. shall accelerate and the
Employee shall be immediately vested in all of the shares granted under
subparagraph 4.B. The option price for shares as to which the vesting schedule
has accelerated shall be determined as follows: if the Change of Control occurs
during calendar year 2000, the strike price shall be as set forth in
subparagraph 4.B.(i), and if the Change of Control occurs thereafter, the strike
price shall be the the average of the strike prices prior to the Change of
Control. "Change of Control" shall mean an event or series of events that would
be required to be described as a change in control of the Company in a proxy or
information statement distributed by the Company pursuant to Section 14 of the
Securities Exchange Act of 1934 in response to Item 6(e) of Schedule 14A
promulgated thereunder, or any substitute provision which may hereafter be
promulgated thereunder or otherwise adopted. The determination of whether and
when a change in control has occurred or is about to occur shall be made by the
Board of Directors in office immediately prior to the occurrence of the event or
series of events constituting such change in control.
E. Company shall cooperate with Employee as reasonably requested, at no
cost to Company, in the event Employee elects to file under Internal Revenue
Code Section 83B.
5. CONFIDENTIALITY, NONCOMPETITION AND NONINTERFERENCE.
A. Employee acknowledges that he will, in the course of, or incident
to, his employment hereunder, obtain from the Company trade secrets and other
confidential business information of the Company (all of which is hereinafter
referred to as "The Restricted Information,") which term shall include all
information that is not known by, or generally available to, the industry at
large and that concerns the business or affairs of the Company,
<PAGE>
including, without limitation, customer lists, customer needs and requirements,
marketing plans, referral sources of business, pricing and product information,
formulas, business plans and methods, customer files, drawings, specifications,
contracts, management reports, financial and legal documents, computer programs
and employee lists, salaries and benefits). Employee acknowledges that his
obtaining The Restricted Information is intended to, and necessary to, enable
him successfully to perform the duties of his employment, and that the
confidentiality of such Restricted Information is necessary to the Company's
ability to compete with its competitors. Employee agrees that:
(1) during the term of Employee's employment by Company, and at all
times thereafter, he will hold all and each portion of The Restricted
Information in the strictest confidence, and not disclose, communicate or
divulge the same to, or use the same for the direct or indirect benefit of, any
person or entity (which terms, as used in this Agreement, shall include, without
limitation, any individual, partnership, joint venture, firm, corporation,
association, or group) including, without limitation, (i) soliciting, diverting,
taking away or accepting business from any customer who was a customer or who
was being solicited by Company during Employee's employment by Company,
including, without limitation, all customers or potential customers produced,
generated or introduced to Company by Employee, (ii) soliciting, inducing or
contracting with any of Company's employees to leave Company for any of
Company's referral sources of business, except as required in the performance of
his duties hereunder; and
(2) upon termination of his employment hereunder for any reason
whatever, he will immediately return to the Company all documents or other
tangible records, and any and all copies thereof, within his possession, custody
or control, containing or reflecting any information concerning The Restricted
Information, or any portion thereof.
B. Employee agrees that, in addition to his undertakings in
subparagraph 5.A. above, during Employee's employment by Company and, unless
terminated under subparagraph 2.A.(5), for a period of one year thereafter
regardless of the reason for termination, Employee will not (1) in any state
where Company provides direct wireless messaging service or otherwise does
business or solicits business during the term hereof, as principal, partner,
officer, director, agent, employee, contractor, consultant or otherwise in any
capacity, directly or indirectly, engage in (except as an employee of the
Company or subsidiary or affiliate of the Company), or assist or advise any
other person or firm engaged in or be financially interested in any business
which is engaged in or be financially interested in any business which is
engaged in direct or indirect competition with the Company, or (2) solicit,
induce or contract with any employee of Company to terminate employment with
Company or to work for Employee or for any company with which Employee is
connected in any way (except as an employee of the Company or subsidiary or
affiliate of the Company). In the event legal action is brought by the Company
with respect to the restriction contained in this subparagraph 5.B. which
results in the finding of a violation, the one year period of time for this
restriction shall be extended for the number of days equal to the period of time
from the date of commencement of such legal action to the date of final
disposition of the action.
C. Any and all writings, inventions, improvements, processes, systems,
procedures, techniques and/or other intellectual property, which Employee may
make, conceive, discover or
<PAGE>
develop, either solely or jointly with any other person or persons, during
working hours, whether at the request or upon the suggestion of the Company or
otherwise, which relate to or are useful in connection with the business now or
hereafter carried on by the Company, including, without limitation, developments
or expansions of its present fields of operations, shall be and hereby are the
sole and exclusive property of the Company. Employee shall make full disclosure
to the Company of all such writings, inventions, improvements, processes,
systems, procedures, techniques and other intellectual property and shall do all
such acts and execute, acknowledge and deliver all such instruments in writing
as may be necessary to vest in the Company the absolute title thereto. Employee
further covenants and agrees to write and prepare all specifications and
procedures and to aid and assist the Company in all other ways in order that the
Company or its nominee properly can prepare and present all claims and
applications for copyright, Letters Patent and/or other intellectual property
rights, in order for Company or its nominee to secure such copyright, Letters
Patent or other intellectual property rights, wherever possible, as well as
reissues, renewals, and extensions thereof, and can obtain the record title to
such copyright, patents or other intellectual property so that the Company or
its nominee shall be the sole and absolute owner thereof in all countries in
which it may desire to have copyright, patent or other intellectual property
rights protection. It is understood and agreed that Employee shall not be
entitled to any additional or special compensation or reimbursement in regard to
any and such writings, inventions, improvements, processes, systems, procedures,
techniques, and other intellectual property.
D. Employee acknowledges that the Company is engaged in business on a
regional basis, that it is engaged in a highly competitive business and that The
Restricted Information as well as its business techniques and programs are of
great significance in enabling it to compete and participate in the various
markets in which it is or seeks to be active. Employee, therefore, agrees that
the restrictions contained in subparagraphs 5.A. through 5.C. above are
reasonable and necessary in order to protect the legitimate interests of the
Company and that any violation thereof would result in irreparable injury to the
Company. Consequently, Employee acknowledges and agrees that, in the event of
any violation thereof, the Company shall be authorized and entitled to obtain,
from any court of competent jurisdiction, temporary, preliminary and permanent
injunctive relief, an equitable accounting of all profits and benefits arising
out of such violation, as well as all losses, damages, costs and expenses,
including, without limitation, actual attorneys fees and costs incurred by
Company in any claim and/or litigation, suit or arbitration, which rights or
remedies to which the Company may be entitled. In the event that subparagraph
5.A., 5.B., or 5.C. above is held to be in any respect an unreasonable
restriction upon Employee, then the court so holding shall reduce the territory
to which it pertains and/or the period of time in which it operates, or effect
any other change to the extent necessary to render such subparagraph
enforceable. In the event legal action is brought by the Company with respect to
subparagraphs 5.A., 5.B., or 5.C. above requesting a temporary or preliminary
injunction, Employee and Company waive any time limitations on discovery imposed
under federal or state law and agree that discovery may be undertaken
immediately upon commencement of any legal action.
E. In the event of a Change of Control, Company may assign its rights
under this Paragraph 5 and such assignee shall thereupon be deemed substituted
for Company upon the terms and subject to the conditions hereof.
<PAGE>
6. CERTAIN REPRESENTATIONS. EMPLOYEE REPRESENTS AND WARRANTS THAT THE
KNOWLEDGE, SKILLS AND ABILITIES HE CURRENTLY POSSESSES ARE SUFFICIENT TO PERMIT
HIM FOR A PERIOD OF ONE (1) YEAR TO EARN A LIVELIHOOD SATISFACTORY TO HIMSELF
WITHOUT VIOLATING ANY PROVISION OF THIS AGREEMENT. HE ACKNOWLEDGES, FOR EXAMPLE,
THAT HE WILL BE ABLE TO USE SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF
THEM, IN THE SERVICE OF A NONCOMPETITOR OF COMPANY. EMPLOYEE ACKNOWLEDGES THAT
HIS COVENANTS CONTAINED IN THIS AGREEMENT ARE GIVEN IN CONSIDERATION OF THE
PAYMENTS TO BE MADE BY COMPANY HEREUNDER AND THAT AGREEMENT BY EMPLOYEE TO THE
CONFIDENTIALITY AND NONCOMPETITION COVENANTS CONTAINED IN PARAGRAPH 5 IS A
MATERIAL INDUCEMENT FOR COMPANY'S AGREEMENT TO ENTER INTO THIS CONTRACT FOR
EMPLOYMENT.
7. NOTICES. Any notice required or permitted hereunder shall be sent by
registered or certified mail, return receipt requested, postage prepaid, to the
respective parties hereto at the addresses set forth below, or to such other
address, or in care of such other person, as any party shall designate as his or
its address for such notices by due notice hereunder.
If to Employee: Nick T. Catania
3200 S. Stonegate Circle #204
New Berlin, WI 53151
Copy to: Steven D. Buck, Esquire
Stevens & Lee
1 Glenhardie Corporate Center
1275 Drummers Lane, PO Box 236
Wayne, PA 19087
Telephone: (610) 293-5895
Facsimile: (610) 687-1384
If to Company: Aquis Communications Group, Inc.
1719A Route 10
Suite 300
Parsippany, NJ 07054
Telephone: (973) 560-8001
Facsimile: (973) 560-8060
Copy to: Dan A. Blakinger, Esquire
Blakinger, Byler & Thomas, P.C.
28 Penn Square
Lancaster, PA 17603
Telephone: (717) 299-1100
Facsimile (717) 299-9529
<PAGE>
8. GENERAL.
A. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania. The parties acknowledge and agree
that the sole and exclusive jurisdiction and venue for all actions shall be the
State or Federal courts located in Pennsylvania and both parties hereby consent
to such jurisdiction and venue.
B. The waiver by either party of a breach of any provisions of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach or violation thereof.
C. The Employee acknowledges that his services are unique and personal.
Accordingly, the Employee may not assign his rights or delegate his duties or
obligations hereunder. The Company's rights and obligations under this
Agreement, including without limitation the confidentiality, noncompetition, and
noninterference provisions for the benefit of the Company under Paragraph 5,
shall be freely assignable by the Company in the event of a Change of Control.
D. This Agreement may not be altered or amended except by an agreement
in writing signed by the parties.
E. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and assigns. If any provision of this 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.
F. The parties intend to be legally bound by this Agreement.
G. If any provision of this Agreement or the application thereof is
held invalid or unenforceable, the invalidity or unenforceability thereof shall
not affect any other provisions of this Agreement which can be given effect
without the invalid or unenforceable provision, and to this end the provisions
of this Agreement are to be severable. Without limiting the foregoing, if the
time or space restrictions of Paragraph 5 are deemed unreasonable, then such
provision shall be reduced according to such extent that the covenants shall be
deemed reasonable and enforceable.
H. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
9. PRIOR EMPLOYMENT. Employee represents and warrants that his
acceptance of employment with the Company has not breached, and the performance
of his duties hereunder will not breach, any duty owned by him to any prior
employer or other person, except that Employee is a party to and is subject to
certain restrictions under that Noncompetition
<PAGE>
Agreement dated July 20, 1998 by and between Vanguard Cellular Operating Corp
and Catania (the "Vanguard Noncompetition Agreement"). Employee agrees that he
will defend, indemnify and hold harmless the Company from all losses, damages,
costs and expenses, including attorney's fees, which Company may sustain arising
out of or in any way related to Employee's breach of this representation and
warranty. Company agrees that it will defend, indemnify and hold harmless the
Employee from all losses, damages, costs and expenses, including attorney's
fees, which Employee may sustain arising out of or in any way related to the
Vanguard Noncompetition Agreement by reason of his employment with Company. If
any claim or liability is asserted or threatened against Employee or any action,
suit or proceeding is commenced against Employee by Vanguard, its successors and
assigns, with respect to the Vanguard Noncompetition Agreement, which might
result in any liability being imposed on Employee under the indemnification
provision of this Agreement, Employee shall, within five days, give notice of
such claim in writing to Company, together with a copy of any complaint or other
documents asserting such claim. Within fifteen (15) business days after the
giving of such notice, Company shall notify Employee, in writing, as to whether
or not Company elects to defend against any such claim or liability. If Company
so elects to defend, it shall be at Company's sole cost and expense, provided
that it shall proceed in good faith, expeditiously and diligently, and provided
further that Employee shall at all times have the right, at his cost and expense
to participate in the defense, negotiation or settlement of such claim. If
Company elects not to defend any claim or liability pursuant to this subsection,
Employee shall have the right, but not the obligation, to undertake the defense
thereof at Company's expense.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed or caused this Agreement to be executed as of the day first above
written.
"COMPANY"
ATTEST: AQUIS COMMUNICATIONS GROUP, INC.
_________________________________
By:_________________________________
"EMPLOYEE"
WITNESS:
_________________________________
____________________________________
Nick T. Catania
<PAGE>
Exhibit 10.29
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made this 7th
day of April, 2000 by and between AQUIS COMMUNICATIONS GROUP, INC. (the
"Company") and NICK T. CATANIA ("Employee").
BACKGROUND
Reference is made to the Employment Agreement dated as of January 4,
2000 between the Company and Employee (the "Agreement") in relation to
Employee's employment as President/CEO of the Company on terms and under the
conditions set forth therein.
The Company and Employee wish to amend the timing and circumstances
under which certain stock options for 300,000 shares of the Company's common
stock granted to Employee in subparagraph 4.B(i) of the Agreement may be
exercised, all as provided for herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, and
for good and valid considerations, the receipt and sufficiency of which is
hereby acknowledged, do hereby agree as follows:
1. AMENDMENT TO AGREEMENT.
Section 4.C of the Agreement is hereby amended and restated to
read in its entirety as follows:
Notwithstanding anything else herein to the contrary
(x) With respect to the 300,000 options granted under
subparagraph 4.B (i), Employee shall be vested without other
conditions on the on the earlier of (x) June 30, 2000 and (y)
the
<PAGE>
initial drawing of funds under equity financing obtained
through Ladenburg Thallman & Co.
(y) With respect to the 600,000 options granted under
subparagraphs 4.B(ii) and 4.B(iii), Employee must be employed
by the Company on December 31st of the year preceding vesting,
E.G., Employee must be so employed on December 21, 2001 to be
vested under subparagraph 4.B(ii), and on December 31, 2002 to
be vested under subparagraph 4.B(iii), provided, however, that
if the term of employment is terminated under subparagraphs
2.A.(1), (2) or (5), then Employee shall be vested at the rate
of 25,000 shares for each full month of employment during the
calendar year of termination, E.G., if Employee were
terminated under subparagraph 2.A.(5) on April 15, 2001, then
Employee would automatically be vested in 75,000 shares in
addition to the shares vested under subparagraph 4.B.(ii).
2. MISCELLANEOUS.
(a) All of the terms, conditions, provisions and covenants
in the Agreement shall remain unaltered and in full force and effect except as
modified by this Amendment.
(b) This Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
(c) Each and every one of the terms and provisions of this
Amendment shall be binding upon and shall inure to the benefit of the Company
and Employee, their respective successors and assigns.
(d) This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall constitute but one
and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
AQUIS COMMUNICATIONS GROUP, INC.
By:______________________________
Name:_________________________
Title:________________________
NICK T. CATANIA
_________________________________
3
<PAGE>
Exhibit 10.30
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
AQUIS COMMUNICATIONS GROUP, INC. AMENDED AND
RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is
made and entered into as of January 4, 2000 (the "Date of Grant") by and between
Aquis Communications Group, Inc. (the "Company") and Nick T. Catania
("Optionee").
WHEREAS, Optionee is the Chief Executive Officer of the Company; and
WHEREAS, pursuant to the employment agreement dated as of January 4,
2000 (the "Employment Agreement"), Optionee is to receive the grant of a
non-qualified option to purchase shares of the Common Stock, par value $.001 per
share of the Company (the "Common Stock"), on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an
option (the "Option") to purchase 900,000 shares of Common Stock (the "Option
Shares") at the Exercise Prices per share set forth below. The Option shall
expire at 5:00 p.m. Eastern time, on December 31, 2009 (the "Option Expiration
Date") and shall be subject to all of the terms and conditions set forth in this
Agreement. The Option shall become exercisable to purchase (vest) as follows:
(a) Of the Option Shares, 300,000 shall have an Exercise Price
of $0.75 and shall vest on the earlier of (x) June 30, 2000 and (y) the initial
drawing of funds under equity financing obtained through Ladenburg Thallman &
Co. (the "First Tranche Options").
(b) Of the Option Shares, 300,000 shall vest on December 31,
2001 and shall have an Exercise Price equal to the closing price of the Common
Stock on January 2, 2001 (the "Second Tranche Options").
(c) Of the Option Shares, 300,000 shall vest on December 31,
2002 and shall have an Exercise Price equal to the closing price of the Common
Stock on January 2, 2002 (the "Third Tranche Options").
<PAGE>
(d) Notwithstanding the foregoing, if the term of Optionee's
employment is terminated under subparagraphs 2.A.(1), (2) or (5) of the
Employment Agreement, then Optionee shall be vested at the rate of 25,000 shares
for each full month of employment during the calendar year of termination, e.g.,
for example, if Optionee were terminated under subparagraph 2.A.(5) on April 15,
2002, then Optionee would automatically be vested in 75,000 shares in addition
to the First Tranche Options.
(e) Further notwithstanding the foregoing, in the event of a
Change in Control, all Option Shares shall immediately vest and the Exercise
Price of previously unvested options shall be as follows: (x) the Exercise Price
of the First Tranche Options if the Change in Control occurs prior to the
January 1, 2001; (y) the average of the Exercise Prices of the First Tranche
Options and the Second Tranche Options if the Change in Control occurs after
January 1, 2001 and prior to January 1, 2002; and (2) the average of the
Exercise Prices of the First Tranche Options, the Second Tranche Options and the
Third Tranche Options if the Change in Control occurs thereafter. "Change of
Control" shall mean an event or series of events that would be required to be
described as a change in control of the Company in a proxy or information
statement distributed by the Company pursuant to Section 14 of the Securities
Exchange Act of 1934 in response to Item 6(e) of Schedule 14A promulgated or any
substitute provision which may hereafter be promulgated thereunder or otherwise
adopted. The determination of whether and when a Change in Control has occurred
or is about to occur shall be made by the Board of Directors in office
immediately prior to the occurrence of the event or series of events
constituting such Change in Control.
2. TAX STATUS OF OPTION.
This Option is intended to be a Nonqualified Stock Option and shall not
be treated as an Incentive Stock Option within the meaning of Section 422(b) of
the Internal Revenue Code of 1986, as amended.
3. ADMINISTRATION.
All questions of interpretation concerning this Option Agreement shall
be determined by the Board.
4. EXERCISE OF THE OPTION.
4.1 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Common Stock for which the Option is being exercised
and such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the provisions
of this Option Agreement. The written notice must be signed by the Optionee and
must be delivered in person, by certified or registered mail, return receipt
requested, by confirmed facsimile transmission, or by such other means as the
Company may permit, to the Chief Financial Officer of the Company, or other
authorized representative of the Company, prior to the termination of the Option
as set forth in Section 6, accompanied by full
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<PAGE>
payment of the aggregate exercise price for the number of shares of Common Stock
being purchased. The Option shall be deemed to be exercised upon receipt by the
Company of such written notice and the aggregate Exercise Price.
4.2 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Common Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Common Stock owned by the
Optionee having a fair market value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the aggregate Exercise Price, (iii) by means of a
Cashless Exercise, as defined in Section 4.2(c), or (iv) by any combination of
the foregoing.
(b) TENDER OF COMMON STOCK. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company of shares of Common Stock
to the extent such tender of Common Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of the
Company's stock. The Option may not be exercised by tender to the Company of
shares of Common Stock unless such shares either have been owned by the Optionee
for more than six (6) months or were not acquired, directly or indirectly, from
the Company.
(c) CASHLESS EXERCISE. A "Cashless Exercise" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Common Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve).
4.3 TAX WITHHOLDING. At the time the Option is exercised, in whole or
in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired upon exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option. The
Optionee is cautioned that the Option is not exercisable unless the tax
withholding obligations of the Company are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested, and the Company shall have no obligation to issue a certificate for such
shares.
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<PAGE>
4.4 CERTIFICATE REGISTRATION. Except in the event the Exercise Price is
paid by means of a Cashless Exercise, the certificate for the shares as to which
the Option is exercised shall be registered in the name of the Optionee, or, if
applicable, in the names of the heirs of the Optionee.
4.5 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of shares of Common Stock upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Common Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Common Stock may then be listed. In addition, the
Option may not be exercised unless (i) a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") shall at the time of
exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option, or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED
UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT
BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares subject to the Option
shall relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to the exercise of the Option, the Company may require
the Optionee to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
4.6 REGISTRATION OF SHARES UDER THE SECURITIES ACT, The Company shall
promptly file a registration statement under the Securities Act including the
Option Shares and take such further action as shall be necessary to cause the
registration statement to become effective and remain so until the Option is
exercised or expires.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the Optionee only by
the Optionee or the Optionee's guardian or legal representative and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution. Following the death of the Optionee, the Option, to the extent
provided in Section 7, may be exercised by the Optionee's legal representative
or by any person empowered to do so under the deceased Optionee's will or under
the then applicable laws of descent and distribution.
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6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on the first
to occur of (a) the Option Expiration Date, and (b) the last date for exercising
the Option following termination of the Optionee's employment as described in
Section 7.
7. EFFECT OF TERMINATION OF EMPLOYMENT.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY OR RETIREMENT. If the Optionee's employment
with the Company is terminated because of the Complete Disability (as defined in
the Employment Agreement)of the Optionee, the Option, to the extent unexercised
and exercisable on the date on which the Optionee's employment terminated, may
be exercised by the Optionee (or, the Optionee's guardian or legal
representative) at any time prior to the expiration of six (6) months after the
date on which the Optionee's employment terminated, but in any event no later
than the Option Expiration Date.
(b) DEATH. If the Optionee's employment with the Company is
terminated because of the death of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee's employment
terminated, may be exercised by the Optionee's legal representative or other
person who acquired the right to exercise the Option by reason of the Optionee's
death at any time prior to the expiration of six (6) months after the date on
which the Optionee's employment terminated, but in any event no later than the
Option Expiration Date. The Optionee's employment shall be deemed to have
terminated on account of death if the Optionee dies within one (1) month after
the Optionee's termination of employment.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's employment
with the Company terminates for any reason, except Complete Disability or death,
the Option, to the extent unexercised and exercisable by the Optionee on the
date on which the Optionee's Service terminated, may be exercised by the
Optionee within one (1) month (or such other longer period of time as determined
by the Board, in its sole discretion) after the date on which the Optionee's
Service terminated, but in any event no later than the Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.5, the Option
shall remain exercisable until one (1) month alter the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
8. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Prices and class of shares of Common Stock subject to the
Option. If a majority of the shares which are of the same class as the shares
that are subject to the Option are exchanged for, converted into, or otherwise
become
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shares of another corporation (the "NEW SHARES"), the Board may unilaterally
amend the Option to provide that the Option is exercisable for New Shares. In
the event of any such amendment, the number of Option Shares and the Exercise
Prices shall be adjusted in a fair and equitable manner, as reasonably
determined by the Board. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 8 shall be rounded up or
down to the nearest whole number, as determined by the Board, and in no event
may the Exercise Price be decreased to an amount less than the par value, if
any, of the stock subject to the Option.
9. RIGHTS AS A STOCKHOLDER.
The Optionee shall have no rights as a stockholder with respect to any
shares covered by the Option until the date of the issuance of a certificate for
the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 8.
10. RESTRICTIONS ON TRANSFER OF SHARES.
No shares acquired upon exercise of the Option may be sold, exchanged,
transferred (including, without limitation, any transfer to a nominee or agent
of the Optionee), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Option Agreement and any such attempted disposition shall be
void. The Company shall not be required (a) to transfer on its books any shares
which will have been transferred in violation of any of the provisions set forth
in this Option Agreement, or (b) to treat as owner of such shares or to accord
the right to vote as such owner or to pay dividends to any transferee to whom
such shares will have been so transferred.
11. BINDING EFFECT.
Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
12. TERMINATION OR AMENDMENT.
The Board may amend the Option at any time; provided, however, that no
such termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or
amendment is necessary to comply with any applicable law or government
regulation. No amendment or addition to this Option Agreement shall be effective
unless in writing.
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13. NOTICES.
Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Option
Agreement provides for effectiveness only upon actual receipt of such notice)
upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
14. INTEGRATED AGREEMENT; CONSTRUCTION.
This Option Agreement constitutes the entire understanding and
agreement of the Optionee and the Company with respect to the subject matter
contained herein and there are no agreements, understandings, restrictions,
representations, or warranties among the Optionee and the Company with respect
to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of this
Option Agreement. Except when otherwise indicated by the contest, the singular
shall include the plural and the plural shall include the singular. Use of the
term "or" is not intended to be exclusive, unless the context clearly requires
otherwise.
15. APPLICABLE LAW.
This Option Agreement shall be governed by the internal laws of the
State of Delaware as such laws are applied to agreements between Delaware
residents entered into and to be performed entirely within the State of
Delaware.
AQUIS COMMUNICATIONS GROUP, INC.
BY:___________________________________
Title:________________________________
Address:______________________________
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Option subject to
all of the terms and provisions thereof.
NICK T. CATANIA
Date:____________________________ BY:__________________________________
Optionee Address:
3200 S. Stonegate Circle #204
New Berlin, WI 53151
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Exhibit 10.31
AMENDED AND RESTATED LOAN AGREEMENT
between
FINOVA CAPITAL CORPORATION,
as Agent and Lender,
and
AQUIS WIRELESS COMMUNICATIONS, INC.
as Borrower
Dated as of January 31, 2000
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TABLE OF CONTENTS
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PRELIMINARY STATEMENT.............................................................................................1
DEFINITIONS AND DETERMINATIONS....................................................................................1
1.1 DEFINITIONS.....................................................................................1
1.2 TIME PERIODS...................................................................................19
1.3 ACCOUNTING TERMS AND DETERMINATIONS............................................................19
1.4 REFERENCES.....................................................................................20
1.5 LENDER'S OR AGENT'S DISCRETION.................................................................20
1.6 BORROWER'S KNOWLEDGE...........................................................................20
ARTICLE II
LOAN AND TERMS OF PAYMENT........................................................................................20
2.1 LOAN..................................................................................20
2.1.1 AGGREGATE LOAN AMOUNT........................................................20
2.1.2 EXISTING PORTION.............................................................20
2.1.3 SOURCEONE PORTION............................................................21
2.1.4 USE OF PROCEEDS..............................................................21
2.1.5 NOTE.........................................................................21
2.1.6 REBORROWING..................................................................21
2.2 INTEREST..............................................................................21
2.2.1 INTEREST RATE ON EXISTING PRINCIPAL BALANCE..................................21
2.2.2 INTEREST RATE ON SOURCEONE PRINCIPAL BALANCE.................................22
2.2.3 INTEREST COMPUTATION.........................................................22
2.2.4 MAXIMUM INTEREST.............................................................23
2.3 LIBOR LOANS...........................................................................24
2.3.1 ELECTION BY BORROWER.........................................................24
2.3.2 LIBOR LIMITATIONS............................................................24
2.3.3 EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE.............24
2.3.4 TAX AND OTHER LAWS...........................................................25
2.3.5 CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL................................25
2.3.6 INDEMNITY....................................................................26
2.4 PRINCIPAL AND INTEREST PAYMENTS.......................................................26
2.4.1 INTEREST.....................................................................26
2.4.2 PRINCIPAL....................................................................26
2.5 DEFAULT RATE..........................................................................27
2.6 LATE CHARGES..........................................................................27
2.7 SOURCEONE LOAN FEE....................................................................27
2.8 PREPAYMENTS...........................................................................27
2.8.1 VOLUNTARY PREPAYMENTS........................................................27
2.8.2 MANDATORY PREPAYMENTS........................................................28
2.8.3 PREPAYMENT PREMIUM...........................................................28
2.8.4 INVOLUNTARY PREPAYMENT.......................................................29
2.9 PAYMENTS AFTER EVENT OF DEFAULT.......................................................29
2.10 METHOD OF PAYMENT; GOOD FUNDS.........................................................29
ARTICLE III
SECURITY.........................................................................................................29
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ARTICLE IV
CONDITIONS OF CLOSING............................................................................................29
4.1 REPRESENTATIONS AND WARRANTIES........................................................30
4.2 PERFORMANCE; NO DEFAULT...............................................................30
4.3 MAXIMUM CASH PURCHASE PRICE...........................................................30
4.4 BANKRUPTCY PROCEEDING.................................................................30
4.5 CONSUMMATION OF SOURCEONE ACQUISITION.................................................30
4.6 DELIVERY OF DOCUMENTS.................................................................30
4.7 TERMINATION OF GUARANTY...............................................................31
4.8 OPINIONS OF COUNSEL; DIRECTION FOR DELIVERY...........................................31
4.9 LICENSES..............................................................................32
4.10 SECURITY INTERESTS....................................................................32
4.11 INDEBTEDNESS TO BE REFINANCED.........................................................32
4.12 MAXIMUM LEVERAGE......................................................................32
4.13 FINANCIAL STATEMENTS AND PROJECTIONS..................................................32
4.14 INSURANCE.............................................................................32
4.15 ENVIRONMENTAL AUDIT...................................................................33
4.16 APPROVAL OF INSTRUMENTS AND SECURITY INTERESTS; CONSENTS..............................33
4.17 USE OF ASSETS.........................................................................33
4.18 PROCEEDINGS AND DOCUMENTS.............................................................33
4.19 MATERIAL ADVERSE CHANGE...............................................................33
4.20 BROKER FEES...........................................................................34
4.21 FEES AND EXPENSES.....................................................................34
ARTICLE V
REPRESENTATIONS AND WARRANTIES...................................................................................34
5.1 EXISTENCE AND POWER...................................................................34
5.2 AUTHORITY.............................................................................34
5.3 BORROWER CAPITAL STOCK AND RELATED MATTERS............................................34
5.3.1 BORROWER CAPITAL STOCK.......................................................34
5.3.2 RESTRICTIONS.................................................................34
5.4 BINDING AGREEMENTS....................................................................35
5.5 BUSINESS AND PROPERTY OF BORROWER.....................................................35
5.5.1 BUSINESS AND PROPERTY........................................................35
5.5.2 LICENSES.....................................................................35
5.5.3 OPERATING AGREEMENTS.........................................................35
5.5.4 FACILITY SITES...............................................................35
5.5.5 LEASES.......................................................................36
5.5.6 REAL ESTATE..................................................................36
5.5.7 OPERATION AND MAINTENANCE OF EQUIPMENT.......................................36
5.6 TITLE TO PROPERTY; LIENS..............................................................36
5.7 PROJECTIONS AND FINANCIAL STATEMENTS..................................................37
5.7.1 FINANCIAL STATEMENTS.........................................................37
5.7.2 PROJECTIONS..................................................................37
5.8 LITIGATION............................................................................37
5.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING AGREEMENTS........................37
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5.10 TAXES.................................................................................38
5.11 COMPLIANCE WITH APPLICABLE LAWS.......................................................38
5.12 PATENTS, TRADEMARKS, FRANCHISES, AGREEMENTS...........................................38
5.14 ENVIRONMENTAL MATTERS.................................................................39
5.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS...........................................39
5.15.1 INVESTMENT COMPANY ACT.......................................................39
5.15.2 HOLDING COMPANY ACT..........................................................39
5.15.3 FOREIGN OR ENEMY STATUS......................................................39
5.15.4 REGULATIONS AS TO BORROWING..................................................39
5.16 MARGIN REGULATIONS....................................................................39
5.17 OTHER INDEBTEDNESS....................................................................40
5.18 NO MISREPRESENTATION..................................................................40
5.19 EMPLOYEE BENEFIT PLANS................................................................40
5.19.1 NO OTHER PLANS...............................................................40
5.19.2 ERISA AND CODE COMPLIANCE AND LIABILITY......................................40
5.19.3 FUNDING......................................................................40
5.19.4 PROHIBITED TRANSACTIONS AND PAYMENTS.........................................41
5.19.5 NO TERMINATION EVENT.........................................................41
5.19.6 ERISA LITIGATION.............................................................41
5.20 EMPLOYEE MATTERS......................................................................41
5.20.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES.................................41
5.20.2 CLAIMS RELATING TO EMPLOYMENT................................................41
5.21 BURDENSOME OBLIGATIONS................................................................41
5.22 BROKER FEES...........................................................................42
5.23 PAGERS IN SERVICE.....................................................................42
5.24 INSURANCE.............................................................................42
ARTICLE VI
AFFIRMATIVE COVENANTS............................................................................................42
6.1 LEGAL EXISTENCE; GOOD STANDING........................................................42
6.2 INSPECTION............................................................................42
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION............................................42
6.3.1 MONTHLY STATEMENTS...........................................................43
6.3.2 QUARTERLY STATEMENTS AND AGINGS..............................................43
6.3.3 ANNUAL STATEMENTS............................................................43
6.3.4 OFFICER'S CERTIFICATES.......................................................44
6.3.5 ACCOUNTANTS' CERTIFICATE.....................................................44
6.3.6 AUDIT REPORTS................................................................44
6.3.7 BUSINESS PLANS...............................................................44
6.3.8 NOTICE OF DEFAULTS; LOSS.....................................................44
6.3.9 NOTICE OF SUITS; ADVERSE EVENTS..............................................45
6.3.10 REPORTS TO SHAREHOLDERS, CREDITORS AND GOVERNMENTAL BODIES...................45
6.3.11 ERISA NOTICES AND REQUESTS...................................................45
6.3.12 OTHER INFORMATION............................................................46
6.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS......................................46
6.5 MAINTENANCE OF LICENSES AND OTHER AGREEMENTS..........................................47
6.6 INSURANCE.............................................................................47
6.6.1 MAINTENANCE OF INSURANCE.....................................................47
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6.6.2 CLAIMS AND PROCEEDS..........................................................47
6.7 FUTURE LEASES.........................................................................48
6.8 FUTURE ACQUISITIONS OF REAL PROPERTY..................................................48
6.9 ENVIRONMENTAL MATTERS.................................................................48
6.9.1 COMPLIANCE...................................................................48
6.9.2 CERTIFICATION................................................................49
6.10 COMPLIANCE WITH LAWS..................................................................49
6.11 TAXES AND CLAIMS......................................................................49
6.12 MAINTENANCE OF PROPERTIES.............................................................49
6.13 GOVERNMENTAL APPROVALS................................................................49
6.14 PAYMENT OF INDEBTEDNESS...............................................................49
6.15 SUNSTAR TRANSFER......................................................................49
ARTICLE VII
NEGATIVE COVENANTS...............................................................................................50
7.1 BORROWING.............................................................................50
7.2 LIENS.................................................................................50
7.3 MERGER AND ACQUISITION................................................................50
7.4 CONTINGENT LIABILITIES................................................................50
7.5 DISTRIBUTIONS.........................................................................50
7.6 CAPITAL EXPENDITURES..................................................................50
7.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY...........................................51
7.8 OBLIGATIONS AS LESSEE UNDER OPERATING LEASES..........................................51
7.9 INVESTMENTS, LOANS....................................................................51
7.10 FUNDAMENTAL BUSINESS CHANGES..........................................................51
7.11 FACILITY SITES........................................................................52
7.12 SALE OR TRANSFER OF ASSETS............................................................52
7.13 AMENDMENT OF CERTAIN AGREEMENTS.......................................................52
7.14 ACQUISITION OF ADDITIONAL PROPERTIES..................................................52
7.15 EQUITY SALES..........................................................................52
7.16 TRANSACTIONS WITH AFFILIATES..........................................................52
7.17 COMPLIANCE WITH ERISA.................................................................53
7.18 SENIOR LEVERAGE RATIO.................................................................53
7.19 SENIOR DEBT SERVICE COVERAGE RATIO....................................................54
7.20 TOTAL LEVERAGE RATIO..................................................................54
7.21 CERTAIN AGREEMENTS....................................................................55
ARTICLE VIII
DEFAULT AND REMEDIES.............................................................................................55
8.1 EVENTS OF DEFAULT.....................................................................55
8.1.1 DEFAULT IN PAYMENT...........................................................55
8.1.2 BREACH OF COVENANTS..........................................................55
8.1.3 BREACH OF WARRANTY...........................................................55
8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY..........................56
8.1.5 BANKRUPTCY...................................................................56
8.1.6 JUDGMENTS....................................................................56
8.1.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS.....................................57
</TABLE>
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8.1.8 COLLATERAL...................................................................57
8.1.9 INTERRUPTION OF OPERATIONS...................................................57
8.1.10 PLANS........................................................................57
8.1.11 Change in Control............................................................58
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS................................................58
8.3 REMEDIES ON DEFAULT...................................................................58
8.3.1 ENFORCEMENT OF SECURITY INTERESTS............................................58
8.3.2 OTHER REMEDIES...............................................................58
8.4 APPLICATION OF FUNDS..................................................................59
8.4.1 EXPENSES.....................................................................59
8.4.2 BORROWER'S OBLIGATIONS.......................................................59
8.4.3 SURPLUS......................................................................59
8.5 PERFORMANCE OF BORROWER'S OBLIGATIONS.................................................59
ARTICLE IX
ADDITIONAL LENDERS AND PARTICIPANTS; THE AGENT...................................................................60
9.1 ASSIGNMENT TO OTHER LENDERS...........................................................60
9.1.1 ASSIGNMENT...................................................................60
9.1.2 EFFECT OF LOAN ASSIGNMENT....................................................60
9.1.3 REGISTER.....................................................................60
9.1.4 SUBSTITUTION OF NOTES........................................................60
9.1.5 INSPECTIONS..................................................................61
9.2 PARTICIPATIONS........................................................................61
9.3 SET OFF AND SHARING OF PAYMENTS.......................................................61
9.4 LENDERS' DECISIONS....................................................................61
9.5 APPOINTMENT OF AGENT..................................................................62
9.6 DELEGATION OF DUTIES..................................................................62
9.7 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION....................................62
9.8 INSTRUCTIONS FROM LENDERS.............................................................62
9.9 EXCULPATORY PROVISIONS................................................................62
9.10 REIMBURSEMENT AND INDEMNIFICATION BY LENDERS OF AGENT.................................63
9.11 RELIANCE BY AGENT.....................................................................63
9.12 NOTICE OF DEFAULT.....................................................................63
9.13 RELEASE OF COLLATERAL.................................................................63
9.14 LENDERS IN THEIR INDIVIDUAL CAPACITIES................................................63
9.15 HOLDERS OF NOTES......................................................................64
9.16 SUCCESSOR AGENT.......................................................................64
9.17 DELIVERY OF INFORMATION...............................................................64
9.18 BENEFICIARIES.........................................................................64
ARTICLE X
CLOSING..........................................................................................................65
ARTICLE XI
EXPENSES AND INDEMNITY...........................................................................................65
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11.1 ATTORNEY'S FEES AND OTHER FEES AND EXPENSES...........................................65
11.1.1 FEES AND EXPENSES FOR PREPARATION OF LOAN INSTRUMENTS........................65
11.1.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF LOAN INSTRUMENT.....65
11.2 INDEMNITY.............................................................................66
11.2.1 BROKERAGE FEES...............................................................66
11.2.2 GENERAL......................................................................66
11.2.3 OPERATION OF COLLATERAL; JOINT VENTURERS.....................................66
11.2.4 ENVIRONMENTAL INDEMNITY......................................................66
ARTICLE XII
MISCELLANEOUS....................................................................................................67
12.1 NOTICES...............................................................................67
12.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES...............................................68
12.3 FURTHER ASSURANCE.....................................................................68
12.4 TAXES AND FEES........................................................................68
12.5 SEVERABILITY..........................................................................69
12.6 WAIVER................................................................................69
12.7 MODIFICATION OF LOAN INSTRUMENTS......................................................69
12.8 CAPTIONS..............................................................................69
12.9 SUCCESSORS AND ASSIGNS................................................................69
12.10 REMEDIES CUMULATIVE...................................................................69
12.11 ENTIRE AGREEMENT; CONFLICT............................................................69
12.12 APPLICABLE LAW........................................................................70
12.13 JURISDICTION AND VENUE................................................................70
12.14 WAIVER OF RIGHT TO JURY TRIAL.........................................................71
12.15 TIME OF ESSENCE.......................................................................71
12.16 ESTOPPEL CERTIFICATE..................................................................71
12.17 CONSEQUENTIAL DAMAGES.................................................................71
12.18 COUNTERPARTS..........................................................................71
12.19 NO FIDUCIARY RELATIONSHIP.............................................................71
12.20 CONFIDENTIALITY.......................................................................71
12.21 GOVERNMENTAL APPROVAL.................................................................72
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LIST OF EXHIBITS TO LOAN AGREEMENT
Schedule I - Commitments
Exhibit 1.1(A) - Compliance Certificate
Exhibit 1.1(B) - Environmental Compliance Certificate
Exhibit 1.1(C) - LIBOR Election Notice
Exhibit 1.1(D) - Pager Certificate
Exhibit 1.1(E) - Other Permitted Liens
Exhibit 5.3.1 - Borrower Capital Stock
Exhibit 5.3.2 - Restrictions
Exhibit 5.5.2 - Licenses
Exhibit 5.5.3 - Operating Agreements
Exhibit 5.5.4 - Facility Sites
Exhibit 5.5.5 - Leases
Exhibit 5.5.5 - Leases
Exhibit 5.5.6 - Real Estate
Exhibit 5.7.1 - Financial Statements
Exhibit 5.7.2 - Projections
Exhibit 5.8 - Litigation
Exhibit 5.19.1 - Employee Benefit Plans
Exhibit 5.20.1 - Collective Bargaining Agreements; Grievances
Exhibit 6.6.1 - Insurance Letter Agreement
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AMENDED AND RESTATED LOAN AGREEMENT
This AMENDED AND RESTATED LOAN AGREEMENT, dated as of January 31, 2000,
is between AQUIS WIRELESS COMMUNICATIONS, INC., a Delaware corporation formerly
known as Aquis Communications, Inc. ("Borrower"), and FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), in its individual capacity and
as agent for all Lenders (this and all other capitalized terms used herein are
defined in Section 1.1 below).
PRELIMINARY STATEMENT:
A. Borrower and FINOVA entered into a Loan Agreement dated as of
December 31, 1998 (the "Original Loan Agreement") which was amended by a First
Amendment to Loan Instruments dated as of March 31, 1999 (the "First Amendment")
(the Original Loan Agreement, as amended by the First Amendment, hereinafter is
referred to as the "Existing Loan Agreement"). Pursuant to the terms and
conditions of the Existing Loan Agreement, FINOVA made loans and other financial
accommodations to Borrower.
B. Borrower has requested the disbursement of additional loans under
the Existing Loan Agreement to finance the consummation of the Source One
Acquisition.
C. Lenders have agreed to provide the additional financing requested by
Borrower upon the terms and subject to the conditions set forth in this Loan
Agreement, which amends and restates in its entirety the Existing Loan
Agreement.
NOW, THEREFORE, the Existing Loan Agreement is amended and restated in
its entirety as follows:
ARTICLE I
DEFINITIONS AND
DETERMINATIONS
.1 DEFINITIONS. As used in this Loan Agreement and in the other
Loan Instruments, unless otherwise expressly indicated herein or therein, the
following terms shall have the following meanings (such meanings to be
applicable equally to both the singular and plural forms of the terms defined):
ACCOUNTANTS: PriceWaterhouseCoopers or any other independent
certified public accounting firm selected by Borrower and reasonably
satisfactory to Lenders.
ACCOUNTING CHANGES: as defined in Section 1.3.
ACCOUNTS DECREASE: for any period, the excess of the Eligible
Accounts at the beginning of such period over the Eligible Accounts at
the end of such period.
ACCOUNTS INCREASE: for any period, the excess of Eligible
Accounts at the end of such period over the Eligible Accounts at the
beginning of such period.
ADA: the Americans with Disabilities Act of 1990, as amended,
any successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
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ADDITIONAL SUMS: as defined in subsection 2.2.4.
AFFILIATE: any Person that directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common
control with another Person. The term "control" means possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership
of voting securities or equity interests, by contract or otherwise. For
the purposes hereof any Person which owns or controls, directly or
indirectly, 30% or more of the securities or equity interests, as
applicable, whether voting or non-voting, of any other Person shall be
deemed to "control" such Person.
AGENT: FINOVA, as agent for all Lenders, or any successor to
FINOVA appointed pursuant to Section 9.16.
APPLICABLE MARGIN: shall have the meaning assigned to that
term in subsection 2.2.1.
APPROVAL ORDERS: the Orders entered on November 18, 1999,
November 30, 1999 and December 30, 1999 by the Bankruptcy Court in the
Bankruptcy Proceeding.
AQUIS GROUP: Aquis Communications Group, Inc., a Delaware
corporation, formerly known as Paging Partners Corporation.
AQUIS GROUP PLEDGE AGREEMENT: a pledge agreement executed by
Aquis Group in favor of Agent covering the Borrower Capital Stock.
ASSIGNEE: any Person (i) who is a financial institution
organized under the laws of the United States of America or any State
thereof or maintains a domestic lending office in the United States of
America and (ii) to which a Loan Assignment is made in compliance with
the provisions of subsection 9.1.1.
ASSIGNMENT AND ACCEPTANCE: an assignment and acceptance
agreement to be executed in connection with each Loan Assignment, in
form and substance reasonably satisfactory to Agent.
ASSIGNMENT OF LEASES: a collateral assignment of leases
executed by Borrower in favor of Agent.
AVAILABLE EXCESS CASH FLOW: for any year, the lesser of (i)
the Excess Cash Flow for such year and (ii) the amount by which the
Cash Equivalents exceed $1,000,000 as of the end of such year.
BANKRUPTCY CODE: the United States Bankruptcy Code and any
successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
BANKRUPTCY COURT: the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
BANKRUPTCY PROCEEDING: Case Nos. 99 B 13841 and 20953 pending
in the Bankruptcy Court.
BASE RATE: the per annum rate of interest announced or
published publicly from time to time by Citibank, N.A. in New York, New
York as its corporate base (or equivalent) rate of interest, which rate
shall change automatically without notice and simultaneously with each
change in such corporate base rate. The Base Rate is a reference rate
and does not necessarily represent the lowest or best rate actually
charged to any customer by Citibank, N.A. in New York, New York.
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BASE RATE PORTION: the Existing Principal Balance other than
the portion thereof consisting of LIBOR Loans.
BASIC FINANCIAL STATEMENTS: as defined in subsection 6.3.3.
BORROWER: has the meaning assigned to that term in the
Preamble to this Loan Agreement.
BORROWER CAPITAL STOCK: all of the issued and outstanding
capital stock of and other equity interests in Borrower and all
warrants, options and other rights to purchase capital stock of and
other equity interests in Borrower.
BORROWER'S OBLIGATIONS: (i) any and all Indebtedness due or to
become due, now existing or hereafter arising, of Borrower to Lenders
and/or Agent pursuant to the terms of this Loan Agreement or any other
Loan Instrument, including, without limitation, the Loan Fees, and (ii)
the performance of the covenants of Borrower contained in the Loan
Instruments.
BUSINESS DAY: (i) except as provided in clause (ii), any day
other than a Saturday, Sunday or other day on which banks in Phoenix,
Arizona or Parsippany, New Jersey are required to close, and (ii) with
respect to all notices, determinations, fundings and payments in
connection with a LIBOR Loan, any day which is a Business Day described
in clause (i) and which is also a day for trading among banks in Dollar
deposits in the London interbank eurodollar market.
BUSINESS INSURANCE: such property, casualty, liability,
business interruption and other insurance as Agent from time to time
requires Borrower to maintain.
CAPITAL EXPENDITURES: payments that are made or liabilities
that are incurred by a Person for the lease, purchase, improvement,
construction or use of any Property, the value or cost of which under
GAAP is required to be capitalized and appears on such Person's balance
sheet in the category of property, plant or equipment, without regard
to the manner in which such payments or the instruments pursuant to
which they are made are characterized, and shall include, without
limitation, payments for or liabilities incurred with respect to the
installment purchase of Property and payments under Capitalized Leases.
Except for the purpose of determining Excess Cash Flow, a Capital
Expenditure shall be deemed to be made as of the time the Property
which is the subject thereof is put into service.
CAPITALIZED LEASE: any lease of Property, the obligations for
the rental of which are required to be capitalized in accordance with
GAAP.
CASH EQUIVALENTS: at any date, the aggregate of Borrower's (i)
cash on hand or in any bank or trust company, and checks on hand and in
transit, (ii) monies on deposit in any money market account, and (iii)
treasury bills, certificates of deposit, commercial paper and readily
marketable securities at current market value having, in each instance,
a maturity of not more than 90 days.
CLOSING: the disbursement of the SourceOne Portion.
CLOSING CERTIFICATE: a closing certificate executed by
Borrower to Agent.
CLOSING DATE: the date upon which the Closing occurs.
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CODE: the Internal Revenue Code of 1986, as amended, any
successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
COLLATERAL: (i) all existing and after-acquired Property of
Borrower, including without limitation all existing and after-acquired
accounts, equipment, inventory and general intangibles, (ii) the
Borrower Capital Stock and (iii) all proceeds of the foregoing.
COMMITMENT: shall mean, as to any Lender at any time, the
amount initially set forth opposite its name in the column labeled
"Commitment" on SCHEDULE I, as adjusted from time to time to reflect
any Assignment and Acceptances.
COMMUNICATIONS ACT: the Communications Act of 1934 as amended,
any successor statute thereto, and the rules, regulations and legally
binding policies of the FCC promulgated thereunder, as amended and in
effect from time to time.
COMPLIANCE CERTIFICATE: a compliance certificate executed by
Borrower in the form of EXHIBIT 1.1(A) attached hereto.
CONTINUING LOAN INSTRUMENTS:
(i) Security Agreement;
(ii) Aquis Group Pledge Agreement;
(iii) Assignment of Leases; and
(iv) Uniform Commercial Code financing statements required
by Agent.
DEFAULT RATE: with respect to (i) the Base Rate Portion and
all other Borrower's Obligations other than the SourceOne Base Rate
Portion, LIBOR Loans and SourceOne LIBOR Loans, a per annum rate equal
to the Base Rate in effect from time to time plus the Applicable Margin
plus 2.0% per annum, (ii) each LIBOR Loan, a per annum rate equal to
the LIBOR Rate applicable thereto plus the Applicable Margin plus 2.0%
per annum, (iii) the SourceOne Base Rate Portion, a per annum rate
equal to the Base Rate in effect from time to time plus the SourceOne
Applicable Margin and (iv) each SourceOne LIBOR Loan, a per annum rate
equal to the LIBOR Rate applicable thereto plus the SourceOne
Applicable Margin plus 2.0% per annum.
DEFAULT RATE PERIOD: a period of time commencing on the date
that an Event of Default has occurred and ending on the date that such
Event of Default is cured or waived.
DETERMINATION DATE: as defined in subsection 2.2.1.
DOLLARS: lawful currency of the United States.
ELIGIBLE ACCOUNTS: at any given time, the aggregate of the
face amount of the accounts receivable of Borrower not over 60 days
past due, net of applicable reserves with respect to such accounts and
Trade Out Transactions.
EMPLOYEE BENEFIT PLAN: any employee benefit plan within the
meaning of Section 3(3) of ERISA which (i) is maintained for employees
of Borrower or any ERISA Affiliate or (ii) has at any time within the
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preceding six years been maintained for the employees of Borrower or
any current or former ERISA Affiliate.
EMPLOYMENT AGREEMENT: the employment agreement dated as of
January 4, 2000 between Aquis Group and Nicholas Catania.
ENGINEER: an engineer selected by Borrower and acceptable to
Agent.
ENVIRONMENTAL AUDIT: (i) a Phase I audit report with respect
to a parcel of real estate and such other studies and reports as Agent
deems necessary after review of the results of such Phase I audit,
including, if required by Agent, soil and ground water tests, each such
report and study to be in form and content and issued by Persons
acceptable to Agent and (ii) a letter from each Person issuing each
such report or study entitling Lenders to rely thereon.
ENVIRONMENTAL CERTIFICATE: an environmental certificate
executed by Borrower to Agent.
ENVIRONMENTAL COMPLIANCE CERTIFICATE: an environmental
compliance certificate in the form of EXHIBIT 1.1(B).
ENVIRONMENTAL LAWS: any and all federal, state and local laws
that relate to or impose liability or standards of conduct concerning
public or occupational health and safety or protection of the
environment, as now or hereafter in effect and as have been or
hereafter may be amended or reauthorized, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C Section 9601 ET SEQ.), the Hazardous Materials
Transportation Act (42 U.S.C. Section 1802 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Clean Air Act (42 U.S.C. Section 7901 et seq.), the National
Environmental Policy Act (42 U.S.C. Section 4231, et seq.), the Refuse
Act (33 U.S.C. Section 407, et seq.), the Safe Drinking Water Act (42
U.S.C. Section 300(f) et seq.), the Occupational Safety and Health Act
(29 U.S.C. Section 651 ET SEQ.), and all rules, regulations, codes,
ordinances and guidance documents promulgated or published thereunder,
and the provisions of any licenses, permits, orders and decrees issued
pursuant to any of the foregoing.
EQUITY CONTRIBUTION: the contribution of cash capital to
Borrower by Aquis Group.
EQUITY CONTRIBUTION PROCEEDS: the gross proceeds paid to
Borrower in connection with any Equity Contribution, less all
reasonable, customary and documented costs and expenses of such Equity
Contribution.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and
regulations issued thereunder, as in effect from time to time.
ERISA AFFILIATE: any Person who is a member of a group which
is under common control with Borrower, who together with Borrower is
treated as a single employer within the meaning of Section 414(b), (c)
and (m) of the Code.
EUROCURRENCY RESERVE REQUIREMENTS: for any day as applied to a
LIBOR Loan, the aggregate (without duplication) of the rates (expressed
as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of
the Federal Reserve System of the United States or other Governmental
Body having jurisdiction with respect thereto) prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a member
bank of the Federal
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Reserve System.
EVENT OF DEFAULT: any of the Events of Default set forth in
Section 8.1.
EXCESS CASH FLOW: for any period, (i) the Operating Cash Flow
for such period, (ii) PLUS, the Accounts Decrease, if any, for such
period and (iii) MINUS, the sum of the following for such period: (A)
Total Debt Service actually paid or accrued during such period with
respect to Indebtedness for Borrowed Money of Borrower permitted
hereunder, (B) amounts actually paid by Borrower with respect to
Capital Expenditures for such period permitted pursuant to Section 7.6,
whether or not such Capital Expenditures were incurred during such
period, but excluding any such amounts paid from the proceeds of
Indebtedness for Borrowed Money and (C) the Accounts Increase, if any,
for such period.
EXCESS INTEREST: as defined in subsection 2.2.4.
EXISTING PORTION: a portion of the Loan in the amount of
$25,314,500, representing the aggregate principal amount of all
advances made by Lenders to Borrower under the Existing Loan Agreement.
EXISTING LOAN AGREEMENT: as defined in the Preliminary
Statement.
EXISTING PRINCIPAL BALANCE: the Principal Balance of the
Existing Portion.
FCC: the Federal Communications Commission or any Governmental
Body succeeding to its functions.
FINOVA: has the meaning assigned to that term in the Preamble
to this Loan Agreement.
GAAP: generally accepted accounting principles as in effect
from time to time, which shall include but shall not be limited to the
official interpretations thereof by the Financial Accounting Standards
Board or any successor thereto.
GOOD FUNDS: United States Dollars available in federal funds
to FINOVA at or before 12:00 noon, Phoenix time, on a Business Day.
GOVERNMENTAL BODY: any foreign, federal, state, municipal or
other government, or any department, commission, board, bureau, agency,
public authority or instrumentality thereof or any court or arbitrator.
HAZARDOUS MATERIALS: any hazardous, toxic, dangerous or other
waste, substance or material defined as such in, regulated by or for
purposes of any Environmental Law.
INCIPIENT DEFAULT: any event or condition which, with the
giving of notice or the lapse of time, or both, would become an Event
of Default.
INDEBTEDNESS: all liabilities, obligations and reserves,
contingent or otherwise, which, in accordance with GAAP, would be
reflected as a liability on a balance sheet or would be required to be
disclosed in a financial statement, including, without duplication: (i)
Indebtedness for Borrowed Money, (ii) obligations secured by any Lien
upon Property, (iii) guaranties, letters of credit and other contingent
obligations, and (iv) liabilities in respect of unfunded vested
benefits under any Pension Plan or in respect of withdrawal liabilities
incurred under ERISA by Borrower or any ERISA Affiliate to any
Multiemployer Plan.
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INDEBTEDNESS FOR BORROWED MONEY: without duplication, all
Indebtedness (i) in respect of money borrowed, (ii) evidenced by a
note, debenture or other like written obligation to pay money
(including, without limitation, all of Borrower's Obligations and
Permitted Senior Indebtedness), (iii) in respect of rent or hire of
Property under Capitalized Leases or for the deferred purchase price of
Property, (iv) in respect of obligations under conditional sales or
other title retention agreements, and (v) all guaranties of any or all
of the foregoing.
INDEBTEDNESS TO BE REFINANCED: all Indebtedness for Borrowed
Money not permitted to exist hereunder which would be assumed or owed
by Borrower upon the consummation of the SourceOne Acquisition.
INSTRUMENTS: collectively, the Loan Instruments and the
SourceOne Acquisition Instruments.
INTEREST PERIOD: a period (i) commencing (A) on the Closing
Date, if Borrower prior thereto has elected pursuant to subsection
2.3.1 to have all or a portion of the portion of the Loan to be
disbursed on such date bear interest from such date at a LIBOR Rate,
(B) with respect to the conversion of all or a portion of the Base Rate
Portion to a LIBOR Loan or of all or a portion of the SourceOne Base
Rate Portion to a SourceOne LIBOR Loan, on the Business Day specified
by Borrower in the applicable LIBOR Election Notice, and (C) with
respect to the continuation as a LIBOR Loan or SourceOne LIBOR Loan of
all or a portion of a then existing LIBOR Loan or SourceOne LIBOR Loan
after the expiration of the Interest Period applicable to such existing
LIBOR Loan or SourceOne LIBOR Loan, on the last day of the Interest
Period applicable to such existing LIBOR Loan or SourceOne LIBOR Loan,
and (ii) ending 30, 60 or 90 days thereafter, as selected by Borrower
in its LIBOR Election Notice; provided, however:
(1) if any Interest Period otherwise would end on a
day that is not a Business Day, such Interest Period shall end
on the next succeeding Business Day, unless the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end
on the immediately preceding Business Day; and
(2) any Interest Period that otherwise would extend
beyond the Maturity Date shall end on the Maturity Date.
INTEREST RATE DETERMINATION DATE: the date for determining a
LIBOR Rate, which date shall be one Business Day prior to the date of
commencement of the applicable Interest Period.
LANDLORD: a lessor under a Lease.
LANDLORD CONSENT AND WAIVER: a landlord consent and waiver in
form and substance satisfactory to Agent.
LEASE: any lease of real estate under which Borrower is the
lessee.
LEASEHOLD PROPERTY: any real estate which is the subject of a
Lease.
LENDER ADDITION AGREEMENT: an agreement executed by a Lender
and an Assignee in connection with a Loan Assignment.
LENDERS: FINOVA and each Assignee.
LENDERS' DECISIONS: all determinations to be made by Lenders
pursuant to the terms of the Loan
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Instruments, including, without limitation, any amendment or
modification of any of the Loan Instruments, determinations with
respect to the declaration of Events of Default and acceleration of
Borrower's Obligations or any other obligation arising under the Loan
Instruments, waivers of affirmative or negative covenants or other
provisions of the Loan Instruments, advancement of funds pursuant to
any of the Loan Instruments or the exercise of any rights or remedies
granted to Lenders or Agent pursuant to the terms of any of the Loan
Instruments.
LIBOR ELECTION NOTICE: a notice by Borrower to Agent to have a
portion of the Principal Balance bear interest determined by reference
to a LIBOR Rate, in the form of EXHIBIT 1.1(C).
LIBOR LOAN: each portion of the Existing Principal Balance
which bears interest determined by reference to a LIBOR Rate.
LIBOR RATE: means for each Interest Period a rate of interest
equal to (i) the rate per annum determined by Agent (rounded upwards to
the nearest 1/100th of 1%) at which deposits of Dollars approximately
equal in amount to the amount of the LIBOR Loan or SourceOne LIBOR Loan
specified in the applicable LIBOR Election Notice are offered to Agent
by prime banks in the London interbank eurodollar market at
approximately 11:00 a.m., London time, on the applicable Interest Rate
Determination Date for the relevant Interest Period, divided by (ii)
1.00 minus the Eurocurrency Reserve Requirements in effect on the
applicable Interest Rate Determination Date. The LIBOR Rate shall be
adjusted with respect to any LIBOR Loan or SourceOne LIBOR Loan
outstanding on the effective date of any change in the Eurocurrency
Reserve Requirements as of such effective date. Agent shall give prompt
notice to Borrower of the LIBOR Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent
manifest error.
LICENSES: all licenses, permits, consents, approvals and
authority issued by any Governmental Body in connection with the
operation of Borrower's Paging Business, including without limitation,
all FCC Licenses.
LIEN: any mortgage, pledge, assignment, lien, charge,
encumbrance or security interest of any kind, or the interest of a
vendor or lessor under any conditional sale agreement, Capitalized
Lease or other title retention agreement.
LOAN: the term loan made or to be made by Lenders to Borrower
in the maximum principal amount of $27,764,500.00 pursuant to Section
2.1.
LOAN AGREEMENT: this Loan Agreement and any amendments or
supplements hereto.
LOAN ASSIGNMENT: the assignment by a Lender of (i) any portion
of such Lender's interest in Borrower's Obligations and (ii) any of
such Lender's other rights under any of the Loan Instruments.
LOAN FEES: the SourceOne Loan Fee and all fees paid by
Borrower to Agent or Lenders pursuant to the Existing Loan Agreement.
LOAN INSTRUMENTS: collectively, the Continuing Loan
Instruments and the SourceOne Portion Loan Instruments.
LOAN YEAR: a period of time from the Original Closing Date or
any anniversary of the Original Closing Date to the immediately
succeeding anniversary of the Original Closing Date.
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MANAGEMENT HOLDERS: Patrick M. Egan, John B. Freiling, R. A.
Ortenzio or any Person over which any of the foregoing individuals,
directly or indirectly, exercises voting control, including, without
limitation, the right to direct the management and policies of such
Person and the right to elect a majority of the Board of Directors or
similar governing authority for such Person.
MATERIAL ADVERSE EFFECT: (i) a material adverse effect upon
the business, operations, Property, profits or financial condition of
Borrower or upon the validity, enforceability or priority of the
Security Interests or (ii) a material impairment of the ability of
Borrower to perform its obligations under any Loan Instrument to which
it is a party or of Agent or any Lender to enforce or collect any of
Borrower's Obligations.
MATURITY DATE: the earlier of (i) December 31, 2003 or (ii) or
the date on which Borrower's Obligations are accelerated pursuant to
this Loan Agreement.
MAXIMUM RATE: as defined in subsection 2.2.4.
MORTGAGE: a mortgage or deed of trust executed by Borrower in
favor of Agent encumbering each parcel of Real Estate owned by
Borrower, in each case in form and substance satisfactory to Agent.
MULTIEMPLOYER PLAN: any multiemployer plan as defined pursuant
to Section 3(37) of ERISA to which Borrower or any ERISA Affiliate
makes, or accrues an obligation to make, contributions, or has made, or
been obligated to make, contributions within the preceding six years.
NET EXCESS CASH FLOW: for any year, the remainder of (i) the
Available Excess Cash Flow for such year minus (ii) the Required Excess
Cash Flow Prepayment for such year.
NOTE: the amended and restated promissory note executed by
Borrower payable to the order of FINOVA in the amount of the Loan,
dated as of the Closing Date and in form and substance satisfactory to
Agent, and any notes issued in substitution therefor pursuant to
subsection 9.1.4.
NOTICE OF BORROWING: a notice of borrowing/disbursement
request from Borrower to Agent with respect to the SourceOne Portion.
OBLIGORS: collectively, Borrower and each other Person (other
than Agent) which is a party to any Security Instrument.
OPERATING AGREEMENT: any material tower or transmitter site
lease or license, office lease, control point lease, equipment lease,
reseller agreement, advertising contract, pager contract, telephone
contract, voice mail contract, maintenance or repair contract,
employment agreement, collective bargaining agreement or other similar
agreement or contract relating to the operation of Borrower's Paging
Business.
OPERATING CASH FLOW: for any period, without duplication, the
net income of Borrower for such period:
(i) PLUS the sum of the following, to the extent deducted in
determining such net income for such period:
(A) losses from sales, exchanges and other
dispositions of Property not in the ordinary course of
business;
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(B) interest paid or accrued on Indebtedness,
including, without limitation, interest on Capitalized Leases
that is imputed in accordance with GAAP;
(C) depreciation and amortization of assets during
such period;
(D) income taxes which are accrued, but not paid,
during such period; and
(E) expenses incurred in connection with Trade Out
Transactions;
(ii) MINUS the sum of the following, to the extent included in
determining such net income for such period:
(A) gains from sales, exchanges and other
dispositions of Property or other extraordinary gains not in
the ordinary course of business;
(B) proceeds of Business Insurance; and
(C) revenue received in connection with Trade Out
Transactions.
OPERATING LEASE: any lease which, under GAAP, is not required
to be capitalized.
ORIGINAL CLOSING DATE: December 31, 1998.
PAGER: any pager owned, leased or otherwise used by a Person
to receive radio communication access or other services from Borrower.
PAGER CERTIFICATE: a certificate in the form of EXHIBIT 1.1(D)
with respect to the number of Pagers in Service executed by Borrower
and delivered pursuant to subsection 6.3.1.
PAGERS IN SERVICE: Pagers for which Borrower is receiving a
monthly payment, with respect to which (i) no such payment is
delinquent by more than 90 days, unless the monthly payments to
Borrower are being paid by Persons such as Fortune 500 companies,
Governmental Bodies or not-for-profit corporations, in which case no
such payment is delinquent by more than 180 days and (ii) the Person
owning, leasing or otherwise using such Pagers, and not the Person
contacting such Pager, incurs the cost of service for such Pagers.
PAGING BUSINESS: the business of owning, operating and
managing mobile common carrier paging systems, mobile communications
systems, control terminals and switches, antenna and transmitter sites,
or telephone systems, including, but not limited to, the ownership and
operation by Borrower of the System.
PARTICIPANT: any Person to which a Lender sells or assigns a
Participation.
PARTICIPATION: a sale or any assignment by a Lender of a
participating interest in (i) any portion of such Lender's interest in
Borrower's Obligations and (ii) any of such Lender's other rights under
any of the Loan Instruments.
PARTICIPATION AGREEMENT: an agreement executed by a Lender and
a Participant pursuant to Section 9.2.
PAY-OFF LETTER: a pay-off letter from each holder of the
Indebtedness to be Refinanced addressed to
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Agent.
PBGC: the Pension Benefit Guaranty Corporation or any
Governmental Body succeeding to the functions thereof.
PENSION PLAN: any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Part 3 of
Title I of ERISA, Title IV of ERISA, or Section 412 of the Code and
which (i) is maintained for employees of Borrower or any ERISA
Affiliate, or (ii) has at any time within the preceding six years been
maintained for the employees of Borrower or any of its current or
former ERISA Affiliates.
PERMITTED LIENS: any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes, assessments or other governmental
charges or levies, which either are (A) not delinquent or (B) being
contested diligently and in good faith by appropriate proceedings, and
as to which Borrower has set aside reserves on its books in accordance
with GAAP;
(iv) statutory Liens, such as landlord's, vendor's,
repairman's, mechanic's, materialman's, warehouseman's, carrier's or
other like Liens, arising by operation of law and incurred in good
faith in the ordinary course of business, provided that the underlying
obligations relating to such Liens are paid in the ordinary course of
business or are not overdue for a period of more than 90 days, or are
being contested diligently and in good faith by appropriate proceedings
and as to which Borrower has set aside reserves on its books in
accordance with GAAP, or the payment of which obligations are otherwise
secured in a manner satisfactory to Agent;
(v) zoning ordinances, easements, rights-of-way,
licenses, reservations, provisions, covenants, conditions, waivers or
restrictions on the use of Property and other similar encumbrances or
title exceptions, in each case, that are acceptable to Agent;
(vi) Liens in respect of judgments or awards with respect
to which no Event of Default would exist pursuant to subsection 8.1.6;
(vii) pledges, deposits or other Liens to secure payment of
insurance premiums (A) to be paid in accordance with applicable laws in
the ordinary course of business relating to payment of worker's
compensation, or (B) that are required for the participation in any
fund in connection with worker's compensation, unemployment insurance,
old-age pensions or other social security programs;
(viii) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of like nature in each case
incurred in the ordinary course of business; and
(ix) Liens described on EXHIBIT 1.1(E) hereto.
PERMITTED PRIOR LIENS: any of the following Liens:
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(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and
(iv) of the definition of Permitted Liens that are accorded priority to
the Security Interests by law; and
(iii) the Permitted Liens described in clauses (v), (vii),
(viii) and (ix) of the definition of Permitted Liens, subject to the
limitations or requirements set forth therein.
PERMITTED SENIOR INDEBTEDNESS: Indebtedness, other than the
Loan, incurred to purchase tangible personal property or Indebtedness
incurred to lease tangible personal property pursuant to Capitalized
Leases, provided that (i) such Indebtedness existing as of the Closing
Date shall not exceed $1,500,000, (ii) during any Loan Year after the
Closing Date the amount of such Indebtedness at any one time
outstanding during such Loan Year shall not exceed $1,500,000, and
(iii) no Event of Default exists at the time or will be caused as a
result of the incurrence of any Indebtedness described in clause (ii).
PERMITTED SENIOR INDEBTEDNESS LIENS: Liens that secure
Permitted Senior Indebtedness, provided that (i) each such Lien
attaches only to the Property purchased or leased with the proceeds of
the Permitted Senior Indebtedness incurred with respect to such
Property and (ii) Agent is granted a Lien upon such Property,
subordinate only to the Lien granted to the holder of the applicable
Permitted Senior Indebtedness.
PERSON: any individual, firm, corporation, business
enterprise, trust, association, joint venture, partnership,
Governmental Body or other entity, whether acting in an individual,
fiduciary or other capacity.
PHILLIPS NIZER: Phillips Nizer Benjamin Krim & Ballon LLP.
PHILLIPS NIZER NOTE: the note dated January 21, 2000 executed
by Aquis Group payable to the order of Phillips Nizer in the original
principal amount of $350,000.
PREPAYMENT PREMIUM: defined in subsection 2.8.1(a).
PRINCIPAL BALANCE: the unpaid principal balance of the Loan or
any specified portion thereof outstanding from time to time.
PRO FORMA OPERATING CASH FLOW: for any period, the sum of (i)
the Operating Cash Flow for such period other than any such Operating
Cash Flow derived by Borrower from the operation of the SourceOne
System for any portion of such period prior to the Closing Date, plus
(ii) $62,500 for each full month occurring in any portion of such
period prior to the Closing Date, plus (iii) for any portion of such
period prior to April 1, 1999, the Operating Cash Flow of Paging
Partners Corporation derived from the operation of the Paging Business
of Paging Partners Corporation, as adjusted in Agent's sole discretion
for expenses intended to be eliminated following the consummation of
the merger with Paging Partners Corporation and Borrower occurring on
March 31, 1999.
PROPERTY: all types of real, personal or mixed property and
all types of tangible or intangible property.
PRO RATA SHARE: the proportion that a Lender's Commitment
bears to the total Commitments of all Lenders.
QUALIFIED DEPOSITORY: a member bank of the Federal Reserve
System having a combined capital and surplus of at least $500,000,000.
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REAL ESTATE: each parcel of real estate owned by Borrower.
REGISTER: has the meaning assigned to that term in subsection
9.1.3.
RELATED PARTIES means (i) any spouse or immediate family
member of a Management Holder, (ii) any trust set up for the benefit of
a Management Holder or any of the Persons specified in clause (i) or
(iii) any corporation or limited liability company wholly owned by a
Management Holder and/or the Persons specified in clause (i) and (ii).
REQUIRED EXCESS CASH FLOW PREPAYMENT: for any year in which a
mandatory prepayment is required to be made pursuant to subsection
2.8.2(a), an amount equal to the lesser of (i) (A) 50% of the Excess
Cash Flow for the preceding year (with respect to the mandatory
prepayment due in 2001) or (B) 25% of the Excess Cash Flow for the
preceding year (with respect to the mandatory prepayment due in 2002
and each year thereafter) or (ii) the amount by which the Cash
Equivalents as of the end of the preceding year exceeds $1,000,000.
SECURITIES ACT: the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, as in effect
from time to time.
SECURITIES EXCHANGE ACT: the Securities Exchange Act of 1934,
as amended, any successor statute thereto, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder, as in effect from time to time.
SECURITY AGREEMENT: a security agreement executed by Borrower
in favor of Agent.
SECURITY INSTRUMENTS: collectively, the Security Agreement,
the Assignment of Leases, the Aquis Group Pledge Agreement and each
Mortgage now or hereafter granted by Borrower to Agent, all as amended
from time to time.
SECURITY INTERESTS: the Liens in the Collateral granted to
Agent pursuant to the Security Instruments and any other document now
or hereafter executed by Borrower or any other Person which purports to
create a Lien on the Property of such Person in favor of Agent.
SENIOR DEBT SERVICE: during any period, all payments of
principal, interest, premium and other charges with respect to the
Principal Balance (other than the Loan Fees), which payments are
required to be made pursuant to this Loan Agreement during such period.
SENIOR DEBT SERVICE COVERAGE RATIO: the ratio of (i) Pro Forma
Operating Cash Flow for the twelve month period ending on the last day
of any quarter to (ii) Senior Debt Service for such twelve month
period.
SENIOR LEVERAGE RATIO: the ratio of the Principal Balance as
of the last day of any month to the Pro Forma Operating Cash Flow for
the twelve month period ending on such last day.
SOLVENCY CERTIFICATE: a solvency certificate executed by
Borrower to Agent.
SOURCEONE: collectively, SourceOne Wireless, Inc., SourceOne
Wireless, L.L.C. and SourceOne Wireless II, L.L.C.
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SOURCEONE ACQUISITION: the acquisition by Borrower of the
SourceOne System and the other Property to be acquired by Borrower
pursuant to the SourceOne Acquisition Instruments.
SOURCEONE ACQUISITION INSTRUMENTS: the Asset Purchase
Agreement dated as of August 2, 1999 between SourceOne and Borrower, as
amended by the Amendment to Asset Purchase Agreement dated as of
November 15, 1999 between SourceOne and Borrower, the Agreement Pending
Purchase Closing dated as of August 2, 1999 between SourceOne and
Borrower, the Approval Orders, and all documents and instruments
executed and delivered in connection with the foregoing.
SOURCEONE APPLICABLE MARGIN: shall have the meaning assigned
to that term in subsection 2.2.2.
SOURCEONE BASE RATE PORTION: the SourceOne Principal Balance
other than the portion thereof consisting of LIBOR Loans.
SOURCEONE DETERMINATION DATE: as defined in subsection 2.2.2.
SOURCEONE LIBOR LOAN: each portion of the SourceOne Principal
Balance which bears interest determined by reference to a LIBOR Rate.
SOURCEONE LOAN FEE: the fee payable by Borrower to Agent
pursuant to subsection 2.7.
SOURCEONE PORTION: a portion of the Loan in an amount not to
exceed the sum of (i) the cash portion of the purchase price required
to be paid by Borrower in consideration for the SourceOne Acquisition
up to a maximum amount of $2,250,000, plus (ii) $100,000 with respect
to transaction costs, plus (iii) $100,000 with respect to the payment
to Agent of the SourceOne Loan Fee.
SOURCEONE PORTION LOAN INSTRUMENTS:
(i) Loan Agreement;
(ii) Note;
(iii) Closing Certificate;
(iv) Solvency Certificate;
(v) Environmental Certificate;
(vi) Notice of Borrowing with respect to the SourceOne
Portion;
(vii) Uniform Commercial Code financing statements required
by Agent; and
(viii) such other instruments and documents as Agent and
Lenders reasonably may require in connection with the transactions
contemplated by this Loan Agreement.
SOURCEONE PRINCIPAL BALANCE: the Principal Balance of the
SourceOne Portion.
SOURCEONE SYSTEM: the portion of the System acquired by
Borrower as a result of the SourceOne
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Acquisition.
SPECIAL PREPAYMENT : the first prepayment of the Principal
Balance after the Closing Date and all subsequent prepayments of the
Principal Balance until the aggregate amount thereof is equal to
$1,250,000.
SPECIAL PREPAYMENT PAYMENT DATE: the date the Special
Prepayment has been made.
STATED RATE: as defined in subsection 2.2.4.
STEP-DOWN DATE: as defined in subsection 2.2.2
SUNSTAR: SunStar Communications, Inc., an Arizona corporation.
SUNSTAR CAPITAL STOCK: all of the issued and outstanding
capital stock of and other equity interests in SunStar and all
warrants, options and other rights to purchase capital stock of and
other equity interests in SunStar.
SUNSTAR PROCEEDS: the gross proceeds payable in connection
with the SunStar Transfer, less (i) all reasonable, customary and
documented costs and expenses of the SunStar Transfer and (ii) all
taxes payable by Borrower as a result of the consummation of the
SunStar Transfer.
SUNSTAR TRANSFER: (i) the sale, assignment or transfer by
Borrower of all of the SunStar Capital Stock or (ii) the sale,
assignment or transfer by SunStar of substantially all of its assets
followed immediately by either the dissolution of SunStar or the sale,
assignment or transfer by Borrower of all of the SunStar Capital Stock
to another Person.
SUNSTAR TRANSFER DATE: the date the SunStar Transfer is
consumated.
SYSTEM: the paging system facilities of Borrower, operated at
the locations described on EXHIBIT 5.5.4, as updated or amended from
time to time in accordance with Section 7.11.
TERMINATION EVENT: (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder; or (ii)
the withdrawal of Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2); or (iii) the termination of a Pension Plan, the
filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section
4041 of ERISA; or (iv) the institution of proceedings to terminate, or
the appointment of a trustee with respect to, any Pension Plan by the
PBGC; or (v) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or (vi) the
partial or complete withdrawal of Borrower or any ERISA Affiliate from
a Multiemployer Plan; or (vii) the imposition of a lien pursuant to
Section 412 of the Code or Section 302 of ERISA; or (viii) any event or
condition which results in the reorganization or insolvency of a
Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (ix) any
event or condition which results in the termination of a Multiemployer
Plan under Section 4041A of ERISA or the institution by the PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA.
TOTAL DEBT SERVICE: during any period, all payments of
principal, interest, premium and other charges with respect to
Indebtedness for Borrowed Money of Borrower (other than the Loan Fees)
made or required to be made during such period.
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TOTAL LEVERAGE RATIO: the ratio of (i) the Principal Balance
of all Indebtedness for Borrowed Money of Borrower as of the last day
of any month to (ii) the Pro Forma Operating Cash Flow for the twelve
month period ending on such last day.
TRADE OUT TRANSACTION: an exchange of advertising time for
non-cash consideration, such as goods, services or program material.
1.2 TIME PERIODS. In this Loan Agreement and the other Loan
Instruments, in the computation of periods of time from a specified date to a
later specified date, (i) the word "from" means "from and including," (ii) the
words "to" and "until" each mean "to, but excluding" and (iii) the words
"through," "end of" and "expiration" each mean "through and including." Unless
otherwise specified, all references in this Loan Agreement and the other Loan
Instruments to (i) a "month" shall be deemed to refer to a calendar month, (ii)
a "quarter" shall be deemed to refer to a calendar quarter and (iii) a "year"
shall be deemed to refer to a calendar year.
1.3 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms not
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made and all financial statements required to be delivered
pursuant hereto shall be prepared in accordance with GAAP as in effect at the
time of such interpretation, determination or preparation, as applicable. In the
event that any Accounting Changes (as hereinafter defined) occur and such
changes result in a change in the method of calculation of financial covenants,
standards or terms contained in this Loan Agreement, then Borrower and Lenders
agree to enter into negotiations to amend such provisions of this Loan Agreement
so as to reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of Borrower shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
For purposes hereof, "Accounting Changes" shall mean changes in generally
accepted accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants (or any successor
thereto) or other appropriate authoritative body.
1.4 REFERENCES. All references in this Loan Agreement to
"Article," "Section," "subsection," "subparagraph," "clause" or "Exhibit,"
unless otherwise indicated, shall be deemed to refer to an Article, Section,
subsection, subparagraph, clause or Exhibit, as applicable, of this Loan
Agreement.
1.5 LENDER'S OR AGENT'S DISCRETION. Whenever the terms
"satisfactory to Lenders or Agent," "determined by Lenders or Agent,"
"acceptable to Lenders or Agent," "Lenders or Agent shall elect," "Lenders or
Agent shall request," "at the option or election of Lenders or Agent," or
similar terms are used in the Loan Instruments, except as otherwise specifically
provided therein, such terms shall mean satisfactory to, at the election or
option of, determined by, acceptable to or requested by Lenders or Agent, as
applicable, in their or its sole and unlimited discretion.
1.6 BORROWER'S KNOWLEDGE. Any statements, representations or
warranties that are based upon the best knowledge of Borrower or an officer
thereof shall be deemed to have been made after due inquiry by Borrower or an
officer, as applicable, with respect to the matter in question.
ARTICLE II
LOAN AND TERMS OF PAYMENT
.1 LOAN.
.1 AGGREGATE LOAN AMOUNT. The Loan shall consist of a
term loan from Lenders to Borrower
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in the maximum aggregate amount of $27,764,500, comprised of the
Existing Portion and the SourceOne Portion.
.2 EXISTING PORTION. The Existing Portion was disbursed
pursuant to the Existing Loan Agreement.
.3 SOURCEONE PORTION. Each Lender severally agrees to disburse
its Pro Rata Share of the SourceOne Portion at any time prior to
February 28, 2000 to or as directed by Borrower provided all of the
terms and conditions set forth in Article IV have been satisfied.
.4 USE OF PROCEEDS. The proceeds of the Existing Portion were
used for the purposes specified in the Existing Loan Agreement and
certain consent letters from FINOVA to Borrower. The proceeds of the
SourceOne Portion shall be used to (i) consummate the SourceOne
Acquisition, (ii) pay the Loan Fee and (iii) pay transaction costs in
amounts acceptable to FINOVA in its sole discretion.
.5 NOTE. The Loan shall be evidenced by the Note.
.6 REBORROWING. Borrower shall not be entitled to reborrow any
portion of the Loan which is repaid or prepaid.
.2 INTEREST.
.1 INTEREST RATE ON EXISTING PRINCIPAL BALANCE. Except as
provided in Section 2.5, the Base Rate Portion shall bear interest at
the Base Rate in effect from time to time plus the Applicable Margin in
effect for the applicable period and each LIBOR Loan shall bear
interest at the applicable LIBOR Rate plus the Applicable Margin in
effect for the applicable period. As used in this Loan Agreement, the
term "APPLICABLE MARGIN" for any period shall be determined by Agent on
the first day of such period (the "DETERMINATION DATE") and shall mean
with respect to the Base Rate Portion and each LIBOR Loan the per annum
percentage rate set forth below:
(i) 1.75% per annum with respect to the Base Rate
Portion and 4.50% per annum with respect to each LIBOR Loan
(A) during the period commencing on the Closing Date through
(1) the date Borrower's Obligations are paid and performed in
full if the Special Prepayment Payment Date occurs on or
before June 8, 2000 and (2) June 8, 2000 if the Special
Prepayment Payment Date does not occur on or before June 8,
2000 and (B) during the period commencing on the Special
Prepayment Payment Date through the date Borrower's
Obligations are paid and performed in full;
(ii) if the Special Prepayment Payment Date does not
occur on or before June 8, 2000, 2.25% per annum with respect
to the Base Rate Portion and 5.00% per annum with respect to
each LIBOR Loan during the period commencing June 9, 2000
through the earlier to occur of (A) July 8, 2000 and (B) the
Special Prepayment Payment Date;
(iii) if the Special Prepayment Payment Date does not
occur on or before July 8, 2000, 2.75% per annum with respect
to the Base Rate Portion and 5.50% per annum with respect to
each LIBOR Loan during the period commencing July 9, 2000
through the earlier to occur of (A) August 8, 2000 and (B) the
Special Prepayment Payment Date;
(iv) if the Special Prepayment Payment Date does not
occur on or before August 8, 2000, 3.25% per annum with
respect to the Base Rate Portion and 6.00% per annum with
respect to each LIBOR Loan during the period commencing August
9, 2000 through the earlier to occur of (A)
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September 8, 2000 and (B) the Special Prepayment Payment Date;
and
(v) if the Special Prepayment Payment Date does not
occur on or before September 8, 2000, 3.75% per annum with
respect to the Base Rate Portion and 6.50% per annum with
respect to each LIBOR Loan during the period commencing
September 9, 2000 through the Special Prepayment Payment Date.
.2 INTEREST RATE ON SOURCEONE PRINCIPAL BALANCE. Except as
provided in Section 2.5, the SourceOne Principal Balance shall bear
interest at the Base Rate in effect from time to time plus the
SourceOne Applicable Margin in effect for the applicable period. As
used in this Loan Agreement, the term "SOURCEONE APPLICABLE MARGIN" for
any period shall be determined by Agent on the first day of such period
(the "SOURCEONE DETERMINATION DATE") and shall mean with respect to the
SourceOne Principal Balance:
(i) 4.00% per annum during the period from the
Closing Date to the date (the "STEPDOWN DATE") which is 545
days after the Closing Date;
(ii) 1.75% per annum with respect to the SourceOne
Base Rate Portion and 4.50% per annum with respect to each
SourceOne LIBOR Loan during the period from and after the
Step-Down Date if (A) the Special Prepayment Payment Date
occurs prior to June 8, 2000 and (B) no Event of Default has
occurred since the Closing Date with respect to which Agent
has given notice to Borrower; and
(iii) the Applicable Margin with respect to the
Existing Indebtedness during the period from and after the
Step-Down Date if (A) the Special Prepayment Payment Date does
not occur prior to June 8, 2000 or (B) an Event of Default
occurred during the period from the Closing Date to the
Step-Down Date with respect to which Agent has given notice to
Borrower.
Borrower may not elect to have any portion of the SourceOne Principal
Balance bear interest at a rate determined by reference to the LIBOR
Rate prior to the Step-Down Date.
.3 INTEREST COMPUTATION. Interest shall be payable monthly in
arrears, computed on the basis of a year consisting of 360 days and
charged for the actual number of days during the period for which
interest is being charged. In computing interest, the Closing Date
shall be included and the date of payment shall be excluded.
.4 MAXIMUM INTEREST. Notwithstanding any provision to the
contrary contained herein or in any other Loan Instrument, Lenders
shall not collect a rate of interest, including the Loan Fees, on any
obligation or liability due and owing by Borrower to Lenders in excess
of the maximum contract rate of interest permitted by applicable law
("Excess Interest"). All fees, charges, goods, things in action or any
other sums or things of value (other than items (a), (b), (c) and (d)
below) paid or payable by Borrower (collectively, the "Additional
Sums"), whether pursuant to the Note, this Loan Agreement, the other
Loan Instruments or any other document or instrument in any way
pertaining to the Loan, that, under the laws of the State of Arizona,
may be deemed to be interest with respect to the Loan, for the purpose
of any laws of the State of Arizona that may limit the maximum amount
of interest to be charged with respect to the Loan shall be payable by
Borrower and shall be deemed to be additional interest, and for such
purposes only, the agreed upon and "contracted for rate of interest"
with respect to the Loan shall be deemed to be increased by the rate of
interest resulting from the Additional Sums. Lenders and Borrower agree
that the interest laws of the State of Arizona shall govern the
relationship among them and understand and believe that the
transactions contemplated by the Loan Instruments comply with the usury
laws of the State of Arizona, but in the event of a final adjudication
to the contrary,
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Borrower shall be obligated to pay, NUNC PRO TUNC, to Lenders only such
interest as then shall be permitted by the laws of the state found to
govern the contract relationship among Lenders and Borrower. For the
purpose of any laws of the State of Arizona that may limit the maximum
amount of interest to be charged with respect to a loan, the
"contracted for rate of interest" for the Loan shall consist of the
following: (a) interest calculated in accordance with the provisions of
subsections 2.2.1 and 2.2.2; (b) interest calculated in accordance with
the provisions of Section 2.5; (c) the late charges, described and
payable in accordance with provisions of Section 2.6; (d) the Loan
Fees; and (e) all Additional Sums, if any. Borrower agrees to pay an
effective "contracted for rate of interest" which is the sum of items
(a), (b), (c), (d) and (e), as applicable, above. If any Excess
Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Loan Agreement or any
other Loan Instrument, then in such event (i) Borrower shall not be
obligated to pay such Excess Interest, (ii) any Excess Interest
collected by Lenders shall be, at Lenders' option, (A) applied to the
Principal Balance or to accrued and unpaid interest not in excess of
the maximum rate permitted by applicable law or (B) refunded to the
payor thereof, (iii) the interest rates provided for herein
(collectively, including, without limitation, the Loan Fees, the
"Stated Rate") shall be automatically reduced to the maximum rate
allowed from time to time under applicable law (the "Maximum Rate") and
this Loan Agreement and the other Loan Instruments, as applicable,
shall be deemed to have been, and shall be, modified to reflect such
reduction, and (iv) Borrower shall not have any action against Agent or
Lenders for any damages arising out of the payment or collection of
such Excess Interest; provided, however, that if at any time thereafter
the Stated Rate is less than the Maximum Rate, Borrower shall, to the
extent permitted by law, continue to pay interest at the Maximum Rate
until such time as the total interest received by Lenders is equal to
the total interest which Lenders would have received had the Stated
Rate been (but for the operation of this provision) the interest rate
payable. Thereafter, the interest rate payable shall be the Stated Rate
unless and until the Stated Rate again exceeds the Maximum Rate, in
which event the provisions contained in this subsection 2.2.4 again
shall apply.
.3 LIBOR LOANS.
.1 ELECTION BY BORROWER. Subject to the provisions of
subsection 2.2.2 and 2.3.2 and provided no Event of Default then
exists, Borrower from time to time may elect to have all or a portion
of the Principal Balance bear or continue to bear interest at a LIBOR
Rate, such election to be exercised by delivery of a LIBOR Election
Notice to Agent c/o Brian Carroll, FINOVA Capital Corporation, 311 S.
Wacker Drive, Chicago, Illinois 60606, Telecopy No. (312) 322-3530, by
facsimile transmission not less than three Business Days prior to the
commencement of the applicable Interest Period. Agent shall determine
(which determination shall, absent manifest error, be presumptively
correct) the LIBOR Rate applicable to the relevant LIBOR Loan or
SourceOne LIBOR Loan on the applicable Interest Rate Determination Date
and promptly shall give notice thereof to Borrower. Agent and Lenders
shall have the right without further confirmation to assume that any
LIBOR Election Notice received by Agent and in good faith believed by
Agent to be executed by Nicholas Catania or any other individual
designated by him in a notice to Agent has been given by a person duly
authorized to act on behalf of Borrower. Any LIBOR Election Notice
received by Agent shall be irrevocable. Upon the expiration of an
Interest Period the applicable LIBOR Loan or SourceOne LIBOR Loan shall
be converted to and become part of the Base Rate Portion or SourceOne
Base Rate Portion, as applicable, unless such LIBOR Loan or SourceOne
LIBOR Loan has been continued as a LIBOR Loan or SourceOne LIBOR Loan
in accordance with this subsection 2.3.1.
.2 LIBOR LIMITATIONS. Each LIBOR Loan and Source One LIBOR
Loan shall be in an amount not less than $1,000,000 or integral
multiples of $100,000 in excess thereof. At no time shall the aggregate
number of LIBOR Loans and SourceOne LIBOR Loans exceed three.
.3 EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. If prior to the
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commencement of any Interest Period Agent determines that Dollar
deposits of the relevant amount for the relevant Interest Period are
not available in the London Interbank Market or the rate at which such
Dollar deposits are being offered will not adequately and fairly
reflect the cost to the Lenders of maintaining a LIBOR Rate for such
Interest Period, or that by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the
LIBOR Rate applicable to such Interest Period, Agent promptly shall
give notice of such determination to Borrower and any LIBOR Election
Notice previously given by Borrower which has not yet become effective
shall be deemed to be canceled.
.4 TAX AND OTHER LAWS. In the event that by reason of any law,
regulation or requirement or interpretation thereof by any Governmental
Body, or the imposition of any requirement of any such Governmental
Body, whether or not having the force of law, including the imposition
of any reserve and/or special deposit requirement (other than reserves
included in the Eurocurrency Reserve Requirements), any Lender shall be
subjected to any tax, levy, impost, charge, fee, duty, deduction or
withholding of any kind whatsoever (other than any tax imposed upon the
total net income of such Lender or franchise tax imposed on such
Lender) and if any such measures or any other similar measure shall
result in an increase in the cost to any Lender of maintaining its
share of any LIBOR Loan or SourceOne LIBOR Loan or in a reduction in
the amount of principal or interest receivable by any Lender in respect
thereof, then Borrower shall pay to the affected Lender within 10 days
after receipt of a notice from such Lender (which notice shall be
accompanied by a statement in reasonable detail setting forth the basis
for the calculation thereof, which calculation, in the absence of
demonstrable error, shall be conclusive and binding), an amount equal
to such increased cost or reduced amount. At any time after receipt of
such notice Borrower may convert all LIBOR Loans and SourceOne LIBOR
Loans to the Base Rate Portion or SourceOne Base Rate Portion, as
applicable, and such conversion shall be effective three Business Days
after the Lenders have received notice from Borrower of such
conversion. Notwithstanding the foregoing, no Lender shall (i) be
entitled to compensation under this subsection 2.3.4 for any amounts
incurred or accruing more than 180 days prior to the giving of notice
to Borrower of additional costs of the type described in this
subsection 2.3.4 or (ii) exercise any of its rights under this
subsection 2.3.4 if it shall not at the time be the general policy or
practice of such Lender to exercise similar rights against its other
borrowers similrly situated. Upon the occurrence of any event giving
rise to the operation of subsections 2.3.4 or 2.3.6 or Section 12.4
with respect to any Lender, such Lender will, if requested by Borrower,
use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any portion of the
Loan affected by such event, provided that such designation is made on
such terms that such Lender and its lending office suffer no material
economic, legal or regulatory disadvantage, with the object of avoiding
the consequence of the event giving rise to the operation of such
subsection or Section. The foregoing shall not affect or postpone any
of the obligations of Borrower or the rights of any Lender provided in
subsection 2.3.4 or 2.3.6 or Section 12.4.
.5 CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any
time any law, treaty or regulation, or any interpretation thereof by
any Governmental Body shall make it unlawful for any Lender to fund or
maintain its share of any LIBOR Loan or SourceOne LIBOR Loan with
monies obtained in the London Interbank Market, such Lender, upon the
occurrence of such event, shall notify Borrower thereof and thereupon
the (i) right of Borrower to make any LIBOR Election shall be suspended
for the duration of such illegality and (ii) if required by such law,
regulation or interpretation, on such date as shall be specified in
such notice all Interest Periods then in effect shall be terminated,
and thereafter all LIBOR Loans and SourceOne LIBOR Loans shall be
deemed converted to the Base Rate Portion.
.6 INDEMNITY. In addition to any other payments payable by
Borrower to Lenders pursuant to the Loan Instruments, Borrower shall
indemnify and reimburse each Lender on demand for any loss or expense
which such Lender may sustain as a consequence of any prepayment of any
LIBOR Loan or SourceOne LIBOR Loan prior to the expiration of the
Interest Period applicable thereto except as required under
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subsection 2.3.5 and/or any failure by Borrower to (i) make any payment
when due of any amount payable with respect to any LIBOR Loan or
SourceOne LIBOR Loan or (ii) borrow the amount set forth in any LIBOR
Election Notice on the date specified therefor.
.4 PRINCIPAL AND INTEREST PAYMENTS.
.1 INTEREST. Except as otherwise provided in subsection
2.8.1(c) and 2.8.2(e), interest on the Principal Balance shall be
payable monthly in arrears on the first Business Day of each month
beginning with the month following the month in which the Closing
occurs.
.2 PRINCIPAL. The Principal Balance shall be payable in
consecutive quarterly installments on the first Business Day of each
quarter commencing with the quarter beginning July 1, 2000. Each such
installment shall be (i) in an amount equal to the percentage of the
Principal Balance as of June 30, 2000 set forth below opposite the
quarter in which such payment is due and (ii) applied first, to the
Existing Principal Balance and then to the SourceOne Principal Balance,
except that the Special Prepayment shall be applied first to the
SourceOne Portion and then to the Existing Principal Balance:
<TABLE>
<CAPTION>
Percentage of Principal
Quarter Beginning Balance as of June 30, 2000
----------------- ---------------------------
<S> <C> <C>
July 1, 2000 0.50%
October 1, 2000 0.50%
January 1, 2001 1.94%
April 1, 2001 1.94%
July 1, 2001 1.94%
October 1, 2001 1.94%
January 1, 2002 3.13%
April 1, 2002 3.13%
July 1, 2002 3.13%
October 1, 2002 3.13%
January 1, 2003 3.50%
April 1, 2003 3.50%
July 1, 2003 3.50%
October 1, 2003 3.50%
</TABLE>
The remaining Principal Balance, together with all accrued and unpaid
interest thereon and all other sums which then are due and payable
pursuant to the terms of the Loan Instruments, shall be due and payable
in full on the Maturity Date.
.5 DEFAULT RATE. During a Default Rate Period, Borrower's
Obligations shall bear interest at the Default Rate.
.6 LATE CHARGES. If a payment of principal or interest to be made
pursuant to this Loan Agreement becomes past due for a period in excess of five
Business Days, Borrower shall pay on demand to Lenders a late charge of 2% of
the amount of such overdue payment.
.7 SOURCEONE LOAN FEE. Borrower shall pay to Lenders a loan fee
in the amount of $100,000 upon the Closing. The SourceOne Loan Fee shall be
deemed to be fully earned as of the Closing.
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.8 PREPAYMENTS.
.1 VOLUNTARY PREPAYMENTS. Borrower may not prepay any LIBOR
Loan prior to the expiration of the Interest Period applicable thereto.
Except as provided in the preceding sentence, Borrower may at any time
voluntarily prepay the Principal Balance in whole or in part, subject
to the following conditions:
(a) PREPAYMENT PREMIUM. Concurrently with any
voluntary prepayment of all or any part of the Principal
Balance and subject to the last sentence of this subsection
2.8.1(a), Borrower shall pay to Lenders a prepayment premium
(the "Prepayment Premium") equal to a percentage of the amount
of the Principal Balance prepaid, determined in accordance
with the following schedule:
<TABLE>
<CAPTION>
Percentage of Principal
Period of Prepayment Balance Prepaid
-------------------- ---------------
<S> <C>
First Loan Year 4.0%
Second Loan Year 3.0%
Third Loan Year 2.0%
Thereafter 0.0%
</TABLE>
(b) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF
PREPAYMENTS. Not less than 10 days prior to the date upon
which Borrower desires to make any voluntary prepayment of the
Principal Balance, Borrower shall deliver to Lenders notice of
its intention to prepay, which notice shall be irrevocable and
shall state the prepayment date and the amount of the
Principal Balance to be prepaid. The amount of any voluntary
partial prepayment of the Principal Balance shall be not less
than $100,000 or integral multiples thereof. A voluntary
prepayment of the Principal Balance shall not be made more
frequently than once a month.
(c) ADDITIONAL PAYMENTS. Concurrently with any
voluntary prepayment of the Principal Balance pursuant to this
subsection 2.8.1, Borrower shall pay to Lenders accrued and
unpaid interest on the portion of the Principal Balance which
is being prepaid to the date on which Lenders are in receipt
of Good Funds, and any other sums which then are due and
payable pursuant to the terms of any of the Loan Instruments.
(d) APPLICATION OF PARTIAL PREPAYMENTS. Any voluntary
partial prepayment of the Principal Balance pursuant to this
subsection 2.8.1 shall be applied to the installments of the
Principal Balance in the inverse order of maturity.
.2 MANDATORY PREPAYMENTS.
(a) REQUIRED EXCESS CASH FLOW PREPAYMENTS. Until
Borrower's Obligations are paid in full, within 120 days after
the end of 2000 and the end of each year thereafter, Borrower
shall pay to Lenders the Required Excess Cash Flow Prepayment
for such year.
(b) PREPAYMENTS FROM INSURANCE PROCEEDS OR EQUITY
CONTRIBUTION PROCEEDS. Until Borrower's Obligations are paid
in full, Borrower shall pay to Lenders all insurance proceeds
to the extent required by subsection 6.6.2 and all Equity
Contribution Proceeds concurrently with the receipt by
Borrower of such Equity Contribution Proceeds.
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(c) SUNSTAR PAYMENT. Borrower shall prepay the
Principal Balance concurrently with the receipt by Borrower or
SunStar of the SunStar Proceeds in an amount equal to the
lesser of (i) an amount reasonably acceptable to Agent or (ii)
the amount of the SunStar Proceeds.
(d) APPLICATION OF MANDATORY PREPAYMENTS. Prepayments
received by Lenders pursuant to clauses (a), (b) and (c) of
this subsection 2.8.2 shall be applied in the following order
of priority to the payment of: (i) any and all sums which are
due and payable pursuant to the terms of the Loan Instruments,
except the Principal Balance and accrued and unpaid interest
thereon, (ii) accrued and unpaid interest on the portion of
the Principal Balance being prepaid, and (iii) the
installments of the Principal Balance in the inverse order of
maturity and as provided in subsection 2.4.2. Notwithstanding
the foregoing provisions of this subsection 2.8.2(d), the
Special Prepayment shall be applied to the SourceOne Principal
Balance.
.3 PREPAYMENT PREMIUM. No Prepayment Premium shall be payable
with respect to prepayments (i) pursuant to subsection 2.8.2(a),
2.8.2(c) or 2.3.5 or (ii) from any refinancing of the Loan made by
Lenders, which refinancing shall be at Lenders' discretion, or (iii)
from proceeds of insurance. Any prepayment from Equity Contribution
Proceeds (i) on or prior to the date Borrower is required to make the
mandatory prepayment under subsection 2.8.2(c) shall be accompanied by
payment of the applicable Prepayment Premium on the amount of such
prepayment from Equity Contribution Proceeds in excess of $1,250,000
and (ii) after the date Borrower is required to make the mandatory
prepayment under subsection 2.8.2(c) shall be accompanied by payment of
the applicable Prepayment Premium on the amount of such prepayment from
Equity Contribution Proceeds.
.4 INVOLUNTARY PREPAYMENT. Concurrently with any payment of
the Principal Balance received by Lenders resulting from the exercise
by Agent and/or Lenders of any remedy available to Agent and/or Lenders
subsequent to the occurrence of an Event of Default and the
acceleration of Borrower's Obligations, Borrower shall pay to Lenders a
Prepayment Premium in an amount equal to the Prepayment Premium which
would be payable if such payment was made pursuant to subsection 2.8.1.
.9 PAYMENTS AFTER EVENT OF DEFAULT. All payments received by
Lenders during the existence of an Event of Default shall be applied in
accordance with Section 8.4.
.10 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made
pursuant to the Loan Instruments by Borrower to Lenders shall be made by wire
transfer of Good Funds to the account of Agent at Citibank, N.A., 399 Park
Avenue, New York, New York, ABA 021000089, Credit: FINOVA Capital Corporation,
Credit Account No. 40680477, or to such other account as Agent shall notify
Borrower.
ARTICLE III
SECURITY
Borrower's Obligations shall be secured by a Lien upon all of the
Collateral, which Lien at all times shall be superior and prior to all other
Liens, except Permitted Prior Liens.
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ARTICLE IV
CONDITIONS OF CLOSING
The obligation of Lenders to disburse the SourceOne Portion shall be
subject to the satisfaction or waiver of all of the following conditions on or
before the Closing Date in a manner, form and substance satisfactory to Agent:
.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties of each Obligor set forth in the Loan Instruments
to which such Person is a party shall be true and correct in all material
respects.
.2 PERFORMANCE; NO DEFAULT. Each Person shall have performed and
complied with all agreements and conditions contained in the Instruments to
which such Person is a party to be performed by or complied with by such Person
prior to or at the Closing Date, and no Event of Default or Incipient Default
then shall exist or result from the disbursement of such portion of the Loan.
.3 MAXIMUM CASH PURCHASE PRICE. The cash portion of the purchase price
payable in connection with the SourceOne Acquisition shall not exceed
$2,250,000.
.4 BANKRUPTCY PROCEEDING. The Approval Orders shall be in full force
and effect and all parties bound by the Approval Orders shall have performed and
complied with their respective obligations thereunder. No subsequent order shall
have been entered by the Bankruptcy Court, and no motion shall have been filed
and no hearing shall be pending in the Bankruptcy Proceeding, which in the sole
judgment of Agent could have a material adverse effect on Borrower or the
businesses and assets to be acquired by Borrower pursuant to the SourceOne
Acquisition Instruments.
.5 CONSUMMATION OF SOURCEONE ACQUISITION. The SourceOne Acquisition
Instruments shall be in form and substance satisfactory to Agent. Agent shall
have received evidence that (i) the SourceOne Acquisition has been consummated
in accordance with the terms of the SourceOne Acquisition Instruments and as
contemplated by this Loan Agreement, (ii) Borrower will acquire concurrently
with the Closing Date good title to all of the Property being purchased pursuant
to the SourceOne Acquisition Instruments, free and clear of all Liens and
Indebtedness, except such Liens and Indebtedness permitted hereunder as Borrower
has agreed to assume or take subject to pursuant to the SourceOne Acquisition
Instruments and (iii) each party to the SourceOne Acquisition Instruments shall
have performed or complied with each term or condition contained therein to be
performed or complied with by it.
.6 DELIVERY OF DOCUMENTS. The following shall have been delivered to
Agent, each duly authorized and executed, where applicable, and in form and
substance satisfactory to Agent:
(i) the SourceOne Portion Loan Instruments;
(ii) a certificates of authority to do business for Borrower
from the Secretary of State of each new State in which Borrower will be
conducting its Paging Business as a result of the consummation of the
SourceOne Acquisition, each dated a recent date prior to the Closing
Date;
(iii) certified copies of (i) the articles of incorporation of
Borrower, certified by the Secretary of State of Delaware as of a
recent date prior to the Closing Date; (ii) the by-laws of Borrower,
certified by the secretary of Borrower and (iii) resolutions adopted by
the board of directors of Borrower authorizing the execution and
delivery of the SourceOne Portion Loan Instruments and the SourceOne
Acquisition Instruments and the consummation of the transactions
contemplated thereby, certified as of the Closing Date by the
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secretary of Borrower;
(iv) signature and incumbency certificates of officers of
Borrower;
(v) to the extent available to Borrower, certified copies or
executed originals of each of the following:
(1) the SourceOne Acquisition Instruments;
(2) the Operating Agreements not previously delivered
to Agent;
(3) the Leases not previously delivered to Agent;
(4) all instruments and documents evidencing
Permitted Senior Indebtedness existing as of the
Closing Date; and
(5) the Employment Agreement;
provided that Borrower shall use reasonable efforts to obtain
all of the foregoing and to provide the same to Agent within
30 days after the Closing Date;
(vi) such other instruments, documents, certificates,
consents, waivers and opinions as Agent reasonably may request.
.7 TERMINATION OF GUARANTY. Borrower shall have demonstrated to the
satisfaction of Agent that (i) all right, title and interest of Guarantor under
the leases and agreement described on Schedule A to the Guaranty dated as of
March 31, 1999 executed by Aquis Group in favor of Agent (except to the extent
Aquis Group is no longer a party to such lease or agreement as a result of its
being canceled or terminated or the premises subject thereto being surrendered
as permitted under the Loan Instruments and excluding those leases and
agreements which are not necessary to the operations of the Paging Business)
have been validly assigned to and assumed by Borrower and (ii) Borrower has
obtained all consents of all Persons whose consent is required, as reasonably
determined by Agent, in connection with such assignments and assumptions.
.8 OPINIONS OF COUNSEL; DIRECTION FOR DELIVERY. Agent shall have
received opinions dated the Closing Date from (A) Phillips Nizer Benjamin Krim &
Ballon LLP, counsel to Borrower, and (B) Richard S. Becker & Associates, special
regulatory counsel for Borrower, in each case addressed to Agent, as a Lender
and as Agent, in such form and covering such matters as Agent reasonably may
require.
.9 LICENSES. Agent shall have received (i) copies of all Licenses
issued by the FCC and any other Governmental Body for the operation of the
SourceOne System and (ii) evidence that (A) such Licenses constitute all
Licenses which are necessary to enable Borrower to conduct the portion of the
Paging Business of Borrower acquired as a result of the SourceOne Acquisition,
except for any Licenses (other than any FCC Licenses), the absence of which
could not reasonably be expected to have a Material Adverse Effect, (B) such
Licenses are in full force and effect as of the Closing Date, except where the
failure of any Licenses (other than any FCC Licenses) to be in full force and
effect could not reasonably be expected to have a Material Adverse Effect, (C)
no event has occurred which could result in the termination, revocation or
non-renewal of any such License, except where the termination, revocation or
non-renewal of any such License (other than any FCC License) could not
reasonably be expected to have a Material Adverse
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<PAGE>
Effect, (D) upon the Closing Date Borrower will be the holder of all such
Licenses, except where the failure of Borrower to be the holder of any such
License (other than any FCC License) could not reasonably be expected to have a
Material Adverse Effect and (E) the consent by the FCC or other applicable
Governmental Body of the transfer of such Licenses to Borrower has become final
and is no longer subject to administrative or judicial reconsideration, review
or appeal, except with respect to any such License (other than any FCC License)
where the failure of such consent to have become final could not reasonably be
expected to have a Material Adverse Effect.
.10 SECURITY INTERESTS. All filings of Uniform Commercial Code
financing statements and all other filings and actions necessary to perfect and
maintain the Security Interests as first, valid and perfected Liens in the
Property covered thereby, subject in priority only to Permitted Prior Liens,
shall have been filed or taken and Agent shall have received such UCC, state and
federal tax Lien, pending suit, judgment and other Lien searches as it deems
necessary to confirm the foregoing.
.11 INDEBTEDNESS TO BE REFINANCED. Agent shall have received evidence
that the Indebtedness to be Refinanced in connection with the consummation of
the SourceOne Acquisition has been paid or will be paid on the Closing Date in
full compliance with the terms of the Approval Orders.
.12 MAXIMUM LEVERAGE. Borrower shall demonstrate to the satisfaction of
Agent that, assuming the SourceOne Portion had been disbursed on the last day of
the second month prior to the month in which the Closing Date is to occur, the
Senior Leverage Ratio as of such last day would not exceed 4.0.
.13 FINANCIAL STATEMENTS AND PROJECTIONS. Agent shall have such
received pro-forma balance sheets, financial statements and operating
projections with respect to Borrower and the SourceOne System as Agent
reasonably may require.
.14 INSURANCE. At least three Business Days prior to the Closing Date,
Borrower shall have delivered to Agent evidence satisfactory to Agent that all
Business Insurance coverage required pursuant to Section 6.6 is in full force
and effect and all premiums then due thereon have been paid in full.
.15 ENVIRONMENTAL AUDIT. Agent shall have received an Environmental
Audit with respect to each parcel of Real Estate to be acquired by Borrower on
the Closing Date designated by Agent, and such other alternative assurances of
compliance with Environmental Laws (such as regulatory records checks) with
respect to each parcel of Leasehold Property to be acquired by Borrower on the
Closing Date designated by Agent. All costs incurred in performing such
Environmental Audits and providing such other alternative assurances of
compliance shall be borne by Borrower.
.16 APPROVAL OF INSTRUMENTS AND SECURITY INTERESTS; CONSENTS. Agent
shall have received evidence that all material approvals or consents shall have
been obtained from the FCC and all other Governmental Bodies and, except to the
extent the failure to obtain such approvals or consents could reasonably be
expected to have a Material Adverse Effect, all other Persons, whose approval or
consent is required to enable (i) Borrower and the other Persons party to the
Instruments to enter into and perform their respective obligations under the
Instruments to which each such Person is a party and (ii) such Person to grant
to Agent the Security Interests contemplated in the Security Instruments to
which such Person is a party.
.17 USE OF ASSETS. Agent shall be satisfied that Borrower at all times
shall be entitled to the use and quiet enjoyment of all Property necessary for
the continued ownership and operation of Borrower's Paging Business, including,
without limitation, the use of equipment, fixtures, Licenses, offices and means
of ingress and egress thereto, and any easements or rights-of-way necessary to
reach any equipment or other items necessary for the operation of the SourceOne
System, except where the failure to be entitled to such use and quiet enjoyment
could not reasonably be expected to have a Material Adverse Effect.
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<PAGE>
.18 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the Instruments and all documents and instruments incident
thereto shall be reasonably satisfactory to Agent, and Agent shall have received
all such counterpart originals or certified or other copies as Agent may
request.
.19 MATERIAL ADVERSE CHANGE. No event shall have occurred since
November 30, 1999 and no litigation or governmental proceeding or investigation
shall be pending, which has had or could reasonably be expected to have a
Material Adverse Effect, except that (i) John Adiletta's services as President
of Borrower have been terminated by Borrower and (ii) Francis Communications I,
Ltd. has initiated a law suit against Borrower. No judgment, order, injunction
or other restraint prohibiting or imposing materially adverse conditions on the
transactions to be consummated on the Closing Date shall be in effect.
.20 BROKER FEES. If the services of a broker or other agent have been
used in connection with the SourceOne Acquisition, all fees owed to such broker
or agent shall have been paid and Agent shall have received evidence of such
payment.
.21 FEES AND EXPENSES. Agent shall have received payment of the
SourceOne Loan Fee and all fees and expenses described in subsection 11.1.1.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and Lenders as follows:
.1 EXISTENCE AND POWER. Borrower is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware. Borrower
is in good standing under the laws of each other jurisdiction in which the
failure to be in good standing could have a Material Adverse Effect, except in
Illinois and Wisconsin, where applications for authority to transact business
are pending. Borrower has all requisite power and authority to own its Property
and to carry on its business as now conducted and as proposed to be conducted
following the Closing Date.
.2 AUTHORITY. Borrower has full power and authority to enter into,
execute, deliver and carry out the terms of the Instruments to which it is a
party and to incur the obligations provided for therein, all of which have been
duly authorized by all proper and necessary action and are not prohibited by its
articles of incorporation or by-laws.
.3 BORROWER CAPITAL STOCK AND RELATED MATTERS.
.1 BORROWER CAPITAL STOCK. There is set forth in Exhibit 5.3.1
a complete description of the Borrower Capital Stock and the SunStar
Capital Stock. The Borrower Capital Stock and the SunStar Capital Stock
is validly issued, fully paid and non-assessable, and has been issued
and sold in compliance with all applicable federal and state laws,
rules and regulations, including, without limitation, all so-called
"Blue-Sky" laws. The Borrower Capital Stock and the SunStar Capital
Stock is owned beneficially and of record by the Persons in the
respective percentages set forth on Exhibit 5.3.1, free and clear of
all Liens except the Security Interests. Borrower has no subsidiaries
other than SunStar.
.2 RESTRICTIONS. Except as set forth in Exhibit 5.3.2,
Borrower (i) is not a party to and has no knowledge of any agreements
restricting the transfer of the Borrower Capital Stock, except the Loan
Instruments, (ii) has not issued any rights which can be convertible
into or exchangeable or exercisable for any Borrower Capital Stock, or
any rights to subscribe for or to purchase, or any options for the
purchase of, or any
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agreements providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, any of
the Borrower Capital Stock or any securities convertible into or
exchangeable or exercisable for any Borrower Capital Stock and (iii) is
not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any Borrower Capital Stock. Borrower is
not required to file, and Borrower has not filed, pursuant to the
Securities Act or Section 12 of the Securities Exchange Act, a
registration statement relating to any class of debt or equity
securities.
.4 BINDING AGREEMENTS. This Loan Agreement and the other Loan
Instruments, when executed and delivered, will constitute the valid and legally
binding obligations of Borrower to the extent Borrower is a party thereto,
enforceable against Borrower in accordance with their respective terms, except
as such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and (ii) equitable principles
(whether or not any action to enforce such document is brought at law or in
equity).
.5 BUSINESS AND PROPERTY OF BORROWER.
.1 BUSINESS AND PROPERTY. Borrower (i) holds all FCC Licenses
necessary to the operation of the System and all other Licenses
necessary to the operation of the System, except where the failure to
hold such other Licenses could not reasonably be expected to have a
Material Adverse Effect and (ii) has not engaged in and does not
propose to engage in any business activity other than the operation of
the System and the Paging Business relating thereto.
.2 LICENSES. There is set forth in Exhibit 5.5.2 a description
of all material Licenses which have been issued or assigned to
Borrower, including all such Licenses issued by the FCC. All of such
Licenses are in full force and effect and have been duly issued in the
name of, or validly assigned to, Borrower, no default or breach exists
thereunder and Borrower has full power and authority thereunder to
operate the System and the Paging Business relating thereto.
.3 OPERATING AGREEMENTS. There is set forth in Exhibit 5.5.3 a
description of all material Operating Agreements relating to the
operation of the System. When the payments are made in accordance with
the Approval Orders to the Persons entitled thereto, each such
Operating Agreement shall be in full force and effect and no event
shall have occurred which could result in the cancellation or
termination of any such Operating Agreement or the imposition
thereunder of any liability upon Borrower which could have a Material
Adverse Effect.
.4 FACILITY SITES. There is set forth in Exhibit 5.5.4 the
locations of the chief executive office of Borrower, the locations of
all of Borrower's Property, the places where Borrower's books and
records are kept and the locations of all switches, transmitters,
control points, antennae, equipment and offices presently used in the
operation of the System.
.5 LEASES. There is set forth in Exhibit 5.5.5 a list of all
Leases, together with a complete and accurate address of each parcel of
Leasehold Property subject to such Leases and the address of each
Landlord under such Lease. When the payments are made in accordance
with the Approval Orders to the Persons entitled thereto, each Lease
shall be in full force and effect, there shall have been no default in
the performance of any of its terms or conditions by Borrower except as
disclosed on Exhibit 5.5.5 or, to the best knowledge of Borrower, any
other party thereto, and, to the best knowledge of Borrower, no claims
of default shall have been asserted with respect thereto except as
disclosed on Exhibit 5.5.5. The present and contemplated use of the
Leasehold Property is in compliance with all applicable zoning
ordinances and regulations and other laws and regulations, the
violation of which could have a Material Adverse Effect.
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.6 REAL ESTATE. There is set forth in Exhibit 5.5.6 a complete
and accurate address and legal description of the Real Estate, together
with the tax identification numbers applicable thereto. The present and
contemplated use of the Real Estate is in compliance with all
applicable zoning ordinances and regulations and other laws and
regulations the failure to comply with which would have a Material
Adverse Effect.
.7 OPERATION AND MAINTENANCE OF EQUIPMENT. To the best
knowledge of Borrower, no Person owning or operating any equipment
necessary for the operation of the System has used, operated or
maintained the same in a manner which now or hereafter could result in
the cancellation or termination of the right of Borrower to use or make
use of the same or which could result in any material liability of
Borrower for damages in connection therewith. To the best knowledge of
Borrower, all of the equipment and other tangible personal property
owned by Borrower is, in all material respects, in good operating
condition and repair (subject to normal wear and tear) and, to the best
knowledge of Borrower, has been used, operated and maintained in
substantial compliance with all applicable laws, rules and regulations.
.6 TITLE TO PROPERTY; LIENS. When the payments are made in accordance
with the Approval Orders to the Persons entitled thereto, Borrower shall have
(i) good title to all Property necessary to conduct its Paging Business, except
(A) any License which cannot be transferred without the consent of a
Governmental Body and (B) the portion thereof consisting of a leasehold estate
and (ii) a valid leasehold estate in each portion of its Property which consists
of a leasehold estate. All Property formerly held by Aquis Group and used in the
operation by Borrower of its Paging Business have been transferred to Borrower
as of the Closing Date and all consents necessary for such transfer have been
obtained. All of such Property is free and clear of all Liens, except Permitted
Liens. Upon the proper filing with the appropriate Governmental Bodies of
appropriate Uniform Commercial Code financing statements, the applicable Loan
Instruments will create valid and perfected first Liens in the Property
described therein, subject in priority only to Permitted Prior Liens.
.7 PROJECTIONS AND FINANCIAL STATEMENTS.
.1 FINANCIAL STATEMENTS. Borrower has delivered to Agent the
financial statements described in Exhibit 5.7.1 pertaining to the
operations of the System. To the best knowledge of Borrower (i) such
financial statements present fairly in all material respects the
results of operations of the System for the periods covered thereby and
the financial condition of the System as of the dates indicated
therein, (ii) all of such financial statements have been prepared in
conformity with GAAP consistently applied, except for the absence of
footnotes and subject to year-end adjustments and (iii) since December
31, 1997, there has been no change which has had a Material Adverse
Effect. Borrower also has delivered to Agent a pro-forma balance sheet
as of the Closing Date. Such pro-forma balance sheet, which assumes the
consummation of the transactions contemplated by the Instruments,
presents fairly in all material respects the anticipated financial
condition of Borrower as of the Closing Date.
.2 PROJECTIONS. Borrower has delivered to Agent the
projections described in Exhibit 5.7.2 of the future operations of
Borrower. Such projections represent the best estimates of future
performance of Borrower believed by Borrower to be reasonable as of the
Closing Date.
.8 LITIGATION. There is set forth in Exhibit 5.8 a description of all
actions, suits, arbitration proceedings and claims pending or, to the best
knowledge of Borrower, threatened against Borrower, relating to the System or
the business or operations thereof or maintained by Borrower at law or in equity
or before any Governmental Body which if adversely determined could reasonably
be expected to have a Material Adverse Effect. None of the matters set forth in
such Exhibit 5.8 could reasonably be expected to be adversely determined.
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.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING AGREEMENTS.
Borrower is not in default under any agreement to which it is a party or by
which it or any of its Property is bound, the effect of which default could have
a Material Adverse Effect. No material authorization, consent, approval or other
action by, and no notice to or filing with, any Governmental Body or any other
Person which has not already been obtained, taken or filed, as applicable, is
required (i) for the due execution, delivery or performance by Borrower of any
of the Instruments to which Borrower is a party or (ii) as a condition to the
validity or enforceability of any of the Instruments to which Borrower is a
party or any of the transactions contemplated thereby or the priority of the
Security Interests, except for (A) certain filings to establish and perfect the
Security Interests and (B) filing of certain of the Loan Instruments with the
FCC. No provision of any mortgage, indenture, material contract, material
agreement, statute, rule, regulation, judgment, decree or order binding on
Borrower or affecting its Property conflicts with, or requires any consent which
has not already been obtained under, or would in any way prevent the execution,
delivery or performance of the terms of any of the Instruments or affect the
validity or priority of the Security Interests. The execution, delivery and
performance of the terms of the Instruments will not constitute a default under,
or result in the creation or imposition of, or obligation to create, any Lien
other than Permitted Liens upon the Property of Borrower pursuant to the terms
of any such mortgage, indenture, contract or agreement.
.10 TAXES. Borrower has filed all tax returns required to be filed, and
has paid, or made adequate provision for the payment of, all taxes shown to be
due and payable on such returns or in any assessments made against it, except
such taxes or assessments as are being contested in good faith and by
appropriate proceedings diligently conducted and for which adequate reserves
have been set aside in accordance with GAAP, and no tax liens have been filed
and, to the best knowledge of Borrower, no claims are being asserted in respect
of such taxes which are required by GAAP to be reflected in the financial
statements of Borrower and are not so reflected therein. The charges, accruals
and reserves on the books of Borrower with respect to all federal, state, local
and other taxes are considered by the management of Borrower to be adequate, and
Borrower does not know of any unpaid assessment which is or might be due and
payable by Borrower or create a Lien against any of Borrower's Property, except
such assessments as are being contested in good faith and by appropriate
proceedings diligently conducted, and for which adequate reserves have been set
aside in accordance with GAAP. None of the tax returns of Borrower are under
audit and Borrower is not the subject or target of any investigation by the
Internal Revenue Service.
.11 COMPLIANCE WITH APPLICABLE LAWS. Borrower is not in default in
respect of any judgment, order, writ, injunction, decree or decision of any
Governmental Body, which default could have a Material Adverse Effect. Borrower
is in compliance in all material respects with all applicable statutes and
regulations, including, without limitation, the Communications Act, all
Environmental Laws, ERISA, ADA and all laws and regulations relating to unfair
labor practices, equal employment opportunity and employee safety, of all
Governmental Bodies, the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. No material condemnation, eminent domain or
expropriation has been commenced or, to the best knowledge of Borrower,
threatened against Borrower's Property.
.12 PATENTS, TRADEMARKS, FRANCHISES, AGREEMENTS. Borrower owns,
possesses or has the right to use all patents, trademarks, service marks, trade
names, copyrights, franchises and rights with respect thereto (i) which are
necessary for the conduct of the Paging Business proposed to be conducted by
Borrower after the Closing Date and (ii) for which the failure to own, possess
or have the right to use could have a Material Adverse Effect, in each case,
without any known conflict with the rights of others and free of any Liens other
than the Security Interests.
.13 FCC MATTERS. Borrower (i) has duly and timely filed all reports and
other filings which are required to be filed by Borrower under the
Communications Act and any other applicable law, rule or regulation of any
Governmental Body, the non-filing of which could have a Material Adverse Effect,
and (ii) is in compliance with the Communications Act and all such laws, rules
and regulations, the noncompliance with which could have a Material Adverse
Effect. All information provided by or on behalf of Borrower in any material
filing with the FCC was at the
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time of filing true, complete and correct in all material respects, and the FCC
has been notified of any substantial or significant changes in such information
as required in accordance with the Communications Act and all other applicable
laws, rules and regulations.
.14 ENVIRONMENTAL MATTERS. Borrower is in compliance in all material
respects with all applicable Environmental Laws and no portion of any of Real
Estate or the Leasehold Property has been used as a land fill. To the best
knowledge of Borrower, there currently are not any known Hazardous Materials
generated, manufactured, released, stored, buried or deposited over, beneath, in
or on (or used in the construction and/or renovation of) the Real Estate or
Leasehold Property in violation of applicable Environmental Laws.
.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS. Borrower is not and no
Affiliate of Borrower is:
.1 INVESTMENT COMPANY ACT. An "investment company," or a
company "controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
.2 HOLDING COMPANY ACT. A "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended.
.3 FOREIGN OR ENEMY STATUS. (i) An "enemy" or an "ally of an
enemy" within the meaning of Section 2 of the Trading with the Enemy
Act, (ii) a "national" of a foreign country designated in Executive
Order No. 8389, as amended, or of any "designated enemy country" as
defined in Executive Order No. 9095, as amended, of the President of
the United States of America, in each case within the meaning of such
Executive Orders, as amended, or of any regulation issued thereunder,
(iii) a "national of any designated foreign country" within the meaning
of the Foreign Assets Control Regulations or the Cuban Assets Control
Regulations of the United States of America (Code of Federal
Regulations, Title 31, Chapter V, Part 515, Subpart B, as amended) or
(iv) an alien or a representative of any alien or foreign government
within the meaning of Section 310 of Title 47 of the United States
Code.
.4 REGULATIONS AS TO BORROWING. Subject to any statute or
regulation which regulates the incurrence of any Indebtedness for
Borrowed Money, including, without limitation, statutes or regulations
relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public
utility services.
.16 MARGIN REGULATIONS. None of the transactions contemplated by this
Loan Agreement or any of the other Loan Instruments, including the use of the
proceeds of the Loan, will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U and X, and Borrower
does not own or intend to carry or purchase any "margin security" within the
meaning of such Regulation U or G.
.17 OTHER INDEBTEDNESS. Upon the Closing, there will be no Indebtedness
for Borrowed Money owed by Borrower to any Person, except (i) Borrower's
Obligations and (ii) Permitted Senior Indebtedness permitted to exist as of the
Closing Date pursuant to this Loan Agreement.
.18 NO MISREPRESENTATION. Neither this Loan Agreement nor any other
Loan Instrument, certificate, information or report furnished or to be furnished
by or on behalf of Borrower to Agent or any Lender in connection with any of the
transactions contemplated hereby or thereby, contains or will contain a
misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements contained herein or
therein, taken as a whole, not misleading in the light of the circumstances
under which such statements were made.
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There is no fact, other than information known to the public generally, known to
Borrower after diligent inquiry, that could have a Material Adverse Effect that
has not expressly been disclosed to Agent in writing.
.19 EMPLOYEE BENEFIT PLANS.
.1 NO OTHER PLANS. Neither Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under, any Employee
Benefit Plan other than those identified on Exhibit 5.19.1. Borrower
has provided Agent accurate and complete copies of all contracts,
agreements and documents described on Exhibit 5.19.1.
.2 ERISA AND CODE COMPLIANCE AND LIABILITY. Borrower and each
ERISA Affiliate are in compliance with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with
respect to all Employee Benefit Plans except where failure to comply
would not result in a material liability to Borrower and except for any
required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has been or will be determined by the Internal Revenue Service
to be so qualified, and each trust related to such plan has been or
will be determined to be exempt under Section 401(a) of the Code. No
material liability has been incurred by Borrower or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan or any Multiemployer Plan.
.3 FUNDING. No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code)
been insured (without regard to any waiver granted under Section 412 of
the Code), nor has any funding waiver from the Internal Revenue Service
been received or requested with respect to any Pension Plan, nor has
Borrower or any ERISA Affiliate failed to make any contributions or to
pay any amounts due and owing as required by Section 412 of the Code,
Section 302 of ERISA or the terms of any Pension Plan prior to the due
dates of such contributions under Section 412 of the Code or Section
302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C), 4063(a) or 4068 of ERISA with respect to
any Pension Plan.
.4 PROHIBITED TRANSACTIONS AND PAYMENTS. Neither Borrower nor
any ERISA Affiliate has: (i) engaged in a nonexempt "prohibited
transaction" as such term is defined in Section 406 of ERISA or Section
4975 of the Code; (ii) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid; (iii) failed to make a required
contribution or payment to a Multiemployer Plan; or (iv) failed to make
a required installment or other required payment under Section 412 of
the Code.
.5 NO TERMINATION EVENT. No Termination Event has occurred or
is reasonably expected to occur.
.6 ERISA LITIGATION. No material proceeding, claim, lawsuit
and/or investigation is existing or, to the best knowledge of Borrower,
threatened concerning or involving any (i) employee welfare benefit
plan (as defined in Section 3(1) of ERISA) currently maintained or
contributed to by Borrower or any ERISA Affiliate, (ii) Pension Plan or
(iii) Multiemployer Plan.
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.20 EMPLOYEE MATTERS.
.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES. Except as set
forth in Exhibit 5.20.1, (i) none of the employees of Borrower is
subject to any collective bargaining agreement with Borrower, (ii) no
petition for certification or union election is pending with respect to
the employees of Borrower and no union or collective bargaining unit
has sought such certification or recognition with respect to the
employees of Borrower and (iii) there are no strikes, slowdowns, work
stoppages, unfair labor practice complaints, grievances, arbitration
proceedings or controversies pending or, to the best knowledge of
Borrower, threatened against Borrower by any of Borrower's employees,
other than employee grievances or controversies arising in the ordinary
course of business that could not in the aggregate be expected to have
a Material Adverse Effect.
.2 CLAIMS RELATING TO EMPLOYMENT. Neither Borrower nor, to
Borrower's best knowledge, any employee of Borrower, is subject to any
employment agreement or non-competition agreement with any former
employer or any other Person which agreement would have a Material
Adverse Effect due to (i) any information which Borrower would be
prohibited from using under the terms of such agreement or (ii) any
legal considerations relating to unfair competition, trade secrets or
proprietary information.
.21 BURDENSOME OBLIGATIONS. After giving effect to the transactions
contemplated by the Instruments (i) Borrower (A) will not be a party to or be
bound by any franchise, agreement, deed, lease or other instrument, or be
subject to any restriction, which is so unusual or burdensome so as to cause, in
the foreseeable future, a Material Adverse Effect and (B) does not intend to
incur, or believe that it will incur, debts beyond its ability to pay such debts
as they become due, and (ii) Borrower (A) owns and will own Property, the fair
saleable value of which is (I) greater than the total amount of its liabilities
(including contingent liabilities) and (II) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured, and (B) has and will have capital that is not
unreasonably small in relation to its business as presently conducted and as
proposed to be conducted. Borrower does not presently anticipate that future
expenditures needed to meet the provisions of federal or state statutes, orders,
rules or regulations will be so burdensome so as to have a Material Adverse
Effect.
.22 BROKER FEES. The services of a broker or other similar agent have
not been used in connection with the Loan.
.23 PAGERS IN SERVICE. As of the Closing Date and after giving effect
to the SourceOne Acquisition, there are no less than 450,000 Pagers in Service.
.24 INSURANCE. No notice of cancellation has been received with respect
to any insurance policies required pursuant to Section 6.6.1 and Borrower is in
material compliance with all conditions contained in such policies.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full
Borrower agrees that it will:
.1 LEGAL EXISTENCE; GOOD STANDING. Maintain its existence and its good
standing in Delaware and maintain its qualification in each other jurisdiction
in which the failure so to qualify could have a Material Adverse Effect.
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.2 INSPECTION. Permit representatives of Agent and Lenders, upon
reasonable prior notice and during normal business hours if no Event of Default
or Incipient Default exists and is continuing, or without notice at any time if
an Event of Default or Incipient Default exists and is continuing, to (i) visit
its offices, (ii) examine its books and records and Accountants' reports
relating thereto, (iii) make copies or extracts therefrom, (iv) discuss its
affairs with its employees, (v) examine and inspect its Property and (vi) meet
and discuss its affairs with the Accountants, and such Accountants, as a
condition to their retention by Borrower, are hereby irrevocably authorized by
Borrower to fully discuss and disclose all such affairs with Agent and Lenders.
.3 FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a standard
system of accounting in accordance with GAAP and furnish to each Lender:
.1 MONTHLY STATEMENTS. As soon as available and in any event
within 30 days after the close of each month:
(a) a copy of the balance sheet of Borrower as of the
end of such month,
(b) statements of operations and Operating Cash Flow
for such month and for the period from the beginning of the
then current year to the end of such month, setting forth in
each case in comparative form the corresponding figures for
the corresponding period in the preceding year, and
(c) a Pager Certificate for each Borrower as of the
last day of such month,
all in reasonable detail, containing such information as Lenders
reasonably may require, and certified as complete and correct, subject
to normal year-end adjustments, by the Chief Financial Officer of
Borrower.
.2 QUARTERLY STATEMENTS AND AGINGS. As soon as available and
in any event within 45 days after the close of each quarter:
(a) a copy of the balance sheet of Borrower as of the
end of such quarter,
(b) statements of operations and Operating Cash Flow
for such quarter and for the period from the beginning of the
then current year to the end of such quarter, setting forth in
each case in comparative form the corresponding figures for
the corresponding period in the preceding year, and
(c) an aging of Borrower's outstanding accounts
payable and accounts receivable as of the end of such quarter,
all in reasonable detail, containing such information as Lenders
reasonably may require, and certified by the Chief Financial Officer as
complete and correct, subject to normal year-end adjustments.
.3 ANNUAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each year:
(a) the balance sheet of Borrower as of the end of
such year and the statements of operations, cash flows,
shareholders' equity (collectively, the "Basic Financial
Statements"), Operating Cash Flow and Excess Cash Flow for
such year setting forth in each case in comparative form the
corresponding figures for the preceding year,
(b) an opinion of the Accountants which shall
accompany the Basic Financial
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Statements of Borrower, which opinion shall be unqualified as
to going concern and scope of audit, stating that (i) the
examination by the Accountants in connection with such Basic
Financial Statements has been made in accordance with
generally accepted auditing standards, (ii) such Basic
Financial Statements have been prepared in conformity with
GAAP and in a manner consistent with prior periods, and (iii)
such Basic Financial Statements fairly present in all material
respects the financial position and results of operations of
Borrower, and
(c) a letter from the Accountants stating that the
statements of Operating Cash Flow and Excess Cash Flow were
computed in accordance with the requirements of this Loan
Agreement.
.4 OFFICER'S CERTIFICATES. The financial statements described
in subsection 6.3.2 and 6.3.3 shall be accompanied by a Compliance
Certificate.
.5 ACCOUNTANTS' CERTIFICATE. Simultaneously with the delivery
of the certified Basic Financial Statements required by subsection
6.3.3, copies of a certificate of the Accountants stating that (i) they
have checked the computations delivered by Borrower in compliance with
subsection 6.3.3, and (ii) in making the examination necessary for
their audit or review of the Basic Financial Statements for such year,
nothing came to their attention of a financial or accounting nature
that caused them to believe that (A) Borrower was not in compliance
with the terms, covenants, provisions or conditions of any of the Loan
Instruments, or (B) there shall have occurred any condition or event
which would constitute an Event of Default, or, if so, specifying in
such certificate all such instances of non-compliance and the nature
and status thereof.
.6 AUDIT REPORTS. Promptly upon receipt thereof, a copy of
each report, other than the reports referred to in subsection 6.3.3,
including any so-called "Management Letter" or similar report,
submitted to Borrower by the Accountants in connection with any annual,
interim or special audit made by the Accountants of the books of
Borrower.
.7 BUSINESS PLANS. Not less than 30 days prior to the end of
each year, a business plan for the Paging Business of Borrower for the
following year setting forth in reasonable detail the projected
Operating Cash Flow, Capital Expenditures and operations budget of such
Paging Business and of Borrower, and such other information as Lenders
reasonably may request, for such following year.
.8 NOTICE OF DEFAULTS; LOSS. Prompt written notice if: (i) any
Indebtedness of Borrower is declared or shall become due and payable
prior to its declared or stated maturity, or called and not paid when
due, (ii) there shall occur and be continuing an Event of Default,
accompanied by a statement of the president of Borrower setting forth
what action Borrower proposes to take in respect thereof, or (iii) any
event shall occur which has a Material Adverse Effect, including the
amount or the estimated amount of any loss or adverse effect.
.9 NOTICE OF SUITS; ADVERSE EVENTS. Prompt written notice of:
(i) any citation, summons, subpoena, order to show cause or other order
naming Borrower a party to any proceeding before any Governmental Body
which might reasonably be expected to have a Material Adverse Effect,
including with such notice a copy of such citation, summons, subpoena,
order to show cause or other order, (ii) any lapse or other termination
of any license, permit, franchise, agreement or other authorization
issued to Borrower by any Governmental Body or any other Person that is
material to the operation of the Paging Business of Borrower, (iii) any
refusal by any Governmental Body or any other Person to renew or extend
any such license, permit, franchise, agreement or other authorization
and (iv) any dispute between Borrower and any Governmental Body or any
other Person, which lapse, termination, refusal or dispute referred to
in clauses (ii) and (iii) above or in this clause (iv) could have a
Material Adverse Effect.
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.10 REPORTS TO SHAREHOLDERS, CREDITORS AND GOVERNMENTAL
BODIES.
(a) Promptly upon becoming available, copies of all
financial statements, reports, notices and other statements
sent or made available generally by Borrower to its
shareholders, of all regular and periodic reports and all
registration statements and prospectuses filed by Borrower
with any securities exchange or with the Securities and
Exchange Commission or any Governmental Body succeeding to any
of its functions, and of all statements generally made
available by Borrower or others concerning material
developments in the business of Borrower.
(b) Promptly upon becoming available, copies of any
periodic or special reports filed by Borrower with any
Governmental Body or Person, if such reports indicate any
material change in the business, operations, affairs or
condition of Borrower, or if copies thereof are requested by
any Lender, and copies of any material notices and other
communications from any Governmental Body or Person which
specifically relate to Borrower.
.11 ERISA NOTICES AND REQUESTS.
(a) With reasonable promptness, and in any event
within 30 days after occurrence of any of the following,
notice and/or copies of: (i) the establishment of any new
Employee Benefit Plan, Pension Plan or Multiemployer Plan;
(ii) the commencement of contributions to any Employee Benefit
Plan, Pension Plan or Multiemployer Plan to which Borrower or
any of its ERISA Affiliates was not previously contributing or
any increase in the benefits of any existing Employee Benefit
Plan, Pension Plan or Multiemployer Plan; (iii) each funding
waiver request filed with respect to any Employee Benefit Plan
and all communications received or sent by Borrower or any
ERISA Affiliate with respect to such request; and (iv) the
failure of Borrower or any of its ERISA Affiliates to make a
required installment or payment under Section 302 of ERISA or
Section 412 of the Code by the due date.
(b) Promptly and in any event within 10 days of
becoming aware of the occurrence of or forthcoming occurrence
of any (i) Termination Event or (ii) "prohibited transaction,"
as such term is defined in Section 406 of ERISA or Section
4975 of the Code, in connection with any Pension Plan or any
trust created thereunder, a notice specifying the nature
thereof, what action Borrower has taken, is taking or proposes
to take with respect thereto and, when known, any action taken
or threatened by the Internal Revenue Service, the Department
of Labor or the PBGC with respect thereto.
(c) With reasonable promptness but in any event
within 10 days after the occurrence of any of the following,
copies of: (i) any favorable or unfavorable determination
letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a)
of the Code; (ii) all notices received by Borrower or any
ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension
Plan; (iii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by Borrower or any
ERISA Affiliate with the Internal Revenue Service with respect
to each Pension Plan; and (iv) all notices received by
Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA; and written
notice within two Business Days of Borrower's or any ERISA
Affiliate's filing of or intention to file a notice of intent
to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA.
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.12 OTHER INFORMATION.
(a) Immediate notice of any material change in, or
termination of, the employment of Nicholas Catania, any change
in the location of any Property of Borrower which is material
to or necessary for the continued operation of Borrower's
business, any change in the name of Borrower, any sale or
purchase of Property outside the regular course of business of
Borrower, and any change in the business or financial affairs
of Borrower, which change could have a Material Adverse
Effect.
(b) Promptly upon request therefor, such other
information and reports relating to the past, present or
future financial condition, operations, plans and projections
of Borrower as Lenders reasonably may request from time to
time.
.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS. Timely file all
material reports, applications, documents, instruments and information required
to be filed pursuant to all rules, regulations or requests of any Governmental
Body or other Person having jurisdiction over the operation of the business of
Borrower, including, but not limited to, such of the Loan Instruments as are
required to be filed with any such Governmental Body or other Person pursuant to
applicable rules and regulations promulgated by such Governmental Body or other
Person, except where the failure to file could not reasonably be expected to
have a Material Adverse Effect.
.5 MAINTENANCE OF LICENSES AND OTHER AGREEMENTS. Maintain in full force
and effect at all times (subject to any modification in the ordinary of business
which could not reasonably be expected to have a Material Adverse Effect), and
apply in a timely manner for renewal of, all Licenses, trademarks, trade names
and agreements necessary for the operation of its Paging Business, the loss of
any of which could have a Material Adverse Effect, and deliver to Agent (i)
prompt notice of the proposed amendment or modification of any of such Licenses,
trademarks, tradenames or agreements which could reasonably be expected to have
a Material Adverse Effect and (ii) (A) evidence of the filing of any application
for renewal of any such Licenses not later than the last day such application
may be filed in accordance with applicable law and (B) copies of any petition
filed to deny any such renewal application promptly after receipt thereof by
Borrower.
.6 INSURANCE.
.1 MAINTENANCE OF INSURANCE. Maintain in full force and effect
Business Insurance as required by the insurance letter agreement
between Borrower and Agent attached hereto as Exhibit 6.6.1, all of
which shall be written by insurers and in amounts and forms
satisfactory to Agent and otherwise comply with the terms of such
insurance letter agreement, and deliver to Agent such evidence of
compliance with this subsection 6.6.1 as Agent may require.
.2 CLAIMS AND PROCEEDS. Borrower hereby directs all insurers
under all policies of Business Insurance to pay all proceeds payable
thereunder directly to Agent and Borrower hereby authorizes Agent to
collect all such proceeds. Borrower irrevocably appoints Agent (and all
officers, employees or agents designated by Agent) as Borrower's true
and lawful attorney and agent in fact for the purpose of and with power
to make, settle and adjust claims under such policies of insurance,
endorse the name of Borrower on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance, and to
make all determinations and decisions with respect to such policies of
insurance. Borrower acknowledges that such appointment as attorney and
agent in fact is a power coupled with an interest, and therefore is
irrevocable. The insurance proceeds received on account of any loss,
damage, destruction or other casualty (i) if any Event of Default
exists and is continuing or if the aggregate amount thereof exceeds
$200,000, at the option of Agent may be applied to the payment of
Borrower's Obligations in the following order of priority: (A) first,
to the
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<PAGE>
payment of any and all sums which then are due and payable pursuant to
the terms of the Loan Instruments, other than the Principal Balance and
interest accrued thereon, (B) next, to accrued and unpaid interest on
the Principal Balance and (C) then, to the Principal Balance of the
Loan in the inverse order of the maturity of the installments thereof,
or (ii) at the option of Agent may be (or if no Event of Default exists
and is continuing and the aggregate amount thereof is $200,000 or less,
shall be), held by Agent and applied to pay for the cost of repair or
replacement of the Property which was the subject of such loss, damage,
destruction or other casualty, in which event such proceeds shall be
made available in the manner and under such conditions as Agent may
require. In the event such proceeds are to be applied to the repair or
replacement of Property, the Property shall be repaired or replaced so
as to be of at least equal value and substantially the same character
as prior to such loss, damage, destruction or other casualty within 90
days after receipt of such proceeds.
.7 FUTURE LEASES. Deliver to Agent, concurrently with the execution by
Borrower, as lessee, of any lease pertaining to real property, (i) an executed
copy thereof, (ii) at the option of Agent, either a leasehold mortgage upon or a
collateral assignment of such lease in favor of Agent, in either case in form
and substance satisfactory to Agent, and (iii) a Landlord Consent and Waiver
from the lessor under such lease.
.8 FUTURE ACQUISITIONS OF REAL PROPERTY. Deliver to Agent concurrently
with the (i) execution by Borrower of any contract relating to the purchase by
Borrower of real property, an executed copy of such contract and (ii) closing of
the purchase of such real property, (A) a first mortgage or deed of trust in
favor of Agent on such real property, in form and substance satisfactory to
Agent, (B) a lender's policy of title insurance, in such form and amount and
containing such endorsements as shall be satisfactory to Agent, (C) an ALTA/ACSM
survey of such real property and (D) such other documents and assurances with
respect to such real property as Agent may require.
.9 ENVIRONMENTAL MATTERS.
.1 COMPLIANCE. At all times comply with, and be responsible
for, its material obligations under all Environmental Laws applicable
to the Real Estate, Leasehold Property and any other Property owned by
Borrower or used by Borrower in the operation of Borrower's Paging
Business. At its sole cost and expense, Borrower shall (i) comply in
all respects with (A) any notice of any violation or administrative or
judicial complaint or order having been filed against Borrower, any
portion of any Real Estate or Leasehold Property or any other Property
owned by Borrower or used by Borrower in the operation of its business
alleging violations of any law, ordinance and/or regulation requiring
Borrower to take any action in connection with the release,
transportation and/or clean-up of any Hazardous Materials, and (B) any
notice from any Governmental Body or any other Person alleging that
Borrower is or may be liable for costs associated with a response or
clean-up of any Hazardous Materials or any damages resulting from such
release or transportation, or (ii) diligently contest in good faith by
appropriate proceedings any demands set forth in such notices, provided
(A) reserves in an amount reasonably satisfactory to Agent to pay the
costs associated with complying with any such notice are established by
Borrower and (B) no Lien would or will attach to the Property which is
the subject of any such notice as a result of any compliance by
Borrower which is delayed during any such contest. Promptly upon
receipt of any notice described in the foregoing clause (i), Borrower
shall deliver to Agent a copy thereof.
.2 CERTIFICATION. Deliver to Agent, not later than the first
Business Day of each year, an Environmental Compliance Certificate.
.10 COMPLIANCE WITH LAWS. Comply with the Communications Act and all
other federal, state and local laws, ordinances, requirements and regulations
and all judgments, orders, injunctions and decrees applicable to Borrower and
its operations, the failure to comply with which could have a Material Adverse
Effect.
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<PAGE>
.11 TAXES AND CLAIMS. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any Property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien (other than
a Permitted Lien) upon the Property of Borrower, provided that Borrower shall
not be required by this Section 6.11 to pay any such amount if the same is being
contested diligently and in good faith by appropriate proceedings and as to
which Borrower has set aside reserves on its books reasonably satisfactory to
Agent.
.12 MAINTENANCE OF PROPERTIES. Maintain all of its Properties necessary
in the operation of its Paging Business in good working order and condition.
.13 GOVERNMENTAL APPROVALS. Upon the exercise by Agent and/or Lenders
of any power, right or privilege pursuant to the provisions of any of the Loan
Instruments after the occurrence and during the continuance of any Event of
Default requiring any consent, approval or authorization of any Governmental
Body (including, without limitation, transfers of Licenses), promptly execute
and cause the execution of all applications, certificates, instruments and other
documents that Agent and/or Lenders may be required to obtain for such consent,
approval or authorization.
.14 PAYMENT OF INDEBTEDNESS. Except as to matters being contested in
good faith and by appropriate proceedings and except to the extent prohibited by
the terms of this Loan Agreement, promptly pay when due, or in conformance with
customary trade terms, all of its Indebtedness.
.15 SUNSTAR TRANSFER. If the SunStar Transfer does not to occur by
March 31, 2000, execute and deliver a pledge agreement in favor of Agent
covering all of the SunStar Capital Stock and cause SunStar to execute and
deliver a guaranty of Borrower's Obligations and a security agreement covering
the Property of SunStar to secure its obligations under such guaranty, in favor
of Agent guarantying payment and performance in full of Borrower's Obligations,
each in form and substance reasonably satisfactory to Agent and each on or
before April 30, 2000.
ARTICLE VII
NEGATIVE COVENANTS
Until all of Borrower's Obligations are paid and performed in full,
Borrower shall not:
.1 BORROWING. Create, incur, assume or suffer to exist any liability
for Indebtedness for Borrowed Money except (i) Borrower's Obligations and (ii)
Permitted Senior Indebtedness, provided that any Permitted Senior Indebtedness
repaid cannot be reborrowed.
.2 LIENS. Create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, except Permitted Liens.
.3 MERGER AND ACQUISITION. Consolidate with or merge with or into any
Person, acquire directly or indirectly all or substantially all of the capital
stock, equity interests or Property of any Person, or acquire any Paging
Business, or enter into any agreement for or related to the foregoing.
.4 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently
agree to purchase, become liable in respect of any letter of credit, or
otherwise become liable upon the obligation of any Person, except for
liabilities arising from the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business.
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<PAGE>
.5 DISTRIBUTIONS. Make any dividends, distributions or other
shareholder expenditures with respect to the Borrower Capital Stock or apply any
of its Property to the purchase, redemption or other retirement of, or set apart
any sum for the payment of, or make any other distribution by reduction of
capital or otherwise in respect of, any of the Borrower Capital Stock, except
that, provided that no Event of Default or Incipient Default exists and is
continuing and any Required Excess Cash Flow Prepayment has been made, Borrower
may, (i) within 120 days after the end of 2000 and the end of each year
thereafter, pay dividends to its shareholders in an aggregate amount not to
exceed the Net Excess Cash Flow for such year and (ii) make distributions to
Aquis Group in amounts equal to and for the purpose of making scheduled payments
as set forth in the Phillips Nizer Note as in effect as of the Closing Date and
other current monthly legal expenses payable to Phillips Nizer as they become
due and payable.
.6 CAPITAL EXPENDITURES. Make or incur any Capital Expenditures in any
year set forth below in excess of the amount set forth below opposite such year,
except to the extent such Capital Expenditures are made from the proceeds of
additional cash capital contributions to Borrower and no Event of Default exists
and is continuing at the time such cash capital contributions are made:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C> <C>
2000 $3,500,000
2001 $3,300,000
2002 $3,000,000
2003 $3,000,000
</TABLE>
.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY. Make any payment or
prepayment on account of any Indebtedness for Borrowed Money other than
Borrower's Obligations, except that Borrower may make regularly scheduled
payments on account of Permitted Senior Indebtedness.
.8 OBLIGATIONS AS LESSEE UNDER OPERATING LEASES. Enter into or suffer
to exist any arrangement as lessee of Property under any Operating Lease if the
aggregate rentals for all such Operating Leases during any year would exceed
$4,000,000.
.9 INVESTMENTS, LOANS. At any time purchase or otherwise acquire, hold
or invest in the capital stock of, or any other interest in, any Person, or make
any loan or advance to, or enter into any arrangement for the purpose of
providing funds or credit to, or make any other investment, whether by way of
capital contribution or otherwise, in or with any Person, including, without
limitation, any Affiliate (including any payment or advance to or for the
benefit of Aquis Group or any of its subsidiaries other than Borrower in
connection with any acquisition by such Person), or expend more than $10,000 in
the nature of earnest money, deposit or down payment for the purchase of capital
stock or any other interest in any Person or of substantially all of the assets
of any Person, or expend more than $10,000 in the nature of due diligence or
other investigation of any Person or the assets of any Person in connection with
the proposed purchase of capital stock or any other interest in any Person or of
substantially all of the assets of any Person, except (i) investments in direct
obligations of, or instruments unconditionally guaranteed by, the United States
of America or in certificates of deposit issued by a Qualified Depository, (ii)
investments in commercial or finance paper which, at the time of investment, is
rated "A" or better by Moody's Investors Service, Inc., or Standard & Poor's
Corporation, respectively, or at the equivalent rate by any of their respective
successors, (iii) any interests in any money market account maintained, at the
time of investment, with a Qualified Depository, the investments of which, at
the time of investment, are restricted to the types specified in clause (i)
above, and (iv) Borrower's investment in SunStar existing as of October 31,
1999, so long as Borrower does not make any additional capital contribution,
loan or advance or other investment in SunStar (A) in excess of $70,000 per
month prior to the SunStar Transfer Date or (B) after the SunStar Transfer Date.
All investments permitted pursuant to clauses (i), (ii) and (iii) of this
Section 7.9 shall have a maturity not exceeding one year.
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<PAGE>
.10 FUNDAMENTAL BUSINESS CHANGES. Materially change the nature of its
business or engage in any business other than the Paging Business.
.11 FACILITY SITES. Not change the locations of any tower
installations, transmitters, switches or offices used in the operation of the
System unless (i) Agent shall have received notice of such change not later than
10 Business Days after such change, (ii) Borrower shall have complied with all
applicable laws, rules and regulations and shall have received all required
consents and approvals from any Governmental Body, including, without
limitation, the FCC, (iii) such change could not reasonably be expected to have
a Material Adverse Effect and (iv) Borrower shall have executed and delivered to
Agent any documents Agent reasonably may require in order to maintain the
validity and priority of the Security Interests.
.12 SALE OR TRANSFER OF ASSETS. Sell, lease, assign, transfer or
otherwise dispose of any Property except for (i) the sale or disposition of (A)
inventory in the ordinary course of business, (B) Property which is not material
to or necessary for the continued operation of its business and (C) obsolete or
unusable items of equipment which promptly are replaced with new items of
equipment of like function and comparable value to the unusable items of
equipment when the same were new or not obsolete or unusable, provided such
replacement items of equipment shall become subject to the Security Interests,
(ii) Trade Out Transactions consummated in connection with promotional or other
activities, all of which shall be conducted by Borrower in the ordinary course
of business consistent with past practices, (iii) Asset Sales with respect to
which Borrower has obtained Lenders' prior written consent, which consent may be
given or withheld in the sole and absolute discretion of Lenders, (iv) the
SunStar Transfer, provided that all terms and conditions of the SunStar
Transfer, including the terms of payment of the purchase price and prepayment
due to FINOVA, are reasonably acceptable to Agent.
.13 AMENDMENT OF CERTAIN AGREEMENTS. Amend, modify or waive any term or
provision of (i) its articles of incorporation or by-laws, or (ii) the
Employment Agreement.
.14 ACQUISITION OF ADDITIONAL PROPERTIES. Acquire any additional
Property except, subject to the conditions and limitations set forth in this
Loan Agreement, such Property as is necessary to or useful in the operation of
its business.
.15 EQUITY SALES. Issue or sell any additional capital stock or any
options or other interests convertible into or exercisable for any such
additional capital stock or any debt securities, provided that the foregoing
shall not be deemed to prohibit Borrower from accepting Equity Contributions.
.16 TRANSACTIONS WITH AFFILIATES. Sell, lease, assign, transfer or
otherwise dispose of any Property to any Affiliate, lease Property, render or
receive services or purchase assets from any Affiliate, or otherwise enter into
any contractual relationship with any Affiliate on terms which are less
favorable to Borrower than those otherwise reasonably attainable on an arm's
length basis from a Person which is not one of its Affiliates, except for the
SunStar Transfer.
.17 COMPLIANCE WITH ERISA.
(i) Permit the occurrence of any Termination Event which would
result in a liability to Borrower or any ERISA Affiliate in excess of
$50,000;
(ii) Permit the present value of all benefit liabilities under
all Pension Plans to exceed the current value of the assets of such
Pension Plans allocable to such benefit liabilities by more than
$50,000;
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<PAGE>
(iii) Permit any accumulated funding deficiency in excess of
$50,000 (as defined in Section 302 of ERISA and Section 412 of the
Code) with respect to any Pension Plan, whether or not waived;
(iv) Fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto which results in or is likely to
result in a liability in excess of $50,000;
(v) Engage, or permit Borrower or any ERISA Affiliate to
engage, in any "prohibited transaction" as such term is defined in
Section 406 of ERISA or Section 4975 of the Code for which a civil
penalty pursuant to Section 502(i) of ERISA or a tax pursuant to
Section 4975 of the Code in excess of $50,000 is imposed;
(vi) Permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to Borrower or any ERISA Affiliate or increase the obligation
of Borrower or any ERISA Affiliate to a Multiemployer Plan which
liability or increase, individually or together with all similar
liabilities and increases, is material to Borrower or any ERISA
Affiliate; or
(vii) Fail, or permit Borrower or any ERISA Affiliate to fail,
to establish, maintain and operate each Employee Benefit Plan in
compliance in all material respects with ERISA, the Code and all other
applicable laws and regulations and interpretations thereof.
.18 SENIOR LEVERAGE RATIO. Permit the Senior Leverage Ratio as of any
date set forth below to be greater than the amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 4.00
June 30, 2000 4.00
September 30, 2000 3.75
December 31, 2000 3.50
March 31, 2001 3.25
June 30, 2001 3.25
September 30, 2001 3.25
December 31, 2001 3.00
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.50
March 31, 2003 2.50
June 30, 2003 2.50
September 30, 2003 2.50
December 31, 2003 2.50
</TABLE>
.19 SENIOR DEBT SERVICE COVERAGE RATIO. Permit the Senior Debt Service
Coverage Ratio as of any date set forth below to be less than the amount set
forth below opposite such date:
Date Amount
---- ------
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<PAGE>
<TABLE>
<S> <C>
March 31, 2000 2.50
June 30, 2000 2.50
September 30, 2000 2.50
December 31, 2000 2.50
March 31, 2001 2.25
June 30, 2001 2.25
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.00
June 30, 2002 2.00
September 30, 2002 2.00
December 31, 2002 2.00
March 31, 2003 1.90
June 30, 2003 1.90
September 30, 2003 1.90
December 31, 2003 1.90
.20 TOTAL LEVERAGE RATIO. Permit the Total Leverage Ratio as of any
date set forth below to be greater than the amount set forth opposite such date:
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 4.25
June 30, 2000 4.25
September 30, 2000 4.00
December 31, 2000 4.00
March 31, 2001 3.50
June 30, 2001 3.50
September 30, 2001 3.50
December 31, 2001 3.25
March 31, 2002 3.00
June 30, 2002 3.00
September 30, 2002 3.00
December 31, 2002 2.75
March 31, 2003 2.75
June 30, 2003 2.75
September 30, 2003 2.75
December 31, 2003 2.75
</TABLE>
.21 CERTAIN AGREEMENTS. Enter into any joint operating or similar
agreements with respect to the operation of the System or any other paging
system without the prior written consent of Lenders.
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ARTICLE VIII
DEFAULT AND REMEDIES
.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default under the Loan Instruments:
.1 DEFAULT IN PAYMENT. If Borrower shall fail to pay all or
any portion of Borrower's Obligations when the same become due and
payable.
.2 BREACH OF COVENANTS.
(a) If Borrower shall fail to observe or perform any
covenant or agreement made by Borrower contained in Section
6.1, 6.2, 6.5, 6.6, 6.9, 6.10, 6.11, 6.13, 6.14 or 6.16 or in
Article VII; or
(b) If any Obligor shall fail to observe or perform
any covenant or agreement (other than those referred to in
subparagraph (a) or (b) above or specifically addressed
elsewhere in this Section 8.1) made by such Person in any of
the Loan Instruments to which such Person is a party, and such
failure shall continue for a period of 30 days after written
notice of such failure is given by Lenders.
.3 BREACH OF WARRANTY. If any representation or warranty made
by or on behalf of any Obligor in or pursuant to any of the Loan
Instruments or in any instrument or document furnished in compliance
with the Loan Instruments shall prove to be false or misleading in any
material respect.
.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY. If (i)
Borrower at any time shall be in default (as principal or guarantor or
other surety) in the payment of any principal of or premium or interest
on any Indebtedness for Borrowed Money (other than Borrower's
Obligations) beyond the grace period, if any, applicable thereto and
the aggregate amount of such payments then in default beyond such grace
period shall exceed $100,000 or (ii) any default shall occur in respect
of any issue of Indebtedness for Borrowed Money of Borrower (other than
Borrower's Obligations) outstanding in a principal amount of at least
$200,000, or in respect of any agreement or instrument relating to any
such issue of Indebtedness for Borrow ed Money, and such default shall
continue beyond the grace period, if any, applicable thereto.
.5 BANKRUPTCY.
(a) If Borrower, or, prior to the SunStar Transfer
Date, SunStar, shall (i) generally not be paying its debts as
they become due, (ii) file, or consent, by answer or
otherwise, to the filing against it of a petition for relief
or reorganization or arrangement or any other petition in
bankruptcy or insolvency under the laws of any jurisdiction,
(iii) make an assignment for the benefit of creditors, (iv)
consent to the appointment of a custodian, receiver, trustee
or other officer with similar powers for it or for any
substantial part of its Property, or (v) be adjudicated
insolvent.
(b) If any Governmental Body of competent
jurisdiction shall enter an order appointing, without consent
of Borrower, or, prior to the SunStar Transfer Date, SunStar,
a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial
part of its Property, or if an order for relief shall be
entered in any case or proceeding for
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<PAGE>
liquidation or reorganization or otherwise to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of
Borrower, or prior to the SunStar Transfer Date, SunStar of
any petition for any such relief shall be filed against it and
such petition shall not be dismissed or stayed within 60 days.
.6 JUDGMENTS. If there shall be entered against Borrower or,
prior to the SunStar Transfer Date, SunStar, one or more judgments,
awards or decrees, or orders of attachment, garnishment or any other
writ, which exceed $250,000 in the aggregate at any one time
outstanding (after taking into account any insurance with respect to
which the insurer has assumed responsibility in writing and any
indemification upon terms and by credit-worthy indemnitors which are
satisfactory to Lenders), or which have been in force for less than the
applicable period for filing an appeal so long as execution has not
been levied thereunder (or in respect of which Borrower or, prior to
the SunStar Transfer Date, SunStar, shall at the time in good faith be
prosecuting an appeal or proceeding for review and in respect of which
a stay of execution or appropriate appeal bond shall have been obtained
pending such appeal or review).
.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS. If (i) any
Governmental Body shall revoke, terminate, suspend or adversely modify
any License of Borrower, the adverse modification or non- continuation
of which could reasonably be expected to have a Material Adverse
Effect, or (ii) there shall exist any violation or default in the
performance of, or a material failure to comply with any agreement, or
condition or term of any License, which violation, default or failure
could reasonably be expected to have a Material Adverse Effect, or
(iii) any agreement which is necessary to the operation of the Paging
Business of Borrower shall be revoked or terminated and not replaced by
a substitute acceptable to Lenders within 30 days after the date of
such revocation or termination, and such revocation or termination and
non- replacement could reasonably be expected to have a Material
Adverse Effect.
.8 COLLATERAL. If any material portion of the Collateral shall
be seized or taken by a Governmental Body or Person, or Borrower shall
fail to maintain or cause to be maintained the Security Interests and
priority of the Loan Instruments as against any Person, or the title
and rights of any Person party to any Loan Instrument to any material
portion of the Collateral shall have become the subject matter of
litigation which could reasonably be expected to result in impairment
or loss of the security provided by the Loan Instruments.
.9 INTERRUPTION OF OPERATIONS. If the operations of the System
shall cease completely at any time for more than 72 hours during any
period of 10 consecutive days, unless (i) the operations of all or
substantially all of the paging systems in the relevant market also are
interrupted for a like period of time and (ii) Borrower shall be
receiving during such period proceeds of business interruption
insurance sufficient to assure that its per diem Operating Cash Flow
during such period is at least equal to its average per diem Operating
Cash Flow for the consecutive three month period preceding the initial
date of interruption; provided, however, that, notwithstanding the
provisions of clauses (i) and (ii) to the contrary, an Event of Default
shall be deemed to occur hereunder if the operations of the System
shall cease completely at any time for more than 120 hours during any
period of 20 consecutive days.
.10 PLANS. If an event or condition specified in subsection
6.3.11 hereof shall occur or exist with respect to any Pension Plan or
Multiemployer Plan and, as a result of such event or condition,
together with all other such events or conditions, Borrower or any
ERISA Affiliate shall incur, or in the opinion of Lenders be reasonably
likely to incur, a liability to a Pension Plan or Multiemployer Plan or
the PBGC (or any of them) which, in the reasonable judgment of Lender,
would have a Material Adverse Effect.
.11 CHANGE IN CONTROL. If (i) Nicholas Catania shall cease to
devote his full business time and
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effort to the day to day operational management of the Systems and
Paging Business of Borrower existing as of the Closing Date or (ii) any
"person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Securities Exchange Act, whether or not
applicable) is or becomes the "beneficial owner" (as such term is used
in Rules 13d-3 and 13d-5 under the Securities Exchange Act, whether or
not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly (including as a result of
a merger or consolidation), of more than 30% of the total voting power
in the aggregate of all classes of capital stock of Aquis Group then
outstanding normally entitled to vote in elections of directors (but
excluding from the percentage of voting power held by any group the
voting power of shares owned by the Management Holders and their
Related Parties who are deemed to be members of the group, provided
that such Management Holders and Related Parties beneficially own a
majority of the total voting power of capital stock held by such
group), if at such time the Management Holders and their Related
Parties together shall fail to beneficially own, directly or
indirectly, securities representing at least the same percentage of the
combined voting power of such capital stock as the percentage
"beneficially owned" by such person or group.
.2 ACCELERATION OF BORROWER'S OBLIGATIONS. Upon the occurrence of:
(a) any Event of Default described in clauses (ii),
(iii), (iv) and (v) of subsection 8.1.5(a) or in 8.1.5(b), all
of Borrower's Obligations at that time outstanding
automatically shall mature and become due, and
(b) any other Event of Default, Lenders, at any time,
at their option, without further notice or demand, may declare
all of Borrower's Obligations due and payable, whereupon
Borrower's Obligations immediately shall mature and become due
and payable,
all without presentment, demand, protest or notice (other than notice of the
declaration referred to in clause (b) above), all of which hereby are waived.
.3 REMEDIES ON DEFAULT. If Borrower's Obligations have been accelerated
pursuant to Section 8.2, Lenders, at their option, may:
.1 ENFORCEMENT OF SECURITY INTERESTS. Enforce their rights and
remedies under the Loan Instruments in accordance with their respective
terms.
.2 OTHER REMEDIES. Enforce any of the rights or remedies
accorded to Lenders and/or Agent at equity or law, by virtue of statute
or otherwise.
.4 APPLICATION OF FUNDS. Any funds received by Lenders or Agent
pursuant to the exercise of any rights accorded to Lenders and/or Agent pursuant
to, or by the operation of any of the terms of, any of the Loan Instruments,
including, without limitation, insurance proceeds, condemnation proceeds or
proceeds from the sale of Collateral shall be applied to Borrower's Obligations
in the following order of priority:
.1 EXPENSES. First, to the payment of (i) all fees and
expenses actually incurred, including, without limitation, court costs,
fees of appraisers, title charges, costs of maintaining and preserving
the Collateral, costs of sale, and all other costs incurred by Agent
and Lenders, in exercising any rights accorded to such Persons pursuant
to the Loan Instruments or by applicable law, including, without
limitation, reasonable attorney's fees, and (ii) all Liens superior to
the Liens of Agent except such superior Liens subject to which any sale
of the Collateral may have been made.
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.2 BORROWER'S OBLIGATIONS. Next, to the payment of Borrower's
Obligations in such order as Lenders may determine.
.3 SURPLUS. Any surplus, to the Person or Persons entitled
thereto.
.5 PERFORMANCE OF BORROWER'S OBLIGATIONS. If Borrower fails to (i)
maintain in force and pay for any insurance policy or bond which Borrower is
required to provide pursuant to any of the Loan Instruments, (ii) keep the
Collateral free from all Liens except for Permitted Liens, (iii) pay when due
all taxes, levies and assessments on or in respect of the Collateral, except as
otherwise permitted pursuant to the terms hereof, (iv) make all payments and
perform all acts on the part of Borrower to be paid or performed in the manner
required by the terms hereof and by the terms of the other Loan Instruments with
respect to any of the Collateral, including, without limitation, all expenses of
protecting, storing, warehousing, insuring, handling and maintaining the
Collateral, (v) keep fully and perform promptly any other of the obligations of
Borrower hereunder or under any of the other Loan Instruments, and (vi) keep
fully and perform promptly the obligations of Borrower with respect to any issue
of Indebtedness for Borrowed Money secured by a Permitted Prior Lien, then Agent
or Lenders may (but shall not be required to) procure and pay for such insurance
policy or bond, place such Collateral in good repair and operating condition,
pay, contest or settle such Liens or taxes or any judgments based thereon or
otherwise make good any other aforesaid failure of Borrower. Borrower shall
reimburse Agent and Lenders immediately upon demand for all sums paid or
advanced on behalf of Borrower for any such purpose, together with costs and
expenses (including reasonable attorney's fees) paid or incurred by Agent and
Lenders in connection therewith and interest on all sums advanced from the date
of advancement until repaid to Agent and Lenders at the Default Rate. All such
sums advanced by Agent and Lenders, with interest thereon, immediately upon
advancement thereof, shall be deemed to be part of Borrower's Obligations.
ARTICLE IX
ADDITIONAL LENDERS AND PARTICIPANTS; THE AGENT
.1 ASSIGNMENT TO OTHER LENDERS.
.1 ASSIGNMENT. FINOVA may make one or more Loan Assignments to
an Assignee and each Assignee, with the prior written consent of Agent
(which may be given or denied in the sole discretion of Agent), may
make a Loan Assignment of the rights and obligations which were
assigned to such Assignee, provided, however, that (i) each Loan
Assignment shall be of a constant, and not a varying, percentage of all
rights and obligations of such Lender under this Loan Agreement, (ii)
each Loan Assignment shall not be less than $5,000,000 and shall be in
integral multiples of $1,000,000 in excess thereof, (iii) the parties
to each such Loan Assignment shall execute and deliver to the Agent an
Assignment and Acceptance, together with any Note or Notes subject to
such assignment and (iv) FINOVA at all times shall maintain not less
than a 51% interest in Borrower's Obligations.
.2 EFFECT OF LOAN ASSIGNMENT. Upon the execution, delivery,
acceptance and recording of an Assignment and Acceptance (i) the
Assignee thereunder shall be a party to this Loan Agreement and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (ii) the Lender thereunder shall,
to the extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Loan Agreement.
.3 REGISTER. Agent shall maintain a copy of each Assignment
and Acceptance delivered to and accepted by it and a register for the
recordation of the names, addresses, and interests of the Lenders in
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Borrower's Obligations (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest
error, and Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
.4 SUBSTITUTION OF NOTES. Simultaneously with the delivery by
Agent to Borrower of any Note which is the subject of a Loan Assignment
which is marked "canceled," Borrower shall execute and deliver to Agent
for delivery to (i) the applicable Assignee, a Note payable to the
order of such Assignee in an amount equal to the amount assigned to
such Assignee, and (ii) the assigning Lender, a Note payable to the
order of such Lender in an amount equal to the amount retained by such
Lender, each such Note to be substantially in the form of the canceled
Note.
.5 INSPECTIONS. Any action which any Assignee shall desire to
undertake pursuant to Section 6.2 shall be coordinated by such Assignee
through Agent, and Agent shall accompany each such Assignee which
desires to undertake any such action pursuant to Section 6.2.
.2 PARTICIPATIONS. Subject to the restrictions set forth in subsection
9.1.1, each Lender shall have the right to sell Participations. In the event of
the sale of a Participation, the obligations of the Lender selling such a
Participation shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any Note which previously has been delivered to Lender pursuant to the terms of
this Loan Agreement, and Borrower shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Loan Agreement. Notwithstanding the sale of any Participation, all amounts
payable by Borrower pursuant to the terms of the Loan Instruments shall be
determined as if no such Participation had been sold. No Participant shall be
entitled to require a Lender to take or omit to take any action pursuant to the
Loan Instruments except as provided in the Participation Agreement executed by
and between the Participant and such Lender.
.3 SET OFF AND SHARING OF PAYMENTS. Upon the occurrence of any Event of
Default and the acceleration of Borrower's Obligations, each Lender is
authorized by Borrower, at any time or from time to time thereafter, without
notice to Borrower or to any other Person, to set off and to appropriate and
apply any and all balances held by such Lender for the account of Borrower, and
any other Property at any time held or owing by such Lender to or for the credit
or for the account of Borrower, against and on account of any of Borrower's
Obligations which are not paid when due. Borrower agrees that (i) each Lender
may exercise its right to set off with respect to amounts in excess of such
Lender's share of Borrower's Obligations and may sell Participations in such
excess to other Lenders and (ii) any Lender so purchasing a Participation in the
Loan made or other of Borrower's Obligations held by other Lenders may exercise
all rights of set-off, bankers' lien, counterclaim or similar rights with
respect to such Participation as fully as if such Lender were a direct holder of
the Loan and other of Borrower's Obligations in the amount of such
Participation.
.4 LENDERS' DECISIONS. Until a Loan Assignment is made, all Lenders'
Decisions shall be made solely by FINOVA. After a Loan Assignment is made,
any Lenders' Decisions which may be made pursuant to the Loan Instruments by
Lenders or as to which the Lenders shall have the right to consent shall be
made as set forth in the applicable Lender Addition Agreements; provided,
however, that (i) except as set forth in clause (ii) below, such Lender
Addition Agreements shall provide that any holder or holders of 67% or more
of the Principal Balance shall have the right to make all Lenders' Decisions
and to consent to any matter arising under the Loan Instruments without
obtaining the consent of any other holder or holders of the Principal Balance
and (ii) the Lender Addition Agreements may provide that the consent of all
Lenders shall be required for Lenders' Decisions relating to (A) increasing
the amount of the Loan, (B) extending the Maturity Date, (C) altering the
interest rates applicable to or the repayment terms of the
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Loan or (D) amending Article VII or Article IX.
.5 APPOINTMENT OF AGENT. Each Lender hereby irrevocably appoints and
authorizes FINOVA to act as Agent for such Lender under this Loan Agreement and
to execute and deliver or accept the other Loan Instruments on behalf of such
Lender. Each Lender hereby irrevocably authorizes, and each holder of any Note
by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent
to take such action on its behalf under the provisions of this Loan Agreement
and the other Loan Instruments and any other instruments and agreements referred
to herein and therein, and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Agent by the terms
of this Loan Agreement, together with such powers as are reasonably incidental
thereto. FINOVA agrees to act as the Agent on behalf of the Lenders to the
extent provided in this Loan Agreement.
.6 DELEGATION OF DUTIES. The Agent may perform any of its respective
duties hereunder by or through agents or employees and shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
.7 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION. Agent shall have
no duties or responsibilities except those expressly set forth in this Loan
Agreement and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Loan Agreement or otherwise
exist. The duties of Agent shall be mechanical and administrative in nature.
Agent shall not have by reason of this Loan Agreement a fiduciary or trust
relationship in respect of any Lender, and nothing in this Loan Agreement
express or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Loan Agreement except as expressly set
forth herein. Each Lender expressly acknowledges that (i) Agent has not made any
representations or warranties to it and that no act by Agent hereafter taken,
including any review of the affairs of any of the Persons party to any Loan
Instrument shall be deemed to constitute any representation or warranty by Agent
to any Lender and (ii) it has made and will continue to make, without reliance
upon Agent, its own independent investigation of the financial condition and
affairs and its own appraisal of the creditworthiness of each of the Persons
party to any Loan Instrument and the condition and value of the Collateral in
connection with this Loan Agreement and the making of the Loan.
.8 INSTRUCTIONS FROM LENDERS. Agent shall have the right to request
instructions from the Lenders by notice to each of the Lenders. If Agent shall
request instructions from the Lenders with respect to any act or action
(including the failure to act) in connection with this Loan Agreement, Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from the Lenders, and Agent shall
not incur liability to any Person by reason of so refraining. No Lender shall
have any right of action against Agent as a result of Agent acting or refraining
from acting in accordance with the instructions of the Lenders.
.9 EXCULPATORY PROVISIONS. None of Agent or any of its respective
directors, officers, employees, agents, attorneys or Affiliates shall (i) be
liable to any Lender for any action taken or omitted to be taken by it or them
pursuant to any Loan Instruments unless caused by it or its respective
directors, officers, employees, agents, attorneys or Affiliates own gross
negligence or willful misconduct, (ii) be responsible in any manner to any of
Lenders for the effectiveness, enforceability, genuineness, validity or due
execution of this Loan Agreement or any other Loan Instruments or for any
recital, representation, warranty, document, certificate, report or statement
herein or made or furnished under or in connection with this Loan Agreement or
any other Loan Instruments, or (iii) be under any obligation to any of Lenders
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Persons
party to any Loan Instrument, the financial condition of such Persons, or the
existence or possible existence of any Event of Default or Incipient Default.
.10 REIMBURSEMENT AND INDEMNIFICATION BY LENDERS OF AGENT. Each Lender
agrees to reimburse and indemnify Agent (to the extent not reimbursed by
Borrower and without limiting the obligation of Borrower to do so) in proportion
to its Ratable Share from and against all liabilities, obligations, losses,
damages, penalties, actions,
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judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against Agent in its
capacity as such, in any way relating to or arising out of this Loan Agreement
or any other Loan Instruments or any action taken or omitted by Agent hereunder
or thereunder, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct.
.11 RELIANCE BY AGENT. Agent shall be entitled to rely upon any
writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon the advice and
opinions of counsel and other professional advisers selected by Agent. Agent
shall be fully justified in failing or refusing to take any action hereunder
unless it shall first be indemnified to its satisfaction by Lenders against any
and all liability and expense (other than a liability or expense relating to
gross negligence or willful misconduct) which may be incurred by it by reason of
taking or continuing to take any such action.
.12 NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Incipient Default or Event of Default unless
Agent has received written notice from a Lender or Borrower referring to this
Loan Agreement, describing such Incipient Default or Event of Default and
stating that such notice is a "notice of default."
.13 RELEASE OF COLLATERAL. Lenders hereby authorize Agent to release
any Lien granted to Agent upon any Collateral upon (i) the payment and
satisfaction of all of Borrower's Obligations or (ii) the request of Borrower if
such release is required pursuant to the terms of any of the Loan Instruments.
.14 LENDERS IN THEIR INDIVIDUAL CAPACITIES. With respect to the
portions of the Loan made by it, Agent shall have the same rights and powers as
any other Lender and may exercise the same as thought it were not Agent, and the
term "Lenders" shall, unless the context otherwise indicates, include Agent in
its individual capacity. Agent and its Affiliates and each of the Lenders and
their respective Affiliates may, without liability to account, except as
prohibited herein, make loans to, accept deposits from, discount drafts for, act
as trustee under indentures of, and generally engage in any kind of banking or
trust business with, Borrower and its Affiliates as though such Lender were not
a Lender hereunder.
.15 HOLDERS OF NOTES. Agent may deem and treat any payee of any Note as
the owner hereof for all purposes unless and until Agent receives an Assignment
and Acceptance with respect thereto. Any request, authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
.16 SUCCESSOR AGENT. Agent may resign at any time by giving not less
than 30 days' prior written notice to Borrower and the other Lenders. The
Lenders shall have the right to appoint a successor Agent. If a successor Agent
is not appointed within 30 days following Agent's notice of its resignation or
its removal, Agent shall appoint a successor agent who shall serve as Agent
until such time as the Lenders appoint a successor Agent. Upon its appointment,
such successor Agent shall succeed to the rights, powers and duties of Agent and
the term "Agent" shall mean such successor effective upon its appointment, and
the former Agent's rights, powers and duties as Agent shall be terminated
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement. After the resignation of any Agent, the
provisions of this Article IX shall inure to the benefit of such former Agent
and such former Agent shall not by reason of such resignation be deemed to be
released from liability for any actions taken or not taken by it while it was
Agent.
.17 DELIVERY OF INFORMATION. Agent shall not be required to deliver to
any Lender originals or copies of
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any documents, instruments, reports, notices, communications or other
information received by Agent from Borrower or any other Person under or in
connection with any Loan Instruments except (i) as specifically provided in the
Loan Instruments or (ii) as specifically requested from time to time in writing
by any Lender with respect to a specific document, instrument, notice or other
written communication received by and in the possession of Agent at the time of
receipt of such request and then only in accordance with such specific request.
.18 BENEFICIARIES. Except as expressly provided in this Loan Agreement,
the provisions of this Article IX are solely for the benefit of Agent and
Lenders, and Borrower shall not have any rights to rely on or enforce any of the
provisions hereof. In performing its functions and duties under this Loan
Agreement, Agent shall act solely as agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower.
ARTICLE X
CLOSING
The Closing Date shall be such date as the parties shall determine, and
the Closing shall take place on such date, provided all conditions for the
Closing as set forth in this Loan Agreement have been satisfied or otherwise
waived by Agent. The Closing shall take place at the offices of Altheimer &
Gray, 10 S. Wacker Drive, Suite 4000, Chicago, Illinois 60606 or such other
place as the parties hereto shall agree. Unless the Closing occurs on or before
January 31, 2000, this Loan Agreement shall terminate and be of no further force
or effect and, except for any obligation of Borrower to Agent pursuant to
Article XI, none of the parties hereto shall have any further obligation to any
other party except as provided in the Existing Loan Agreement.
ARTICLE XI
EXPENSES AND INDEMNITY
.1 ATTORNEY'S FEES AND OTHER FEES AND EXPENSES. Whether or not any of
the transactions contemplated by this Loan Agreement shall be consummated,
Borrower agrees to pay to Agent on demand all expenses incurred by Agent and
Lenders, in connection with the transactions contemplated hereby (including,
without limitation, any appraisal fees, environmental audit fees and title and
recording charges) and in connection with any amendments, modifications or
waivers (whether or not the same become effective) under or in respect of any of
the Loan Instruments, including, without limitation:
.1 FEES AND EXPENSES FOR PREPARATION OF LOAN INSTRUMENTS. All
expenses, disbursements and reasonable attorney's fees (including,
without limitation, charges for required mortgagee's title insurance,
lien searches, reproduction of documents, long distance telephone calls
and overnight express carriers) of counsel retained by Agent and
Lenders in connection with the preparation and negotiation of the Loan
Instruments or any amendments, modifications or waivers hereto or
thereto.
.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF
LOAN INSTRUMENTS. Any expenses or other costs, including reasonable
attorney's fees and expert witness fees actually incurred by Agent and
Lenders in connection with the enforcement or collection against
Borrower or any other Person party to any Loan Instrument of any
provision of any of the Loan Instruments, and in connection with or
arising out of any litigation, investigation or proceeding instituted
by any Governmental Body or any other Person with respect to any of the
Loan Instruments, whether or not suit is instituted, including, but not
limited to, such costs
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or expenses arising from the enforcement or collection against Borrower
or any other Person party to the Loan Instruments of any provision of
any of the Loan Instruments in any state or federal bankruptcy or
reorganization proceeding.
.2 INDEMNITY. Borrower agrees to indemnify and save Agent and Lenders
harmless of and from the following:
.1 BROKERAGE FEES. The fees, if any, of brokers and finders
engaged by Borrower.
.2 GENERAL. Any loss, cost, liability, damage or expense
(including reasonable attorney's fees and expenses) incurred by Agent
and Lenders, in investigating, preparing for, defending against,
providing evidence, producing documents or taking other action in
respect of any commenced or threatened litigation, administrative
proceeding, suit instituted by any Person or investigation under any
law, including any federal securities law, the Bankruptcy Code, any
relevant state corporate statute or any other securities law,
bankruptcy law or law affecting creditors generally of any
jurisdiction, or any regulation pertaining to any of the foregoing, or
at common law or otherwise, relating, directly or indirectly, to the
transactions contemplated by or referred to in, or any other matter
related to, the Loan Instruments, whether or not Agent or any Lender is
a party to such litigation, proceeding or suit, or is subject to such
investigation, except to the extent of any gross negligence or willful
misconduct of Agent or any Lender.
.3 OPERATION OF COLLATERAL; JOINT VENTURERS. Any loss, cost,
liability, damage or expense (including reasonable attorney's fees and
expenses) incurred in connection with the ownership, operation or
maintenance of the Collateral, the construction of Agent or any Lender
and Borrower as having the relationship of joint venturers or partners
or the determination that Agent or any Lender has acted as agent for
Borrower.
.4 ENVIRONMENTAL INDEMNITY. Any and all claims, losses,
damages, response costs, clean-up costs and expenses suffered and/or
incurred at any time by Agent and Lenders arising out of or in any way
relating to the existence at any time of any Hazardous Materials in,
on, under, at, transported to or from, or used in the construction
and/or renovation of, any of the Real Estate or Leasehold Property, or
otherwise with respect to any Environmental Law, and/or the failure of
Borrower to perform its obligations and covenants hereunder with
respect to environmental matters, including, but not limited to: (i)
claims of any Persons for damages, penalties, response costs, clean-up
costs, injunctive or other relief, (ii) costs of removal and
restoration, including fees of attorneys and experts, and costs of
reporting the existence of Hazardous Materials to any Governmental
Body, and (iii) any expenses or obligations, including attorney's fees
and expert witness fees, incurred at, before and after any trial or
other proceeding before any Governmental Body or appeal therefrom
whether or not taxable as costs, including, without limitation, witness
fees, deposition costs, copying and telephone charges and other
expenses, all of which shall be paid by Borrower to Agent or such
Lender when incurred by Agent or such Lender, except to the extent of
any gross negligence or willful misconduct of Agent or any Lender.
ARTICLE XII
MISCELLANEOUS
.1 NOTICES. All notices and communications under this Loan Agreement
shall be in writing and shall be (i) delivered in person, (ii) sent by telecopy,
or (iii) mailed, postage prepaid, either by registered or certified mail, return
receipt requested, or by overnight express carrier, addressed in each case as
follows:
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To Borrower: Aquis Wireless Communications, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
Attention: Nicholas Catania
Telecopy No.: (973) 560-8004
Copy to: Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Attention: Adley Van Gartenstein, Esq.
Telecopy No.: (212) 262-5152
To Lender: FINOVA Capital Corporation
311 South Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attention: Portfolio Manager
Communications Finance
Telecopy No.: (312) 322-3530
Copy to: FINOVA Capital Corporation
The FINOVA Corporate Center
4800 North Scottsdale Road
Scottsdale, Arizona 85251-7623
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
Copy to: Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Michael L. Owen, Esq.
Telecopy No.: (312) 715-4800
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a written notice to the other parties hereto. All
notices sent pursuant to the terms of this Section 12.1 shall be deemed received
(i) if personally delivered, then on the Business Day of delivery, (ii) if sent
by telecopy before 2:00 p.m. Phoenix time, on the day sent if a Business Day or
if such day is not a Business Day or if sent after 2:00 p.m. Phoenix time, then
on the next Business Day, (iii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iv) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received. Any notice by telecopy shall be followed
by delivery on the next Business Day by overnight, express carrier or by hand.
.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES. All covenants, agreements,
representations and warranties made in this Loan Agreement and in the
certificates delivered pursuant hereto shall survive the making by Lender of the
Loan and the execution and delivery to Lenders of the Note and of all other Loan
Instruments, and shall continue in full force and effect so long as any of
Borrower's Obligations remain outstanding, unperformed or unpaid.
Notwithstanding the repayment of all amounts due under the Loan Instruments, the
cancellation of the Note and the release and/or cancellation of any and all of
the Loan Instruments or the foreclosure of any Liens on the Collateral, the
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obligations of Borrower to indemnify Agent and Lenders with respect to the
expenses, damages, losses, costs and liabilities described in Section 11.2 shall
survive until all applicable statute of limitations periods with respect to
actions which may be brought against Agent or any Lender have run.
.3 FURTHER ASSURANCE. From time to time, Borrower shall execute and
deliver to Agent and Lenders such additional documents as Lenders reasonably may
require to carry out the purposes of the Loan Instruments and to protect
Lenders' rights thereunder, including, without limitation, using its best
efforts in the event any Collateral is to be sold to secure the approval by any
Governmental Body of any application required by such Governmental Body in
connection with such sale, and not take any action inconsistent with such sale
or the purposes of the Loan Instruments.
.4 TAXES AND FEES. Should any tax (other than taxes based upon the net
income of any Lender), recording or filing fees become payable in respect of any
of the Loan Instruments, or any amendment, modification or supplement thereof,
Borrower agrees to pay the same on demand, together with any interest or
penalties thereon attributable to any delay by Borrower in meeting any Lender's
demand, and agrees to hold Lenders harmless with respect thereto.
.5 SEVERABILITY. In the event that any provision of this Loan Agreement
is deemed to be invalid by reason of the operation of any law, including, but
not limited to, any of the rules and regulations and policies of the FCC, or by
reason of the interpretation placed thereon by any court or the FCC or any other
Governmental Body, as applicable, the validity, legality and enforceability of
the remaining terms and provisions of this Loan Agreement shall not in any way
be affected or impaired thereby, all of which shall remain in full force and
effect, and the affected term or provision shall be modified to the minimum
extent permitted by law so as to achieve most fully the intention of this Loan
Agreement.
.6 WAIVER. No delay on the part of Agent or any Lender in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, and
no single or partial exercise of any right, power or privilege hereunder shall
preclude other or further exercise thereof, or be deemed to establish a custom
or course of dealing or performance between the parties hereto, or preclude the
exercise of any other right, power or privilege.
.7 MODIFICATION OF LOAN INSTRUMENTS. No modification or waiver of any
provision of any of the Loan Instruments shall be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
.8 CAPTIONS. The headings in this Loan Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
.9 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, subject to the limitations set forth in Article
IX; provided, however, that Borrower shall not be entitled to assign any of its
rights or delegate any of its duties hereunder.
.10 REMEDIES CUMULATIVE. All rights and remedies of Agent and Lenders
pursuant to this Loan Agreement, any other Loan Instruments or otherwise, shall
be cumulative and non-exclusive, and may be exercised singularly or
concurrently. Neither Agent nor any Lender shall be required to prosecute
collection, enforcement or other remedies against Borrower or any other Person
party to the Loan Instruments before proceeding against any such Person or to
enforce or resort to any security, liens, collateral or other rights of Agent or
Lenders. One or more successive actions may be brought against Borrower and/or
any other Person party to the Loan Instruments, either in the same action or in
separate actions, as often as Lenders deem advisable, until all of Borrower's
Obligations are paid and
61
<PAGE>
performed in full.
.11 ENTIRE AGREEMENT; CONFLICT. This Loan Agreement and the other Loan
Instruments executed prior or pursuant hereto constitute the entire agreement
among the parties hereto with respect to the transactions contemplated hereby or
thereby and supersede any prior agreements, whether written or oral, relating to
the subject matter hereof. In the event of a conflict between the terms and
conditions set forth herein and the terms and conditions set forth in any other
Loan Instrument, the terms and conditions set forth herein shall govern.
.12 APPLICABLE LAW. THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF ARIZONA.
FOR PURPOSES OF THIS SECTION 12.12, THE LOAN INSTRUMENTS SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF ARIZONA.
.13 JURISDICTION AND VENUE. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF AGENT OR ANY
LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN
WHICH AGENT OR SUCH LENDER SHALL INITIATE OR TO WHICH AGENT OR SUCH LENDER SHALL
REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER HEREBY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED BY AGENT OR ANY LENDER IN OR REMOVED BY AGENT OR ANY LENDER
TO ANY OF SUCH COURTS, AND HEREBY AGREES THAT PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE
MANNER PROVIDED FOR NOTICES HEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO
SECTION 12.1. BORROWER WAIVES ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE
DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK
OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD BORROWER, AFTER BEING SO SERVED,
FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, BORROWER
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE
COURT AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET FORTH IN THIS
SECTION 12.13 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY
LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING BY AGENT OR ANY
LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION,
AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION.
.14 WAIVER OF RIGHT TO JURY TRIAL. AGENT, LENDERS AND BORROWER
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN
INSTRUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
62
<PAGE>
.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
BORROWER OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER
LOAN INSTRUMENTS.
.16 ESTOPPEL CERTIFICATE. Within 15 days after Agent or any Lender
requests Borrower to do so, Borrower will execute and deliver to Agent or such
Lender a statement certifying (i) that this Loan Agreement is in full force and
effect and has not been modified except as described in such statement, (ii) the
date to which interest on the Note has been paid, (iii) the Principal Balance,
(iv) whether or not to its knowledge an Event of Default has occurred and is
continuing, and, if so, specifying in reasonable detail each such Event of
Default of which it has knowledge, (v) whether to its knowledge it has any
defense, setoff or counterclaim to the payment of the Note in accordance with
its terms, and, if so, specifying each defense, setoff or counterclaim of which
it has knowledge in reasonable detail (including where applicable the amount
thereof), and (vi) as to any other matter reasonably requested by Agent or such
Lender.
.17 CONSEQUENTIAL DAMAGES. Neither Agent nor any Lender nor any agent
or attorney of Agent or such Lender shall be liable to Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Borrower's
Obligations.
.18 COUNTERPARTS. This Loan Agreement may be executed by the parties
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
.19 NO FIDUCIARY RELATIONSHIP. No provision in this Loan Agreement or
in any other Loan Instrument, and no course of dealing among the parties hereto,
shall be deemed to create any fiduciary duty by Agent or any Lender to Borrower.
.20 CONFIDENTIALITY. Except as provided for in the Loan Instruments and
except as necessary to enable Agent or Lenders to realize upon Borrower's
Obligations and except in connection with the administration or enforcement of
Agent's and Lenders' rights under the Loan Instruments, Agent and Lenders each
shall use their commercially reasonable efforts not to disclose any information
relative to the Paging Business of Borrower designated by Borrower as
confidential to any Person without the prior written consent of Borrower, except
that Agent and Lenders may disclose any such information (i) in connection with
any proposed Loan Assignment or Participation, (ii) which otherwise is in the
public domain, (iii) to the extent required by applicable law or any rule,
regulation, decree, order or injunction of any Governmental Body, subject to any
protective order obtained by Borrower or (iv) which is obtained by Agent or any
Lender from a third party not known to Agent or any Lender to be under an
obligation of confidentiality to Borrower.
.21 GOVERNMENTAL APPROVAL. Notwithstanding anything to the contrary
contained herein or in any other Loan Instrument, no party hereto shall take any
action that would constitute or result in the transfer or assignment of any FCC
license, or other license, permit or authority issued by any Governmental Body,
or a transfer of control over any such license, permit or authorization, if such
assignment or transfer would require the prior approval of and/or notice to any
Governmental Body, without such party first having notified such Governmental
Body of any such assignment or transfer and, if required, obtaining the approval
of such Governmental Body therefor.
[remainder of this page intentionally left blank]
63
<PAGE>
IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered
by each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
AQUIS WIRELESS COMMUNICATIONS, INC., a
Delaware corporation
By: /s/ NICK T. CATANIA
---------------------------------
Nicholas Catania
President
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By: /s/ ANDREW J. PLUTA
---------------------------------
Andrew J. Pluta
Vice President
64
<PAGE>
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Lender Commitment Pro Rata Share
- ------ ---------- --------------
<S> <C> <C>
FINOVA Capital Corporation $27,764,500.00 100%
(553595.6)
</TABLE>
65
<PAGE>
Exhibit 10.32
FIRST AMENDMENT TO LOAN INSTRUMENTS
This FIRST AMENDMENT TO LOAN INSTRUMENTS (this "FIRST AMENDMENT"),
dated as of April 10, 2000, is between AQUIS WIRELESS COMMUNICATIONS, INC., a
Delaware corporation formerly known as Aquis Communications, Inc. and BAP
Acquisition Corporation ("BORROWER"), and FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), in its individual capacity and as agent for all Lenders
(this and all other capitalized terms used but not elsewhere defined herein are
defined in Section 2 below).
R E C I T A L S
A. Borrower and FINOVA entered into an Amended and Restated Loan
Agreement dated as of January 31, 2000 (the "LOAN AGREEMENT"), pursuant and
subject to the terms and conditions of which Lenders agreed to make loans and
other financial accommodations to Borrower.
B. Borrower has requested that FINOVA agree to (i) waive a certain
violation of the financial covenants under the Loan Agreement and (ii) make
certain amendments to the Loan Agreement.
C. FINOVA is willing to agree to such requests of Borrower on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, Borrower and FINOVA agree as follows:
1. INCORPORATION OF RECITALS. The Recitals set forth above are
incorporated herein, are acknowledged by Borrower, Agent and Lenders to be true
and correct and by this reference are made a part hereof.
2. DEFINITIONS. All capitalized terms used but not elsewhere defined
herein shall have the respective meanings ascribed to such terms in the Loan
Agreement, as amended by this First Amendment.
3. AMENDMENTS TO LOAN INSTRUMENTS. The Loan Instruments are amended as
set forth below:
(a) SECTION 1.1 - AMENDED DEFINITIONS. Section 1.1 of the Loan
Agreement is amended by deleting the current versions of the following
definitions and substituting the following versions of such definitions
in appropriate alphabetical order:
<PAGE>
MATURITY DATE: the earlier of (i) (A) if the Aquis Group 11%
Convertible Debenture has been indefeasibly paid in full and marked
"canceled" on or before July 1, 2001, December 31, 2003 or (B)
otherwise, July 31, 2001 and (ii) the date on which Borrower's
Obligations are accelerated pursuant to this Loan Agreement.
OPERATING CASH FLOW: for any period, without
duplication, the net income of Borrower for such period:
(i) PLUS the sum of the following, to the
extent deducted in determining such net income for
such period:
(A) losses from sales,
exchanges and other dispositions of Property
not in the ordinary course of business;
(B) interest paid or
accrued on Indebtedness, including, without
limitation, interest on Capitalized Leases
that is imputed in accordance with GAAP;
(C) depreciation and
amortization of assets during such period;
(D) income taxes which are
accrued, but not paid, during such period;
and
(E) expenses incurred in
connection with Trade Out Transactions;
(F) obligations incurred in
connection with the Adiletta Settlement
Agreement;
(G) non-cash consideration
incurred in connection with the Catania
Employment Agreement; and
(H) non-cash consideration
incurred in connection with the issuance of
an aggregate of 180,000 shares of common
stock of Aquis Group on December 15, 1999 to
the members of the board of the directors of
Aquis Group;
(ii) MINUS the sum of the following, to the
extent included in determining such net income for
such period:
2
<PAGE>
(A) gains from sales,
exchanges and other dispositions of Property
or other extraordinary gains not in the
ordinary course of business;
(B) proceeds of Business
Insurance; and
(C) revenue received in
connection with Trade Out Transactions;
(iii) PLUS, for any such period occurring
wholly or partly in 1999, an amount which is equal to
the aggregate of $1,692,000 recorded in 1999 related
to various agreed upon one-time costs of abandoned
business combinations to the extent that any such
amounts fell within the subject period being tested.
(b) SECTION 1.1 - ADDITIONAL DEFINITIONS. Section 1.1 of the
Loan Agreement is amended by inserting the following definitions in
appropriate alphabetical order:
ADILETTA SETTLEMENT AGREEMENT: the Settlement
Agreement and Release and Waiver of Claims dated as of April
4, 2000 in the matter of the arbitration between Aquis Group
and John X. Adiletta.
AQUIS GROUP 11% CONVERTIBLE DEBENTURE: the 11%
Convertible Debenture dated April ___, 2000 issued by Aquis
Group payable to AMRO International, S.A. or permitted assigns
in the original principal amount of $2,000,000.
AQUIS GROUP 11% CONVERTIBLE DEBENTURE TRANSACTION:
collectively, the transactions contemplated by the Aquis Group
11% Convertible Debenture.
AQUIS GROUP DEBT/EQUITY TRANSACTION: collectively,
the transactions contemplated by the Aquis Group Debt/Equity
Transaction Instruments.
AQUIS GROUP DEBT/EQUITY TRANSACTION INSTRUMENTS:
collectively, the following documents, each dated April ___,
2000, each among Aquis Group and the other parties signatories
thereto: the Common Stock Purchase Agreement, Stock Purchase
Warrant, Loan Agreement, the Aquis Group 11% Convertible
Debenture and all other documents, instruments and agreements
executed or delivered in connection with any of the foregoing.
CATANIA EMPLOYMENT AGREEMENT: the Employment
Agreement dated as of January 4, 2000 between Aquis Group and
Nick T. Catania, as amended by the Amendment to Employment
Agreement dated as of April 7, 2000 between such parties.
3
<PAGE>
FIRST AMENDMENT: the First Amendment to Loan
Instruments dated as of April __, 2000 by and between Borrower
and FINOVA.
(c) SECTION 2.2.1. Subsection 2.2.1 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"2.2.1 INTEREST RATE ON EXISTING PRINCIPAL
BALANCE. Except as provided in Section 2.5, the Base Rate
Portion shall bear interest at the Base Rate in effect from
time to time plus the Applicable Margin in effect for the
applicable period and each LIBOR Loan shall bear interest at
the applicable LIBOR Rate plus the Applicable Margin in effect
for the applicable period. As used in this Loan Agreement, the
term "APPLICABLE MARGIN" for any period shall be determined by
Agent on the first day of such period (the "DETERMINATION
DATE") and shall mean with respect to the Base Rate Portion
and each LIBOR Loan the per annum percentage rate set forth
below:
(i) 1.75% per annum with respect to the Base
Rate Portion and 4.50% per annum with respect to each LIBOR
Loan (A) during the period commencing on the Closing Date
through (1) the date Borrower's Obligations are paid and
performed in full if the Special Prepayment Payment Date
occurs on or before April 30, 2000 and (2) April 30, 2000 if
the Special Prepayment Payment Date does not occur on or
before April 30, 2000 and (B) during the period commencing on
the Special Prepayment Payment Date through the date
Borrower's Obligations are paid and performed in full;
(ii) if the Special Prepayment Payment Date
does not occur on or before April 30, 2000, 2.25% per annum
with respect to the Base Rate Portion and 5.00% per annum with
respect to each LIBOR Loan during the period commencing May 1,
2000 through the earlier to occur of (A) May 31, 2000 and (B)
the Special Prepayment Payment Date;
(iii) if the Special Prepayment Payment Date
does not occur on or before May 31, 2000, 2.75% per annum with
respect to the Base Rate Portion and 5.50% per annum with
respect to each LIBOR Loan during the period commencing June
1, 2000 through the earlier to occur of (A) June 30, 2000 and
(B) the Special Prepayment Payment Date;
(iv) if the Special Prepayment Payment Date
does not occur on or before June 30, 2000, 3.25% per annum
with respect to the Base Rate Portion and 6.00% per annum with
respect to each LIBOR Loan during the period commencing July
1, 2000 through the earlier to occur of (A) July 31, 2000 and
(B) the Special Prepayment Payment Date; and
4
<PAGE>
(v) if the Special Prepayment Payment Date
does not occur on or before July 31, 2000, 3.75% per annum
with respect to the Base Rate Portion and 6.50% per annum with
respect to each LIBOR Loan during the period commencing August
1, 2000 through the Special Prepayment Payment Date."
(d) SECTION 2.2.2. Subsection 2.2.2 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"2.2.2 INTEREST RATE ON SOURCEONE PRINCIPAL BALANCE.
Except as provided in Section 2.5, the SourceOne Principal Balance
shall bear interest at the Base Rate in effect from time to time plus
the SourceOne Applicable Margin in effect for the applicable period. As
used in this Loan Agreement, the term "SOURCEONE APPLICABLE MARGIN" for
any period shall be determined by Agent on the first day of such period
(the "SOURCEONE DETERMINATION DATE") and shall mean with respect to the
SourceOne Principal Balance:
(i) 4.00% per annum during the period from
the Closing Date to the date (the "STEP-DOWN DATE") which is
545 days after the Closing Date;
(ii) 1.75% per annum with respect to the
SourceOne Base Rate Portion and 4.50% per annum with respect
to each SourceOne LIBOR Loan during the period from and after
the Step-Down Date if (A) the Special Prepayment Payment Date
occurs prior to April 30, 2000 and (B) no Event of Default has
occurred since the Closing Date with respect to which Agent
has given notice to Borrower; and
(iii) the Applicable Margin with respect to
the Existing Indebtedness during the period from and after the
Step-Down Date if (A) the Special Prepayment Payment Date does
not occur prior to April 30, 2000 or (B) an Event of Default
occurred during the period from the Closing Date to the
Step-Down Date with respect to which Agent has given notice to
Borrower.
Borrower may not elect to have any portion of the SourceOne
Principal Balance bear interest at a rate determined by
reference to the LIBOR Rate prior to the Step-Down Date."
(e) SECTION 2.7. Section 2.7 is deleted in its entirety and
the following is substituted therefor:
"2.7 FEES.
2.7.1 SOURCEONE LOAN FEE. Borrower paid to
Lenders a loan fee in the amount of $100,000 (the
"SourceOne Loan Fee") upon the Closing. The SourceOne
Loan Fee was fully earned as of the Closing.
5
<PAGE>
2.7.2 MODIFICATION FEE. Borrower shall pay
to Lenders a modification fee in the amount of
$200,000 on the date of the First Amendment, which
fee shall be in consideration of FINOVA's agreement
to enter into the First Amendment.
2.7.3 JUNE 30, 2000 FEE. If the Senior
Leverage Ratio as of June 30, 2000 is equal to or
greater than 4.00, Borrower shall pay to FINOVA a fee
of $75,000 on such date.
2.7.4 SEPTEMBER 30, 2000 FEE. If the Senior
Leverage Ratio as of September 30, 2000 is equal to
or greater than 4.90, Borrower shall pay to FINOVA a
fee of $100,000 on such date. If the Senior Leverage
Ratio as of September 30, 2000 is less than 4.90 but
equal to or greater than 3.75, Borrower shall pay to
FINOVA a fee of $75,000 on such date.
2.7.5 DECEMBER 31, 2000 FEE. If the Senior
Leverage Ratio as of December 31, 2000 is equal to or
greater than 4.20, Borrower shall pay to FINOVA a fee
of $100,000 on such date. If the Senior Leverage
Ratio as of December 31, 2000 is less than 4.20 but
greater than or equal to 3.50, Borrower shall pay to
FINOVA a fee of $75,000 on such date.
2.7.6 MARCH 31, 2001 FEE. If the Senior
Leverage Ratio as of March 31, 2001 is equal to or
greater than 3.25, Borrower shall pay to FINOVA a fee
of $75,000 on such date.
2.7.7 JUNE 30, 2001 FEE. If the Senior
Leverage Ratio as of June 30, 2001 is equal to or
greater than 3.25, Borrower shall pay to FINOVA a fee
of $75,000 on such date."
(f) SECTION 6.16. Section 6.16 is added to the Loan Agreement
immediately following 6.15:
"6.16 PREPAYMENT OF PROCEEDS OF AQUIS GROUP 11%
CONVERTIBLE DEBENTURE. Prepay the Principal Balance by not
less than $1,250,000 concurrently with the consummation of the
Aquis Group 11% Convertible Debenture Transaction."
(g) SECTION 6.17. Section 6.17 is added to the Loan Agreement
immediately following 6.16:
"6.17 REQUIRED SUNSTAR TRANSFER. If the Senior
Leverage Ratio as of June 30, 2000 equals or exceeds 4.00, (i)
consummate the SunStar Transfer on or before October 31, 2000
on terms and conditions, including cash purchase price
reasonably acceptable to FINOVA and (ii) apply the SunStar
Proceeds to repay Borrower's Obligations."
6
<PAGE>
(h) SECTION 7.18. Subsection 7.18 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"7.18 SENIOR LEVERAGE RATIO. (A) Provided the Special
Prepayment has been paid by any date set forth below, permit the Senior
Leverage Ratio as of such date to be greater than the amount set forth
opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 4.91
June 30, 2000 5.30
September 30, 2000 5.59
December 31, 2000 5.16
March 31, 2001 5.06
June 30, 2001 5.00
September 30, 2001 3.25
December 31, 2001 3.00
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.50
March 31, 2003 2.50
June 30, 2003 2.50
September 30, 2003 2.50
December 31, 2003 2.50
(B) If the Special Prepayment has not been paid by any date set forth
below, permit the Senior Leverage Ratio as of such date to be greater
than the amount set forth opposite such date:
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 4.91
June 30, 2000 5.54
September 30, 2000 5.85
December 31, 2000 5.41
March 31, 2001 5.30
June 30, 2001 5.25
September 30, 2001 3.25
December 31, 2001 3.00
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.50
</TABLE>
7
<PAGE>
March 31, 2003 2.50
June 30, 2003 2.50
September 30, 2003 2.50
December 31, 2003 2.50"
(i) SECTION 7.19. Section 7.19 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"7.19 SENIOR DEBT SERVICE COVERAGE RATIO. Permit the
Senior Debt Service Coverage Ratio as of any date set forth below to be
less than the amount set forth below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 2.00
June 30, 2000 1.80
September 30, 2000 1.61
December 31, 2000 1.64
March 31, 2001 1.64
June 30, 2001 1.64
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.00
June 30, 2002 2.00
September 30, 2002 2.00
December 31, 2002 2.00
March 31, 2003 1.90
June 30, 2003 1.90
September 30, 2003 1.90
December 31, 2003 1.90"
(j) SECTION 7.20. Subsection 7.20 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"7.20 TOTAL LEVERAGE RATIO. (A) Provided the Special
Prepayment has been made by any date set forth below, permit the Total
Leverage Ratio as of such date to be greater than the amount set forth
opposite such date:
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 5.15
June 30, 2000 5.50
September 30, 2000 5.80
December 31, 2000 5.34
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
March 31, 2001 5.25
June 30, 2001 5.15
September 30, 2001 3.50
December 31, 2001 3.25
March 31, 2002 3.00
June 30, 2002 3.00
September 30, 2002 3.00
December 31, 2002 2.75
March 31, 2003 2.75
June 30, 2003 2.75
September 30, 2003 2.75
December 31, 2003 2.75
(B) If the Special Prepayment has not been paid by any date set forth
below, permit the Total Leverage Ratio as of such date to be greater
than the amount set forth opposite such date:
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 2000 5.15
June 30, 2000 5.75
September 30, 2000 6.06
December 31, 2000 5.59
March 31, 2001 5.48
June 30, 2001 5.43
September 30, 2001 3.50
December 31, 2001 3.25
March 31, 2002 3.00
June 30, 2002 3.00
September 30, 2002 3.00
December 31, 2002 2.75
March 31, 2003 2.75
June 30, 2003 2.75
September 30, 2003 2.75
December 31, 2003 2.75"
</TABLE>
(k) SUBSECTION 8.1.2. Subsection 8.1.2 of the Loan Agreement
is deleted in its entirety and the following is substituted therefor:
9
<PAGE>
"8.1.2 BREACH OF COVENANTS.
(a) If Borrower shall fail to observe or
perform any covenant or agreement made by Borrower contained
in Section 6.1, 6.2, 6.5, 6.6, 6.9, 6.10, 6.11, 6.13, 6.14,
6.16 or 6.17 or in Article VII; or
(b) If any Obligor shall fail to observe or
perform any covenant or agreement (other than those referred
to in subparagraph (a) or (b) above or specifically addressed
elsewhere in this Section 8.1) made by such Person in any of
the Loan Instruments to which such Person is a party, and such
failure shall continue for a period of 30 days after written
notice of such failure is given by Lenders."
(l) SECTION 8.1.4. Section 8.1.4 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED
MONEY. If (i) Borrower, Aquis Group or, prior to the SunStar
Transfer Date, SunStar, at any time shall be in default (as
principal or guarantor or other surety) in the payment of any
principal of or premium or interest on any Indebtedness for
Borrowed Money (other than Borrower's Obligations) beyond the
grace period, if any, applicable thereto and the aggregate
amount of such payments then in default beyond such grace
period shall exceed $100,000, (ii) any default shall occur in
respect of any issue of Indebtedness for Borrowed Money of
Borrower (other than Borrower's Obligations), Aquis Group or,
prior to the SunStar Transfer Date, SunStar, outstanding in a
principal amount of at least $200,000, or in respect of any
agreement or instrument relating to any such issue of
Indebtedness for Borrowed Money, and such default shall
continue beyond the grace period, if any, applicable thereto,
or (iii) Aquis Group shall be in default under the Aquis Group
Debt/Equity Transaction Instruments."
(m) SECTION 8.1.5. Section 8.1.5 of the Loan Agreement is
deleted in its entirety and the following is substituted therefor:
"8.1.5 BANKRUPTCY.
(a) If Borrower, Aquis Group, or, prior to
the SunStar Transfer Date, SunStar, shall (i)
generally not be paying its debts as they become due,
(ii) file, or consent, by answer or otherwise, to the
filing against it of a petition for relief or
reorganization or arrangement or any other petition
in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the
benefit of creditors, (iv) consent to the appointment
of a custodian, receiver, trustee or other officer
with similar powers for it or for any substantial
part of its Property, or (v) be adjudicated
insolvent.
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(b) If any Governmental Body of competent
jurisdiction shall enter an order appointing, without
consent of Borrower, Aquis Group, or, prior to the
SunStar Transfer Date, SunStar, a custodian,
receiver, trustee or other officer with similar
powers with respect to it or with respect to any
substantial part of its Property, or if an order for
relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up
or liquidation of Borrower, Aquis Group, or prior to
the SunStar Transfer Date, SunStar of any petition
for any such relief shall be filed against it and
such petition shall not be dismissed or stayed within
60 days."
(n) SECTION 8.1.12. Section 8.1.12 is added to the Loan
Agreement immediately following 8.1.11:
"8.1.12 CONTRIBUTION OF PROCEEDS OF AQUIS GROUP 11%
CONVERTIBLE DEBENTURE. If Aquis Group fails to contribute to
Borrower the full amount of proceeds of the Aquis Group 11%
Convertible Debenture by April 15, 2000."
4. CONDITIONS TO EFFECTIVENESS. The effectiveness of this First
Amendment shall be subject to the satisfaction of all of the following
conditions in a manner, form and substance reasonably satisfactory to FINOVA:
(a) DELIVERY OF DOCUMENTS. The following shall have been
delivered to FINOVA, each duly authorized and executed:
(1) this First Amendment;
(3) a good standing certificate for Borrower from the
Secretary of State of Delaware;
(3) a good standing certificate for Borrower from the
Secretary of State of Arizona;
(4) certified copies of (i) any amendments to the
articles of incorporation of Borrower since January 31, 2000,
certified by the Secretary of State of Delaware; (ii) any
amendments to the by-laws of Borrower since January 31, 2000,
certified as of the date of this First Amendment by the
secretary of Borrower and (iii) resolutions adopted by the
board of directors of Borrower authorizing the execution and
delivery of this First Amendment;
(5) certified copies or executed originals of the
fully executed Aquis Group Debt/Equity Transaction
Instruments;
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(6) such other documents, agreements, opinions and
consents as FINOVA reasonably may request.
(c) OPINION OF COUNSEL. Agent shall have received an opinion
of counsel dated the date hereof from Buchanan Ingersoll Professional
Corporation, in such form and covering such matters as Agent reasonably
may require.
(d) MODIFICATION FEE. FINOVA shall have received a
modification fee in the amount of $200,000, due and payable upon the
date of this Fist Amendment, in consideration of the agreement of
Lenders to enter into this First Amendment. Such modification fee shall
be deemed to be fully earned as of the date hereof.
(e) CONSUMMATION OF AQUIS GROUP 11% CONVERTIBLE DEBENTURE
TRANSACTION. (1) The $2,000,000 purchase price of the Aquis Group 11%
Convertible Debenture shall have been transferred to the Escrow Agent,
as defined in the Escrow Agreement dated as of March 31, 1999 (the
"Escrow Agreement") by and among Aquis Group, the lenders signatory
thereto and Epstein Becker & Green, P.C. and (2) the Escrow Agent shall
have provided to FINOVA written confirmation of (A) the receipt by the
Escrow Agent of such purchase price and (B) the satisfaction in full of
all conditions precedent to the disbursement from the escrow account of
such purchase price.
Upon the satisfaction of conditions set forth in this Paragraph 4, this
First Amendment shall be effective as of the date set forth in the preamble
hereto and such date shall be referred to herein as the "Effective Date."
5. WAIVER. From and after the Effective Date, FINOVA waives its rights
to pursue its remedies on account of any Event of Default under Section 7.18 of
the Loan Agreement arising out of Borrower's permitting the Senior Leverage
Ratio to exceed 4.00 for the quarter ending December 31, 1999, provided that,
after giving effect to the definition of "Operating Cash Flow" as set forth in
this First Amendment, the Senior Leverage Ratio for the quarter ending December
31, 1999 as reported in Borrower's audited financial statements shall not exceed
4.50. The foregoing waiver shall not be deemed a waiver of any other Event of
Default which has occurred or hereafter may occur under the Loan Agreement, as
amended by this First Amendment. Except as specifically set forth in this
Paragraph 5, FINOVA reserves and preserves all of its rights and remedies under
the Loan Agreement, as amended by this First Amendment.
6. OTHER EVENTS OF DEFAULT. FINOVA represents to Borrower that, except
for the Event of Default waived in Section 5 of this First Amendment, FINOVA has
no actual knowledge as of the date hereof of the existence of any Event of
Default or Incipient Default. The foregoing sentence is a statement of fact of
the actual knowledge of FINOVA as of the date hereof and shall not be deemed to
constitute a waiver of any Event of Default or Incipient Default which may exist
as of the date hereof of which FINOVA has no actual knowledge. FINOVA reserves
and preserves all of its rights and remedies under the Loan Agreement, as
amended by this First Amendment, with respect to any
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other Event of Default or Incipient Default of which FINOVA has no actual
knowledge as of this date.
7. REFERENCES; SATISFACTION OF CONDITIONS. From and after the Effective
Date all terms used in the Loan Instruments which are defined in the Loan
Agreement shall be deemed to refer to such terms as amended by this First
Amendment.
8. REPRESENTATIONS AND WARRANTIES. Borrower hereby confirms to Agent
and Lenders that the representations and warranties set forth in the Loan
Instruments, as amended by this First Amendment, to which any Obligor is a party
are true and correct in all material respects as of the date hereof, and shall
be deemed to be remade as of the date hereof. Borrower represents and warrants
to Agent and Lenders that (i) Borrower has full power and authority to execute
and deliver this First Amendment and to perform its obligations hereunder, (ii)
upon the execution and delivery hereof, this First Amendment will be valid,
binding and enforceable upon Borrower in accordance with its terms, (iii) the
execution and delivery of this First Amendment does not and will not contravene,
conflict with, violate or constitute a default under (A) its articles of
incorporation or by-laws or (B) any applicable law, rule, regulation, judgment,
decree or order or any agreement, indenture or instrument to which Borrower is a
party or is bound or which is binding upon or applicable to all or any portion
of Borrower's Property and (iv) as of the date hereof no Incipient Default or
Event of Default exists, except as waived in Paragraph 5 hereof.
9. COSTS AND EXPENSES; MODIFICATION FEE. Borrower agrees to reimburse
Agent for all fees and expenses incurred in the preparation, negotiation and
execution of this First Amendment and the consummation of the transactions
contemplated hereby, including, without limitation, the fees and expenses of
counsel for Agent. Borrower agrees to pay a $200,000 modification fee on the
date of this First Amendment in consideration for FINOVA's agreement to enter
into this First Amendment.
10. NO FURTHER AMENDMENTS; RATIFICATION OF LIABILITY. Except as amended
hereby, the Loan Agreement and each of the other Loan Instruments shall remain
in full force and effect in accordance with its respective terms. Borrower
hereby ratifies and confirms its liabilities, obligations and agreements under
the Loan Agreement and the other Loan Instruments, all as amended by this First
Amendment, and the Liens created thereby, and acknowledges that (i) it has no
defenses, claims or set-offs to the enforcement by Agent and Lenders of such
liabilities, obligations and agreements, (ii) Agent and Lenders have fully
performed all obligations to Borrower which any such Person may have had or has
on and as of the date hereof and (iii) other than as specifically set forth
herein, neither Agent nor any Lender waives, diminishes or limits any term or
condition contained in the Loan Agreement or the other Loan Instruments. Agent
and Lenders' agreement to the terms of this First Amendment or any other
amendment of the Loan Agreement shall not be deemed to establish or create a
custom or course of dealing among Agent, Lenders and Borrower. The Loan
Instruments, as amended by this First Amendment, contain the entire agreement
among Agent, Lenders and Borrower with respect to the transactions contemplated
hereby.
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11. COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
12. FURTHER ASSURANCES. Borrower covenants and agrees that it will at
any time and from time to time do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
documents and instruments as reasonably may be required by Agent and Lenders in
order to effectuate fully the intent of this First Amendment.
13. SEVERABILITY. If any term or provision of this First Amendment or
the application thereof to any party or circumstance shall be held to be
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining terms
and provisions of this First Amendment shall not in any way be affected or
impaired thereby, and the affected term or provision shall be modified to the
minimum extent permitted by law so as most fully to achieve the intention of
this First Amendment.
14. CAPTIONS. The captions in this First Amendment are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this First Amendment or any of the provisions hereof.
[remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, this First Amendment has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
AQUIS WIRELESS COMMUNICATIONS,
INC., a Delaware corporation
By: /s/ NICK T. CATANIA
----------------------------------
Nick T. Catania
President
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: s/s ANDREW J. PLUTA
----------------------------------
Andrew J. Pluta
Vice President
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EXHIBIT NO. 10.33
LOAN AGREEMENT
BETWEEN
AQUIS COMMUNICATIONS GROUP, INC.
AND
THE LENDERS SIGNATORY HERETO
LOAN AGREEMENT dated as of March 31, 2000 (the "Agreement"), between
the Lenders signatory hereto (each a "Lender" and together the "Lenders"), and
Aquis Communications Group, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall borrow from the Lenders, and the
Lenders shall lend to the Company in the aggregate, (i) $2,000,000 in exchange
for the Company's 11% Convertible Debentures (as defined below) and (ii)
Warrants (as defined below) to purchase shares of the Common Stock (as defined
below) as described herein;
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and/or 4(6) of the United States Securities Act
of 1933 and/or Regulation D ("Regulation D") and the other rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in securities to be made
hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "CAPITAL SHARES" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "CAPITAL SHARES EQUIVALENTS" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any Warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3. "CLOSING" shall mean the closing of the purchase and sale of
the Convertible Debentures and Warrants pursuant to Section 2.1.
<PAGE>
Section 1.4. "CLOSING DATE" shall mean the date on which all conditions to
the Closing have been satisfied (as defined in Section 2.1 (b) hereto) and the
Closing shall have occurred.
Section 1.5. "COMMON STOCK" shall mean the Company's common stock, $0.01
par value per share.
Section 1.6. "CONVERSION SHARES" shall mean the shares of Common Stock
issuable upon conversion of the Convertible Debentures.
Section 1.7. "CONVERTIBLE DEBENTURES" shall mean the Company's 11%
Convertible Debentures in the form of EXHIBIT A hereto.
Section 1.8. "DAMAGES" shall mean any loss, claim, damage, judgment,
penalty, deficiency, liability, costs and expenses (including, without
limitation, reasonable attorney's fees and disbursements and reasonable costs
and expenses of expert witnesses and investigation).
Section 1.9. "EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10. "ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
Section 1.11. "ESCROW AGREEMENT" shall mean the Escrow Agreement in
substantially the form of EXHIBIT D hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
Section 1.13. "LEGEND" shall mean the legend set forth in Section 9.1.
Section 1.14. "MARKET PRICE" on any given date shall mean the average of the
five (5) lowest closing bid prices on the Principal Market (as reported by
Bloomberg L.P.) of the Common Stock during the twenty-two Trading Day period
ending on the Trading Day immediately prior to the date for which the Market
Price is to be determined.
Section 1.15. "MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, operations, properties, prospects, stock price or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Convertible
Debentures or the Warrants in any material respect.
Section 1.16. "OUTSTANDING" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares;
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PROVIDED, HOWEVER, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.17. "PERSON" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.18. "PRINCIPAL MARKET" shall mean the American Stock Exchange, the
New York Stock Exchange, the NASDAQ National Market, or the NASDAQ Small-Cap
Market or the OTC Bulletin Board, whichever is at the time the principal trading
exchange or market for the Common Stock, based upon share volume.
Section 1.19. "PURCHASE PRICE" shall mean the principal amount of the
Convertible Debentures.
Section 1.20. "REGISTRABLE SECURITIES" shall mean the Conversion Shares and
the Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC, and all Conversion Shares and Warrant Shares have been
disposed of pursuant to the Registration Statement, (ii) all Conversion Shares
and Warrant Shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.21. "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Lenders as of
the Closing Date in the form annexed hereto as EXHIBIT C.
Section 1.22. "REGISTRATION STATEMENT" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale by the Lenders of
the Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Lender of the Registrable Securities under the
Securities Act.
Section 1.23. "REGULATION D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.24. "SEC" shall mean the Securities and Exchange Commission.
Section 1.25. "SECTION 4(2)" and "SECTION 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
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Section 1.26. "SECURITIES ACT" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27. "SEC DOCUMENTS" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, the draft Annual Report on
Form 10-K, for the fiscal year ended December 31, 1999 in the form provided to
the Lenders, and each report, proxy statement or registration statement filed by
the Company with the SEC pursuant to the Exchange Act or the Securities Act
since the filing of the Annual Report for the fiscal year ended December 31,
1998 through the date hereof.
Section 1.28. "SHARES" shall have the meaning set forth in Section 1.16.
Section 1.29. "TRADING DAY" shall mean any day during which the Principal
Market shall be open for business.
Section 1.30. "WARRANTS" shall mean the Warrants substantially in the form
of EXHIBIT B to be issued to the Lenders hereunder.
Section 1.31. "WARRANT SHARES" shall mean all shares of Common Stock
or other securities issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES AND WARRANTS
Section 2.1. INVESTMENT.
(a) Upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and the Lenders agree to purchase the Convertible
Debentures together with the Warrants at the Purchase Price on the Closing Date
as follows:
(i) Upon execution and delivery of this Agreement, each
Lender shall deliver to the Escrow Agent immediately
available funds in their proportionate amount of the
Purchase Price as set forth on the signature pages
hereto, and the Company shall deliver the Convertible
Debentures and the Warrants to the Escrow Agent, in
each case to be held by the Escrow Agent pursuant to
the Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in
Section 2.1(b), the Closing ("Closing") shall occur
at the offices of the Escrow Agent at which the
Escrow Agent (x) shall release the Convertible
Debentures and the Warrants to the Lenders and (y)
shall release the Purchase Price (after all fees have
been paid as set forth in the Escrow Agreement),
pursuant to the terms of the Escrow Agreement.
(b) The Closing is subject to the satisfaction or waiver by the
party sought to be benefited thereby of the following conditions:
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(i) acceptance and execution by the Company and by the
Lenders, of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Lender of immediately
available funds in the amount of the Purchase Price
of the Convertible Debentures and the Warrants, as
more fully set forth in the Escrow Agreement;
(iii) all representations and warranties of the Lenders
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Lenders'
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Convertible Debentures and Warrants,
or shall have the availability of exemptions
therefrom;
(vi) the sale and issuance of the Convertible Debentures
and the Warrants hereunder, and the proposed issuance
by the Company to the Lenders of the Common Stock
underlying the Convertible Debentures and the
Warrants upon the conversion or exercise thereof
shall be legally permitted by all laws and
regulations to which the Lenders and the Company are
subject and there shall be no ruling, judgment or
writ of any court prohibiting the transactions
contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Debentures and Warrants certificates to the Escrow
Agent;
(viii) delivery to the Escrow Agent of an opinion of
Buchanan Ingersoll Professional Corporation, counsel
to the Company, in the form of EXHIBIT E hereto;
(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached
hereto as EXHIBIT F;
(x) delivery to the Escrow Agent of the Registration
Rights Agreement; and
(xi) The Company shall have entered into an equity
financing arrangement acceptable for up to Twenty
Million Dollars ($20,000,000) arranged through
Ladenburg Thalmann & Co. Inc. or other equity
financing agreement approved by all of the Lenders
within thirty (30) days of the Closing Date.
Section 2.2. THE WARRANTS. The number of Warrants to be issued shall equal
one-half of (i) the principal amount of the Convertible Debentures issued at
Closing divided by (ii) the Market
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Price on the Trading Day immediately prior to the Closing Date. The exercise
price of such Warrants shall be 115% of the closing bid price for the Common
Stock on the Principal Market on the Trading Day immediately prior to the
Closing Date. Two-thirds of the Warrants shall be immediately exercisable upon
issuance. The remaining one-third of each Lender's Warrants shall only become
exercisable if the Convertible Debentures have not been redeemed in accordance
with their terms on or before the 100th day after the Closing Date.
Section 2.3. LIQUIDATED DAMAGES. The parties hereto acknowledge and agree
that the sums payable pursuant to the Registration Rights Agreement shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amounts specified in such Registration
Rights Agreement bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Lenders in
connection with the failure by the Company to timely cause the registration of
the Registrable Securities and (c) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LENDERS
Each Lender, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. INTENT. The Lender is entering into this Agreement for its own
account and not with a view to or for sale in connection with any distribution
of the Convertible Debentures, the Warrants or the Conversion Shares. The Lender
has no present arrangement (whether or not legally binding) at any time to sell
the Convertible Debentures, the Warrants, any Conversion Shares or Warrant
Shares to or through any person or entity; provided, however, that by making the
representations herein, the Lender does not agree to hold such securities for
any minimum or other specific term and reserves the right to dispose of the
Conversion Shares and Warrant Shares at any time in accordance with Federal and
state securities laws applicable to such disposition.
Section 3.2. SOPHISTICATED LENDER. The Lender is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Lender has such experience in
business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Convertible Debentures, the Warrants
and the underlying Common Stock. The Lender acknowledges that an investment in
the Convertible Debentures, the Warrants and the underlying Common Stock is
speculative and involves a high degree of risk.
Section 3.3. AUTHORITY. This Agreement and each agreement attached as an
Exhibit hereto which is required to be executed by Lender has been duly
authorized and validly executed and delivered by the Lender and is a valid and
binding agreement of the Lender enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar laws
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relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4. NOT AN AFFILIATE. The Lender is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and executed
by the Lender in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Lender, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Lender or (a) violate any
provision of any indenture, instrument or agreement to which Lender is a party
or is subject, or by which Lender or any of its assets is bound; (b) conflict
with or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Lender to any
third party; or (d) require the approval of any third-party (which has not been
obtained) pursuant to any material contract, agreement, instrument, relationship
or legal obligation to which Lender is subject or to which any of its assets,
operations or management may be subject.
Section 3.6. DISCLOSURE; ACCESS TO INFORMATION. The Lender has received all
documents, records, books and other publicly available information pertaining to
Lender's investment in the Company that have been requested by the Lender. The
Company is subject to the periodic reporting requirements of the Exchange Act,
and the Lender has reviewed copies of all SEC Documents deemed relevant by
Lender.
Section 3.7. MANNER OF SALE. At no time was Lender presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and Warrants to the Lenders that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
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Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Convertible Debentures, the Conversion Shares, the
Warrants and the Warrant Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Convertible Debentures, the Convertible
Debentures and the Warrants by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Convertible Debentures and the Warrants have been duly executed and delivered by
the Company and at the Closing shall constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the conversion of the
Convertible Debentures and for the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Conversion Shares. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Convertible
Debentures and Warrant Shares upon exercise of the Warrants in accordance with
this Agreement and the Convertible Debentures is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. Section 101 et seq. (the "Bankruptcy
Code"). The Company shall not seek judicial relief from its obligations
hereunder except pursuant to the Bankruptcy Code. In the event the Company is a
debtor under the Bankruptcy Code, the Company hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. Section 362 in
respect of the conversion of the Convertible Debentures and the exercise of the
Warrants. The Company agrees, without cost or expense to the Lenders, to take or
consent to any and all action necessary to effectuate relief under 11 U.S.C.
Section 362.
Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 75,000,000 shares of Common Stock, $0.01 par value per share, of
which 16,371,000 shares are issued and outstanding as of March 31, 2000 and
1,000,000 shares of preferred stock, $0.01 par value per share, of which 100,000
shares, designated as 7-1/2% Redeemable Preferred Stock, are issued and
outstanding as of March 31, 2000. Except as set forth in the SEC Documents and
as set forth in the Disclosure Schedule, there are no outstanding Capital Shares
Equivalents nor any agreements or understandings pursuant to which any Capital
Shares Equivalents may become outstanding. The Company is not a party to any
agreement granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. All of the outstanding shares
of Common Stock and Preferred Stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.
Section 4.4. COMMON STOCK. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for
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the continued listing or quotation of its Common Stock, and such Common Stock is
currently listed or quoted on, the Principal Market. As of the date hereof, the
Principal Market is the NASDAQ Small-Cap Market and the Company has not received
any notice regarding, and to its knowledge there is no threat, of the
termination or discontinuance of the eligibility of the Common Stock for such
listing.
Section 4.5. SEC DOCUMENTS. The Company has made available to the Lenders
true and complete copies of the SEC Documents. Except for the information
contained in the draft Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, the Company has not provided to the Lenders any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act, and rules and
regulations of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Lenders' representations in Article III, the sale of the
Convertible Debentures, the Conversion Shares, the Warrants and the Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When issued and paid for in accordance with the
Warrants and validly converted in accordance with the terms of the Convertible
Debentures, the Conversion Shares and the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sales of the
Convertible Debentures, the Conversion Shares, the Warrants or the Warrant
Shares pursuant to, nor the Company's performance of its obligations under, this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Convertible Debentures or the Warrants will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Convertible Debentures, the Conversion Shares, the Warrants or the
Warrant Shares or, except as contemplated herein, any of the assets
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of the Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe for or acquire the Capital Shares or
other securities of the Company. The Convertible Debentures, the Conversion
Shares, the Warrants and the Warrant Shares shall not subject the Lenders to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7. NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Convertible
Debentures or the Warrants, or (ii) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Convertible Debentures, the Conversion Shares, the
Warrants or the Warrant Shares under the Securities Act.
Section 4.8. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of and payment of
interest upon the Convertible Debentures, the Conversion Shares, the Warrants
and the Warrant Shares, do not and will not (i) result in a violation of the
Company's Certificate of Incorporation or By-Laws or (ii) conflict with, or
constitute a material default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
Federal, state or local law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate would not have a Material
Adverse Effect. The Company is not required under any Federal, state or local
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Convertible Debentures or the Warrants in
accordance with the terms hereof (other than any SEC, Principal Market or state
securities filings that may be required to be made by the Company subsequent to
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Principal Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Lenders
herein.
Section 4.9. NO MATERIAL ADVERSE CHANGE. Since December 31, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
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Section 4.10. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31,
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.11. INTEGRATED OFFERING. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, or pursuant to its discussion with the
Lenders in connection with the transactions contemplated hereby, the Company has
not issued, offered or sold the Convertible Debentures, the Warrants or any
shares of Common Stock (including for this purpose any securities of the same or
a similar class as the Convertible Debentures, the Warrants or Common Stock, or
any securities convertible into a exchangeable or exercisable for the
Convertible Debentures or Common Stock or any such other securities) within the
six-month period next preceding the date hereof, and the Company shall not
permit any of its directors, officers or affiliates directly or indirectly to
take, any action (including, without limitation, any offering or sale to any
Person of the Convertible Debentures, Warrants or shares of Common Stock), so as
to make unavailable the exemption from Securities Act registration being relied
upon by the Company for the offer and sale to Lenders of the Convertible
Debentures (and the Conversion Shares) or the Warrants (and the Warrant Shares)
as contemplated by this Agreement.
Section 4.12. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the
SEC Documents, there are no lawsuits or proceedings pending or, to the knowledge
of the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.13. NO MISLEADING OR UNTRUE COMMUNICATION. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Debentures or the Warrants in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.14. MATERIAL NON-PUBLIC INFORMATION. Except for the information
contained in the draft Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, the Company has not disclosed to the Lenders any material
non-public information that (i) if disclosed, would reasonably be expected to
have a material effect on the price of the Common Stock or (ii) according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company prior to the date hereof but which has not been so disclosed.
Section 4.15. INSURANCE. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with
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industry standards and the Company's historical claims experience. The Company
has not received notice from, and has no knowledge of any threat by, any insurer
(that has issued any insurance policy to the Company) that such insurer intends
to deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.16. TAX MATTERS.
(a) The Company and each subsidiary has filed all Tax Returns
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and has been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
Federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, Federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, Federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; and (B) has not agreed to or is required to make
any adjustments pursuant to Section 481 (a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or change in accounting
method, or has any application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to the business or
operations of the Company. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Internal Revenue Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Internal Revenue Code.
(c) The Company has not made an election under Section 341(f) of
the Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under
Section 280G of the Internal Revenue Code.
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(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means Federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 1.17. PROPERTY. Neither the Company nor any of its subsidiaries owns
any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property, mineral or water rights, and buildings held under
lease by the Company as tenant are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and intended to be made of such property, mineral or water
rights, and buildings by the Company.
Section 4.18. INTELLECTUAL PROPERTY. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no adverse
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.19. INTERNAL CONTROLS AND PROCEDURES. The Company maintains books
and records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party or
by which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
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Section 4.20. PAYMENTS AND CONTRIBUTIONS. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.21. NO MISREPRESENTATION. The representations and warranties of
the Company contained in this Agreement, any schedule, annex or exhibit hereto
and any agreement, instrument or certificate furnished by the Company to the
Lenders pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
COVENANTS OF THE LENDERS
Each Lender, severally and not jointly, covenants with the Company
that:
Section 5.1. COMPLIANCE WITH LAW. The Lender's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and Federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to issue the Conversion Shares and the
Warrant Shares pursuant to any conversion of the Convertible Debentures or
exercise of the Warrants. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered pursuant to any conversion of the
Convertible Debentures or exercise of the Warrants and the number of shares so
reserved shall be increased or decreased to reflect potential increases or
decreases in the Common Stock that the Company may thereafter be obligated to
issue by reason of adjustments to the Warrants.
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Section 6.3. LISTING OF COMMON STOCK. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to list the Conversion Shares and the Warrant
Shares on the Principal Market, if required. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Conversion Shares and the Warrant
Shares, and will take such other action as is necessary or desirable in the
opinion of the Lenders to cause the Conversion Shares and Warrant Shares to be
listed on such other Principal Market as promptly as possible. The Company will
take all action to continue the listing and trading of its Common Stock on a
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Lenders with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Trading Days of the Company's receipt thereof, until the
Lenders have disposed of all of their Registrable Securities.
Section 6.4. EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(b) or (g) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Lenders have
disposed of all of their Registrable Securities.
Section 6.5. LEGENDS. The certificates evidencing the Registrable
Securities shall be free of legends, except as set forth in Article IX.
Section 6.6. CORPORATE EXISTENCE; CONFLICTING AGREEMENTS. The Company will
take all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto or under the Convertible Debentures.
Section 6.7. CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligations of the Company to the Lenders pursuant to this
Agreement and the Convertible Debentures.
Section 6.8. ISSUANCE OF CONVERTIBLE DEBENTURES AND WARRANT SHARES. The
sale of the Convertible Debentures and the Warrants and the issuance of the
Warrant Shares pursuant to exercise of the Warrants and the Conversion Shares
upon conversion of the Convertible Debentures shall be made in accordance with
the provisions and requirements of Section 4(2), 4(6) or Regulation D and any
applicable state securities law. The Company shall make any necessary SEC and
"blue sky" filings required to be made by the Company in connection with the
sale of the Securities to the Lenders as required by all applicable laws, and
shall provide a copy thereof to the Lenders promptly after such filing.
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Section 6.9. LIMITATION ON FUTURE FINANCING. The Company agrees that it
will not enter into any sale of its securities for cash at a discount to the
then-current bid price until the earlier of repayment in full of all of the
Convertible Debentures, or 120 days after the effective date of the Registration
Statement except for any sales (i) pursuant to any presently existing employee
benefit plan which plan has been approved by the Company's stockholders, (ii)
pursuant to any compensatory plan for a full-time employee or key consultant,
(iv) pursuant to any transaction arranged through Ladenburg Thalmann & Co., Inc.
or (iv) with the prior approval of a majority in interest of the Lenders, which
will not be unreasonably withheld, in connection with a strategic partnership or
other business transaction, the principal purpose of which is not simply to
raise money.
Section 6.10. PRO-RATA REDEMPTION. The Company agrees that if it shall
redeem any of the Convertible Debentures, that it shall make such redemption
pro-rata among all Lenders in proportion their respective initial purchases of
such securities pursuant to this Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made
by each of the Company and each Lender in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
Section 7.2. INDEMNITY. (a) The Company hereby agrees to indemnify and hold
harmless the Lenders, their respective Affiliates and their respective officers,
directors, partners and members (collectively, the "Lender Indemnitees"), from
and against any and all Damages, and agrees to reimburse the Lender Indemnitees
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Lender
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
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(iii) any action instituted against the Lenders, or any of
them, by any stockholder of the Company who is not an Affiliate of an
Lender, with respect to any of the transactions contemplated by this
Agreement.
(b) Each Lender, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and agrees to reimburse the
Company Indemnitees for reasonable all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with any misrepresentation, omission of fact, or breach of any of the
Lender's representations or warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or certificate entered
into or delivered by the Lender pursuant to this Agreement. Notwithstanding
anything to the contrary herein, the Lender shall be liable under this Section
7.2(b) for only that amount as does not exceed the net proceeds to such Lender
as a result of the sale of Registrable Securities pursuant to the Registration
Statement.
Section 7.3. NOTICE. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or
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compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
All fees and expenses of the Indemnified Party (including
reasonable costs of defense and investigation in a manner not inconsistent with
this Section and all reasonable attorneys' fees and expenses) shall be paid to
the Indemnified Party, as incurred, within ten (10) Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
Section 7.4. DIRECT CLAIMS. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being asserted
by a third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party. If the Indemnified Party disputes the claim,
such dispute shall be resolved by mutual agreement of the Indemnified Party and
the Indemnifying Party or by binding arbitration conducted in accordance with
the procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company
shall make available for inspection and review by the Lenders, advisors to and
representatives of the Lenders (who may or may not be affiliated with the
Lenders and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Lenders pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, Nasdaq or other filing, all
SEC Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Lenders or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Lenders and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
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(a) Except for the information contained in the draft Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, the Company
shall not disclose material non-public information to the Lenders, advisors to
or representatives of the Lenders unless prior to disclosure of such information
the Company identifies such information as being non-public information and
provides the Lenders, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review. Other than
disclosure of any comment letters received from the SEC staff with respect to
the Registration Statement, the Company may, as a condition to disclosing any
non-public information hereunder, require the Lenders' advisors and
representatives to enter into a confidentiality agreement in form and content
reasonably satisfactory to the Company and the Lenders.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Lenders or their advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any Lenders who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Lenders and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Lenders (without the written consent of the Lenders prior to
disclosure of such information as set forth in Section 8.2(a)) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following
legend or equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS.
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NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Registrable Securities and no instructions
or "stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX.
Section 9.4. LENDERS' COMPLIANCE. Nothing in this Article shall affect in
any way each Lender's obligations to comply with all applicable securities laws
upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1. GOVERNING LAW/ARBITRATION. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation
law of the company's state of incorporation, in which event the corporation law
of such jurisdiction shall govern such issue. To the extent practical, decisions
of the Board of Arbitration shall be rendered no more than thirty (30) calendar
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all
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parties involved in the dispute. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The Board of Arbitration shall be
authorized and is hereby directed to enter a default judgment against any party
failing to participate in any proceeding hereunder within the time periods set
forth in the AAA rules. The non-prevailing party to any arbitration (as
determined by the Board of Arbitration) shall pay the expenses of the prevailing
party, including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available, and the non-prevailing party
to any such injunctive proceeding shall pay the expenses of the prevailing
party, including reasonable attorney's fees, in connection with such proceeding.
ARTICLE XI
ASSIGNMENT
Section 11.1. ASSIGNMENT. Neither this Agreement nor any rights of the
Lenders or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any permitted transferee
of any of the Convertible Debentures or Warrants purchased or acquired by any
Lender hereunder with respect to the Convertible Debentures or Warrants held by
such person, and (b) subject to compliance with applicable Federal and state
securities laws, upon the prior written consent of the Company, which consent
shall not unreasonably be withheld or delayed, each Lender's interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any Affiliate of the Lender) who agrees to make the
representations and warranties contained in Article III and who agrees to be
bound by the terms of this Agreement.
ARTICLE XII
NOTICES
Section 12.1. NOTICES. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) hand delivered, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the first business day following the date of sending
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<PAGE>
by reputable courier service, fully prepaid, addressed to such address, or (c)
upon actual receipt of such mailing, if mailed. The addresses for such
communications shall be as set forth in the Escrow Agreement. Either party
hereto may from time to time change its address or facsimile number for notices
under this Section 12.1 by giving written notice of such changed address or
facsimile number to the other party hereto as provided in this Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. ENTIRE AGREEMENT. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible
Debentures, the Warrants, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. NUMBER AND GENDER. There may be one or more Lenders parties to
this Agreement, which Lenders may be natural persons or entities. All references
to plural Lenders shall apply equally to a single Lender if there is only one
Lender, and all references to an Lender as "it" shall apply equally to a natural
person.
Section 13.6. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Lenders and the Company shall be required to employ any other reporting entity.
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Section 13.7. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debentures or any
Conversion Shares or Warrants or any Warrant Shares and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
(which shall not include the posting of any bond) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. FEES AND EXPENSES. Each of the Company and the Lenders agrees
to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of counsel to the Lenders, in an amount equal to $15,000, all as
set forth in the Escrow Agreement.
Section 13.9. FINDER'S AND BROKER'S FEES. Each of the parties hereto
represents that it has had no dealings in connection with this transaction with
any finder or broker who will demand payment of any fee or commission from the
other party except for Ladenburg Thalmann & Co., Inc., whose fee shall be paid
by the Company. The Company on the one hand, and the Lenders, on the other hand,
agree to indemnify the other against and hold the other harmless from any and
all liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
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Section 13.10. PUBLICITY. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Lenders, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from their
receipt of such proposed release. No release shall name the Lenders without
their express consent.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed by the undersigned, thereunto duly authorized, as of the date
first set forth above.
AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ NICK T. CATANIA
-----------------------------------
Nick T. Catania, President & CEO
LENDER:
Amount subscribed for: AMRO International, S.A.
$2,000,000
By: /s/ H.U. BACHOFEN
----------------------------------------
H.U. Bachofen, Director
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Exhibit 10.34
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is dated as of
April 9, 2000 by and between Aquis Communications Group, Inc., a Delaware
corporation (the "Company"), and Coxton, Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS.
(a) "AVERAGE DAILY PRICE" shall be the price based on the VWAP of the
Company on the Nasdaq SmallCap Market or, if the Nasdaq SmallCap Market is not
the Principal Market, on the Principal Market.
(b) "DRAW DOWN" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(c) "DRAW DOWN EXERCISE DATE" shall have the meaning assigned to such term
in Section 6.1(b) hereof.
(d) "DRAW DOWN PRICING PERIOD" shall mean a period of twenty-two (22)
consecutive Trading Days preceding a Draw Down Exercise Date.
(e) "EFFECTIVE DATE" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared effective.
(f) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, operations, properties or financial condition of the Company that
materially impairs the ability of the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations under any other
material agreement.
(g) "PRINCIPAL MARKET" shall mean initially the Nasdaq SmallCap Market, and
shall include the Nasdaq National Market, the American Stock Exchange or the New
York Stock Exchange if the Company is listed and trades on such market or
exchange, but shall not include the OTC Bulletin Board without the express
consent of the Purchaser.
(h) "REGISTRATION STATEMENT" shall mean the registration statement under
the Securities Act of 1933, as amended, to be filed with the Securities and
Exchange Commission for
<PAGE>
the registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as EXHIBIT A.
(i) "SEC DOCUMENTS" shall mean a draft Annual Report on Form 10-K for
fiscal year ended December 31, 1999 in the form provided to the Purchaser, the
Company's latest Form 10-K for the fiscal year ended December 31, 1998 and as of
the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time as the Company no longer has an obligation to maintain the effectiveness of
a Registration Statement as set forth in the Registration Rights Agreement.
(j) "SHARES" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder.
(k) "THRESHOLD PRICE" is the lowest Average Daily Price at which the
Company will sell its Common Stock with respect to this Agreement.
(l) "TRADING DAY" shall mean any day on which the Principal Market is open
for business.
(m) "VWAP" shall mean the daily volume weighted average price of the
Company' Common Stock on the Nasdaq SmallCap Market or on any Principal Market
as reported by Bloomberg Financial using the AQR function.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
of this Agreement, the Company may issue and sell to the Purchaser and the
Purchaser shall purchase from the Company up to Twenty Million Dollars
($20,000,000) of the Company's Common Stock, $0.01 par value per share (the
"Common Stock"), based on up to twelve (12) Draw Downs of up to Seven Million
Dollars ($7,000,000) per Draw Down.
Section 2.2 THE SHARES. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, 500,000 of its authorized but unissued
shares of its Common Stock to cover the Shares to be issued in connection with
all Draw Downs requested under this Agreement. Anything in this Agreement to the
contrary notwithstanding, (i) at no time will the Company request a Draw Down
which would result in the issuance of a number of shares of Common Stock
pursuant to this Agreement which exceeds 19.9% of the number of shares of Common
Stock issued and outstanding on the Closing Date without obtaining stockholder
approval of such excess issuance, and (ii) the Company may not make a Draw Down
to the extent that, after such purchase by the Purchaser, the sum of the number
of shares of Common Stock beneficially owned by the Purchaser and its affiliates
would result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For
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purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities and Exchange Act
of 1934, as amended.
Section 2.3 PURCHASE PRICE AND CLOSING. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representation, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down. The closing under this Agreement shall take
place at the offices of Epstein Becker & Green, P.C., 250 Park Avenue, New York,
New York 10177 (the "Closing") at 10:00 a.m. E.S.T. on (i) April 9, 2000, or
(ii) such other time and place or on such date as the Purchaser and the Company
may agree upon (the "Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATION AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted. The Company does not have any subsidiaries and does not own more that
fifty percent (50%) of or control any other business entity except as set forth
in the SEC Documents or in Schedule 3.1(g). The Company is duly qualified and is
in good standing as a foreign corporation to do business in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect on the Company's financial condition.
(b) AUTHORIZATION, ENFORCEMENT.(i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement and to
issue the Draw Down Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement and the Escrow Agreement have been duly executed
and delivered by the Company and at the initial Closing shall constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement
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of, creditors' rights and remedies or by other equitable principles of general
application. The Company has duly and validly authorized and reserved for
issuance 500,000 shares of Common Stock for the issuance of the Draw Down Shares
and at the time of each Draw Down shall have reserved shares of Common Stock
sufficient in number for the issuance of the Draw Down Shares at each Draw Down.
(c) CAPITALIZATION. The authorized capital stock of the company consists of
75,000,000 shares of Common Stock, $0.01 par value per share, of which
16,531,000 shares are issued and outstanding as of March 31, 2000 and 1,000,000
shares of preferred stock, $0.01 par value per share, of which 100,000 are
issued and outstanding. All of the outstanding shares of the Company's Common
Stock have been duly and validly authorized and are fully-paid and
non-assessable. Except as set forth in this Agreement and the Registration
Rights Agreement and as set forth in the SEC Documents, or on Schedule 3.1(c)
hereto, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement and as
set forth in the SEC Documents or on SCHEDULE 3.1(C), there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. The Company is not a party to any agreement granting registration
rights to any person with respect to any of its equity or debt securities.
Except as set forth on Schedule 3.1(c), the Company is not a party to, and it
has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. Except as set forth in the SEC
Documents or on SCHEDULE 3.1(C) hereto, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect on the Company's financial condition
or operating results. The Company has made available to the Purchaser true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Certificate"), and the Company's Bylaws as in effect on the
date hereof (the "Bylaws"). The Principal Market for the Common Stock in the
United States is the Nasdaq SmallCap Market, and the Company has not received
any notice from such market questioning or threatening the continued inclusion
of the Common Stock on such market.
(d) ISSUANCE OF SHARES. The Shares to be issued under this Agreement have
been duly authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and non-assessable, and the Purchaser shall be
entitled to all rights accorded to a holder of Common Stock.
(e) NO CONFLICTS. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Certificate or Bylaws, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
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cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or other foreign statute, rule, regulation, order, judgment or
decree (including any federal and state or securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries are bound or affected, except,
in all cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under any federal, state or local law, rule
or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Securities and
Exchange Commission (the "Commission") or state securities administrators
subsequent to the Closing and any registration statement which may be filed
pursuant hereto); provided that, for purpose of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, except as disclosed in the SEC
Documents or on SCHEDULE 3.1(F) hereto, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the "Commission Documents"). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since December 31, 1998. The
Company has not provided to the Purchaser any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such documents, and, as of their respective dates, none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
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Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) SUBSIDIARIES. The SEC Documents or Schedule 3.1(g) hereto sets forth
each subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such subsidiary. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and non-assessable. Except as et forth on
Schedule 3.1(g), there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Except as set forth
on Schedule 3.1(g), neither the Company nor any subsidiary is a party to, nor
has any knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of any subsidiary.
(h) NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents or on SCHEDULE 3.1(H) hereof.
(i) NO UNDISCLOSED LIABILITIES. Except as disclosed in the SEC Documents or
on SCHEDULE 3.1(I) hereto, neither the Company nor any of its subsidiaries has
any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
that would be required to be disclosed on a balance sheet of the Company or any
subsidiary (including the notes thereto) in conformity with GAAP which are not
disclosed in the Commission Documents, other than those incurred in the ordinary
course of the Company's or its subsidiaries respective businesses since such
date and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or its subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31, 1999, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or
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regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed in the
SEC Documents.
(k) INDEBTEDNESS. The SEC Documents or SCHEDULE 3.1(K) hereto sets forth as
of the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $250,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $250,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) TITLE TO ASSETS. Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or on SCHEDULE 3.1(1) hereto or such that do not cause a Material Adverse Effect
on the Company's financial condition or operating results. All said leases of
the Company and each of its subsidiaries are valid and subsisting and in full
force and effect.
(m) ACTIONS PENDING. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the SEC Documents or on SCHEDULE
3.1(M) hereto, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary.
(n) COMPLIANCE WITH LAW. The business of the Company and the subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the SEC Documents or on SCHEDULE 3.1(N) hereto or such
that do not cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their respective businesses as now being conducted by them unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
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(o) TAXES. The Company and each subsidiary has filed all Tax Returns which
it is required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to Section 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Internal Revenue Code.
The Company has not made an election under Section 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6
(or comparable provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) otherwise. The Company is not
a party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under Section 280G of the
Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or
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other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any
kind whatsoever (including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed or
not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
(p) CERTAIN FEES. Except as set forth on SCHEDULE 3.1(P) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) DISCLOSURE. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) OPERATION OF BUSINESS. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents and on SCHEDULE
3.1(R) hereto, and all rights with respect to the foregoing, which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Regulatory Compliance. The Company has all necessary licenses,
registrations and permits to conduct its business as now being conducted in all
states where the Company conducts its business, other than those in which the
failure so to obtain such licenses, registrations and permits would not have a
Material Adverse Effect on the Company's financial condition.
(t) BOOKS AND RECORDS. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
(u) MATERIAL AGREEMENTS. Except as set forth in the SEC Documents, or on
SCHEDULE 3.1(U) hereto, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form S-1 or other applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, to the
best of the Company's knowledge are not in default under any Material Agreement
now in effect, the result of which could cause a Material Adverse Effect. Except
as set forth on Schedule 3.1(u), no written or oral contract,
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instruments, agreement, commitment, obligation, plan or arrangement of the
Company or of any subsidiary limits or shall limit the payment of dividends on
the Company's Common Stock.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in the SEC Documents
or on SCHEDULE 3.1(V) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (a) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediately family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) SECURITIES ACT OF 1933. The Company has complied and will comply with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder. Neither the Company nor anyone acting
on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Shares or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchaser), so as
to bring the issuance and sale of the Shares under the registration provisions
of the Securities Act and applicable state securities laws. Neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of the Shares.
(x) GOVERNMENTAL APPROVALS. Except as set forth in the SEC Documents or on
SCHEDULE 3.1(x) hereto, and except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable federal or state
securities laws (which if required, shall be filed on a timely basis), including
the filing of a registration statement or statements pursuant to this Agreement,
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Shares, or for the
performance by the Company of its obligations under this Agreement.
(y) EMPLOYEES. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth in the SEC Documents or on SCHEDULE 3(Y) hereto. Except as set forth
in the SEC Documents or on SCHEDULE 3(Y) hereto, neither the Company nor any
subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since December 31, 1999,
no officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the
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Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.
(z) ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided in SEC Documents or
in SCHEDULE 3.1(z) hereto, since December 31, 1999 neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount
to the current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the Company's or such subsidiary's
business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of
its capital stock;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of
business or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the
loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate
in excess of $ 500,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
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(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in
the aggregate would be material to the Company or its subsidiaries.
(aa) USE OF PROCEEDS. The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for general corporate purposes.
(bb) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SHARES. Company
acknowledges and agrees that Purchaser is acting solely in the capacity of arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares. The
Company further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its own representatives and counsel.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) ORGANIZATION AND STANDING OF THE PURCHASER. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Shares
being sold to it hereunder. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement, the Registration Rights Agreement and the Escrow Agreement have
been duly executed and delivered by the Purchaser and at the initial Closing,
shall constitute valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(c) NO CONFLICTS. The execution, delivery and performance of this Agreement
and the consummation by the Purchaser of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such
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conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on Purchaser). The Purchaser is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares in accordance with the terms hereof, provided that for purposes of
the representation made in this sentence, the Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) FINANCIAL RISKS. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it has been
given full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Purchaser is capable
of evaluating the risks and merits of an investment in the Shares by virtue of
its experience as an investor and its knowledge, experience, and sophistication
in financial and business matters and the Purchaser is capable of bearing the
entire loss of its investment in the Shares.
(e) ACCREDITED INVESTOR The Purchaser is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act.
(f) COMPLIANCE WITH LAW. The Purchaser's trading and distribution
activities with respect to the Shares will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the Principal Market.
(g) GENERAL. The Purchaser understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the suitability of the Purchaser to acquire the Shares.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1 SECURITIES COMPLIANCE.
The Company shall notify The Nasdaq Stock Market, Inc., in accordance with
their rules and regulations, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares to the Purchaser or subsequent holders.
Section 4.2 REGISTRATION AND LISTING. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, and will not
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take any action or file any document (whether or not permitted by the Securities
Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of its
Common Stock on the Nasdaq SmallCap Market or another Principal Market and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and The Nasdaq Stock Market.
Section 4.3 REGISTRATION STATEMENT. The Company shall cause to be filed the
Registration Statement, which Registration Statement shall provide for the sale
of the Shares to the Purchaser and resale by the Purchaser to the public in
accordance with this Agreement. The Company shall cause such Registration
Statement to be declared effective by the Commission as expeditiously as
practicable. Before the Purchaser shall be obligated to accept a Draw Down
request from the Company, the Company shall have caused a sufficient number of
shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down.
Section 4.4 ESCROW ARRANGEMENT. The Company and the Purchaser shall enter
into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the Form of EXHIBIT B hereto respecting payment against delivery of
the Shares.
Section 4.5 COMPLIANCE WITH LAWS. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
Section 4.6 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall keep
and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.7 AMENDMENTS. The Company shall not amend or waive any provision
the Certificate of Incorporation, Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.8 OTHER AGREEMENTS. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the right
to perform of the Company or any subsidiary under this Agreement or the
Certificate of Incorporation of the Company.
Section 4.9 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO REQUEST A DRAW DOWN. The Company will immediately notify the Purchaser
upon the occurrence of any of the following events in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the Commission or any
other federal or state governmental authority during the period of effectiveness
of the Registration Statement the response to which would require any amendments
or supplements to the Registration Statement or related prospectus; (ii) the
issuance by the
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Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.11 LIMITATION ON FUTURE FINANCING. The Company agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i) twelve
(12) months from the effective date of the Registration Statement, or (ii) sixty
(60) days after the entire $20,000,000 of Shares has been purchased by
Purchaser. The foregoing shall not prevent or limit the Company from engaging in
any sale of securities (i) in a registered public offering by the Company which
is underwritten by one or more established investment banks, (ii) in one or more
private placements where the purchasers do not have registration rights, (iii)
pursuant to any presently existing or future employee benefit plan which plan
has been or is approved by the Company's stockholders, (iv) pursuant to any
compensatory plan for a full-time employee or key consultant, (v) in connection
with an acquisition or strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money, (vi) where the
Purchaser is unable to purchase Shares due to the limitation set forth in
Section 2.2(ii), or (vii) to which Purchaser gives its written approval.
ARTICLE V
CONDITIONS TO CLOSING AND DRAW DOWNS
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Section 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL
THE SHARES. The obligation hereunder of the Company to issue and sell the Shares
to the Purchaser is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Closing and as of each
Draw Down Exercise Date as though made at that time, except for representations
and warranties that speak as of a particular date.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have performed,
satisfied and complied in all material respects with all material covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing and as of each Draw
Down Exercise Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
CLOSE. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
at that time (except for representations and warranties that speak as of a
particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking
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to restrain, prevent or change the transactions contemplated by this Agreement,
or seeking damages in connection with such transactions.
(e) OPINION OF COUNSEL, ETC. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of EXHIBIT C hereto, and such other certificates and documents as the
Purchaser or its counsel shall reasonably require incident to the Closing.
(f) WARRANTS. In lieu of a minimum Draw Down commitment by the Company, the
Purchaser shall receive a warrant certificate to purchase a number of shares of
Common Stock as shall equal $1,200,000 (6% of the commitment amount) divided by
the closing bid price on the Trading Day immediately prior to the Closing Date
(the "Warrants"). The Warrants will have a three (3) year term from their date
of issuance. The Warrant strike price shall be 115% of the closing bid price of
the Common Stock on the Trading Day immediately prior to the Closing Date. The
Common Stock underlying the Warrants will be registered in the Registration
Statement referred to in Section 4.3 hereof. The Warrants shall be identical in
the form to the Warrants issued to the placement agent, Ladenburg Thalmann & Co.
Inc.
Section 5.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
ACCEPT A DRAW DOWN AND PURCHASE THE SHARES. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise
Date, of each of the conditions set forth below. The conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
(a) SATISFACTION OF CONDITIONS TO CLOSING. The Company shall have
satisfied, or the Purchaser shall have waived, the conditions set forth in
Section 5.2 hereof
(b) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
registering the Shares shall have been declared effective by the Commission and
shall remain effective on each Draw Down Exercise Date.
(c) NO SUSPENSION. Trading in the Company's Common Stock shall not have
been suspended by the Commission or The Nasdaq Stock Market, Inc. (except for
any suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally as reported by
Nasdaq shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by Nasdaq.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect and no
Consolidation Event shall have occurred.
(e) OPINION OF COUNSEL The Purchaser shall have received a "down-to-date"
letter from the Company's counsel, confirming that there is no change from the
counsel's previously delivered opinion, or else specifying with particularity
the reason for any change.
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ARTICLE VI
DRAW DOWN TERMS
Section 6.1 DRAW DOWN TERMS. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise a draw
down (a "Draw Down") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period.
The price per share paid by the Purchaser shall be based on the Average Daily
Price on each separate Trading Day during the Draw Down Pricing Period. The
number of shares of Common Stock purchased by the Purchaser with respect to each
Draw Down shall be determined on a daily basis during each Draw Down Pricing
Period and settled at the election of the Purchaser on a weekly basis or on the
Draw Down Exercise Date, which shall be the first Trading Day following the end
of the Draw Down Pricing Period. In connection with each Draw Down Pricing
Period, the Company may set an Average Daily Price below which the Company will
not sell any Shares (the "Threshold Price"). If the Average Daily Price on any
day within the Draw Down Pricing Period is less than the Threshold Price, the
Company shall not sell and the Purchaser shall not be obligated to purchase the
Shares otherwise to be purchased for such day.
(c) There shall be a maximum of twelve (12) Draw Downs during the terms
of this Agreement. The Company shall have the right to issue and exercise a
Draw Down of up to $7,000,000 of the Company's Common Stock per Draw Down,
subject to the limitations set forth immediately below. The minimum Draw Down
shall be $250,000 unless otherwise agreed by Purchaser.
(d) The maximum dollar amount of each Draw Down during any Draw Down
Pricing Period shall be limited pursuant to the following formula: Average Stock
Price: Average of the Average Daily Prices for the 22 Trading Days prior to the
Draw Down Notice date. Average Trading Volume: Average daily trading volume for
the 45 Trading Days prior to the Draw Down Notice date. Maximum dollar amount of
each Draw Down: 20% of (Average Stock Price x (Average Trading Volume x 22)) the
number of Shares of Common Stock to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each trading day within the Draw
Down Pricing Period) of (x) 1/22nd of the Draw Down amount and (y) 93% of the
Average Daily Price of the Common Stock on each Trading Day within the Draw Down
Pricing Period. If the Average Daily Price on a given Trading Day is less than
the Threshold Price, then the Purchaser's Draw Down payment will be reduced by
1/22nd and that day shall be withdrawn from the Draw Down Pricing Period.
(e) The Company must inform the Purchaser by delivering a Draw Down Notice,
in the form of EXHIBIT D hereto, via facsimile transmission as to the amount of
the Draw Down the Company wishes to exercise before the first day of the Draw
Down Pricing Period (the "Draw Down Notice"). The Company may set the Threshold
Price, if any, prior to each Draw Down request. At no time shall the Purchaser
be required to purchase more than the scheduled
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Draw Down amount for a given Draw Down Pricing Period so that if the Company
chooses not to exercise the maximum permitted Draw Down in a given Draw Down
Pricing Period the Purchaser is not obligated to purchase more than the
scheduled maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before three Trading Days after each Draw Down Exercise Date, the
Shares purchased by the Purchaser shall be delivered to The Depository Trust
Company ("DTC") on the Purchaser's behalf. The Shares shall be credited by the
Company to the DTC account designated by the Purchaser upon receipt by the
Escrow Agent of payment for the Draw Down into the Escrow Agent's trust account
as provided in the Escrow Agreement. The Escrow Agent shall be directed to pay
94% of the purchase price to the Company, net of One Thousand Five Hundred
Dollars ($1,500) as escrow expenses to the Escrow Agent, and 6% to the placement
agent. The delivery of the Shares into the Purchaser's DTC account in exchange
for payment therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION BY MUTUAL CONSENT. The term of this Agreement shall
be twelve (12) months from the Effective Date. This Agreement may be terminated
at any time by mutual consent of the parties.
Section 7.2 OTHER TERMINATION. (a) The Purchaser may terminate this
Agreement upon one (1) Trading Day's notice if (i) an event resulting in a
Material Adverse Effect has occurred, (ii) the Common Stock is de-listed from
the Nasdaq SmallCap Market unless such de-listing is in connection with the
listing of the Common Stock on the Nasdaq National Market, the New York or
American Stock Exchanges, (iii) the Company files for protection from creditors
under any applicable law, (iv) the Company completes any financing prohibited by
Section 4.11, (v) the Registration Statement is not effective by August 31, 2000
or (vi) in the event that the officers and directors of the Company shall own
less than twenty-five percent (25%) of the outstanding Common Stock of the
Company.
(b) The Company may terminate this Agreement upon one (1) Trading Day's
notice if the Purchaser shall fail to fund more than one properly noticed
Draw Down within three (3) Trading Days of the date payment for such Draw
Down is due.
Section 7.3 EFFECT OF TERMINATION. In the event of termination by the
company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 9.1 and 9.2, and
Article VIII herein. Nothing in this Section 7.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights to the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
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ARTICLE VIII
INDEMNIFICATION
Section 8.1 GENERAL INDEMNITY. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the Purchaser
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable attorneys
fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchaser herein. Notwithstanding anything to the contrary herein, the
Purchaser shall be liable under this Section 8.1 for only that amount as does
not exceed the net proceeds to such Purchaser as a result of the sale of Shares
pursuant to the Registration Statement.
Section 8.2 INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with
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counsel of its choice at its sole cost and expense. The indemnifying party shall
not be liable for any settlement of any action, claim or proceeding effected
without its prior written consent. Notwithstanding anything in this Article VIII
to the contrary, the indemnifying party shall not, without the indemnified
party's prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on
the indemnified party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the indemnified party of
a release from all liability in respect of such claim. The indemnification
required by this Article VIII shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, within ten (10)
Trading Days of written notice thereof to the indemnifying party so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FEES AND EXPENSES. The Company shall pay all fees and expenses
related to the transactions contemplated by this Agreement; provided, that the
Company shall pay, at the Closing, all attorneys and escrow fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchaser of $20,000 in connection with the preparation, negotiation, execution
and delivery of this Agreement and the transactions contemplated hereunder. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchaser in connection with any amendments, modifications or waivers of this
Agreement or the Registration Rights Agreement or incurred in connection with
the enforcement of this Agreement and the Registration Rights Agreement,
including, without limitation, all reasonable attorneys fees and expenses. The
Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
Section 9.2 SPECIFIC ENFORCEMENT. The Company and the Purchaser acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the
Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein,
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neither the Company nor the Purchaser makes any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
Section 9.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: Aquis Communications Group, Inc.
1719A Route 10, Suite 300
Parsippany, New Jersey 07054
Telephone Number: (973) 560-8000
Fax: (973) 560-8053
Attention: Nick Catania
with copies to: Buchanan Ingersoll, P.C.
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, Pennsylvania 19103
Telephone number: (215) 665-3879
Fax: (215) 665-8760
Attention: Joseph P. Galda
If to Purchaser: c/o Dr. Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz, Liechtenstein
Fax: 011-075-236-0405
with copies to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Telephone Number: (212) 351-3771
Fax: (212) 661-0989
Attention: Robert Charron
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.
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Section 9.5 WAIVERS. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 9.6 HEADINGS. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.
Section 9.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9 GOVERNING LAW/ARBITRATION. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration under
the American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
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Section 9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
Section 9.11 PUBLICITY. Prior to the Closing, neither the Company nor the
Purchaser shall issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. After the Closing, the Company may
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement; provided, that prior to issuing any such press
release, making any such public statement or announcement, the Company obtains
the prior consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed.
Section 9.12 SEVERABILITY. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 9.13 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, each of the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ D. Brian Plunkett
---------------------------------------------
D. Brian Plunkett, Chief Financial Officer
COXTON, LIMITED
By: /s/ Hans Gassner
---------------------------------------------
Hans Gassner, Authorized Signatory
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Exhibit 10.35
IN ARBITRATION UNDER THE RULES OF
THE COMMERCIAL ARBITRATION TRIBUNAL
OF THE AMERICAN ARBITRATION ASSOCIATION
NEW YORK CITY, NEW YORK
- ------------------------------------------
In the Matter of the Arbitration Between:
JOHN X. ADILETTA,
Claimant,
SETTLEMENT AGREEMENT
AND RELEASE AND WAIVER
OF CLAIMS.
AQUIS COMMUNICATIONS GROUP, INC.
A Delaware corporation f/k/a/ as BAP
ACQUISITION CORP.,
Respondent.
- ------------------------------------------
SETTLEMENT AGREEMENT AND RELEASE AND WAIVER OF CLAIMS
THIS SETTLEMENT AGREEMENT AND RELEASE AND WAIVER OF CLAIMS, dated as of
April 4, 2000 (hereinafter "Agreement"), is made and entered into by and between
Aquis Communications Group, Inc. ( "Respondent") and John X. Adiletta
("Claimant"). Respondent and Claimant may also be referred to collectively as
the "Parties."
W I T N E S S E T H
WHEREAS, Claimant has filed a Demand for Arbitration and Statement of Claim
(above-captioned) and has initiated an arbitral proceeding which has alleged
among other things, claims for the alleged breach of an employment agreement,
claims for wrongful discharge and claims for alleged lost stock options and
fringe benefits (the "Arbitration");
WHEREAS, Respondent does not admit to any acts of wrongdoing or liability
to Claimant, and specifically denies all allegations contained therein, and
<PAGE>
WHEREAS, Respondent and Claimant desire to enter into a full and complete
settlement of ALL differences and outstanding claims between them, not only of
claims that are the subject of the Demand For Arbitration and Statement of
Claim, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and intending to be legally bound hereby, it is agreed as follows:
1. A. As its consideration for this Agreement, Respondent shall pay
Claimant the sum of One Hundred Thousand Dollars ($100,000.00) (hereinafter the
"Settlement Amount"). The parties intend and agree that the Settlement Amount is
to be allocated as follows: Fifty Thousand Dollars ($50,000.00) for alleged
emotional pain and suffering and the other Fifty Thousand Dollars ($50,000.00)
as damages on account of alleged breach of contract. The Settlement Amount shall
be paid as follows: A certified check in the amount of Twenty-Five Thousand
Dollars ($25,000.00) of the Settlement Amount shall be made payable to "Camhy
Karlinsky & Stein LLP as attorneys for John X. Adiletta," and shall be delivered
to Claimant's counsel by overnight mail so as to be received no later than the
third (3rd) day after the Effective Date of this Agreement subject to the
conditions set forth in this Agreement. The remaining seventy-five Thousand
Dollars ($75,000.00) of the Settlement Amount shall be applied to the principal
balance of the New Promissory Note (defined in paragraph 1.C. below) such that
the amount of indebtedness under the New Promissory Note shall be Fifty Thousand
Dollars ($50,000.00) upon the Effective Date of this Agreement. The entire
Settlement Amount is a sum of money the Claimant is entitled to receive only by
virtue of the settlement of pending litigation.
B. As further consideration, Respondent shall issue such number of shares
(the "Settlement Shares") of restricted common stock of the Respondent, par
value $.01 per share (the
<PAGE>
"Common Stock"), upon the expiration of the Effective Date with no revocation,
to the Claimant with an aggregate market value of Four Hundred Thousand Dollars
($400,000.00), such valuation to be based upon the average of the high and low
bid and asked price of the Common Stock on the NASDAQ SmallCap Market on the
date of this Agreement (without discount relating to their restricted nature).
Claimant represents to the Respondent (x) that he is an "accredited investor"
(as such term is defined in Rule 501 under the Securities Act of 1933, as
amended (the "Securities Act")), (y) that he is familiar with the business and
operations and financial condition of the Respondent and is capable of making an
informed decision with respect to a decision to accept the Settlement Shares as
consideration for this Agreement, and (z) is acquiring the Settlement Shares for
investment purposes and not with a view to the distribution thereof.
Certificates representing the Settlement Shares shall be issued with an
appropriate restrictive legend pursuant to the Securities Act, and shall be
delivered to Claimant by overnight mail no later than the third (3rd) day after
the Effective Date of this Agreement. Respondent covenants that (i) Respondent
will file a Registration Statement under the Securities Act as soon as
practicable with respect to the Settlement Shares and all of the shares of
common stock underlying the Settlement Options (defined in paragraph 1.D.
below), (ii) that said shares shall be in the next Registration Statement filed
after the date of this Agreement by Respondent with the Securities and Exchange
Commission, and that Respondent will not file any Registration Statement unless
it includes said shares, (iii) Respondent will keep the Registration Statement
current for not less than one (1) year, and (iv) Respondent shall otherwise
subject such shares to the registration rights previously granted to Claimant in
a certain Registration Rights Agreement, dated as of March 31, 1999, which is
incorporated herein by reference, and the terms and conditions thereof (except
as modified herein).
<PAGE>
C. As further consideration, the Respondent agrees to release the
indebtedness reflected in the Promissory Note dated December 1998 (the "Prior
Promissory Note") and which is secured by shares of Common Stock in the monetary
amount of Two Hundred Forty Thousand Dollars ($240,000.00), as well as any
interest accrued to the Effective Date, and to reduce such indebtedness, to One
Hundred and Twenty-Five Thousand Dollars ($125,000). Respondent shall terminate
any security interest in the original promissory note. The parties agree that
simultaneous with the execution of this Agreement, the Claimant will sign a new
Promissory Note (hereinafter the "Note")"reflecting the same terms and
conditions as the note referenced herein in the amount of One Hundred and
Twenty-Five Thousand Dollars ($125,000.00). Such Note shall be payable at the
earlier of (x) thirty (30) days after the effectiveness of a registration
statement under the Securities Act registering the resale of the Settlement
Shares, or (y) six months after the Effective Date of this Agreement. Respondent
shall not report as income taxable to Claimant an amount in excess of One
Hundred and Fifteen Thousand Dollars ($115,000.00) attributable to the
transactions contemplated by this section 1.C. Respondent will surrender the
Prior Promissory Note by sending it to Claimant by overnight delivery so that it
is received no later than five (5) business days after receipt of the Note
executed by Claimant. If the Prior Promissory Note can not be located,
Respondent will provide an affidavit to that effect. Respondent represents and
warrants that the Prior Promissory Note has not been pledged, hypothecated,
assigned or otherwise transferred to an unrelated third-party.
D. As further consideration, the parties agree that of the options to
purchase Common Stock previously issued to the Respondent, Fifty-Five Thousand
(55,000) options ("Settlement Options") shall become immediately vested at an
exercise price of $1.12 per share. The Settlement Options shall be the subject
of a written option grant, a copy of which is annexed
<PAGE>
hereto and incorporated hereby as Exhibit "A." The written Option Agreement
shall be executed and delivered to the Claimant no later than two (2) business
days after the Effective Date. Respondent hereby waives all other conditions of
its current stock option plan that would prohibit the Claimant from entitlement
to such shares or to the exercise thereof consistent with this section 1.D.
Claimant hereby acknowledges that all remaining options previously granted to
him have been terminated and are null and void.
E. Claimant will receive appropriate tax documentation for the
consideration received hereunder, which documentation shall have been reviewed
by Claimant's counsel prior to the execution of this Agreement. Claimant
acknowledges that Respondent's foregoing consideration represents a full and
complete settlement of the claims and allegations referenced above. Claimant
further acknowledges that the foregoing consideration provided by Respondent in
exchange for his waiver of claims and other covenants and promises as outlined
below is in addition to anything of value to which he is already entitled.
2. As a material inducement for Respondent to enter into this Agreement,
Claimant hereby agrees, acknowledges and promises to forego and waive any and
all rights he may have to file a claim, action, complaint, controversy, cause of
action, lawsuit, charge, complaint, suit, demand or petition ("claim" or
"claims") in a court of law or any other tribunal against Respondent,
Respondent's owners, stockholders, predecessors, successors, assigns, agents,
directors, officers, current and former employees, representatives, attorneys,
divisions, groups, subsidiaries, affiliates and parent companies, as well as any
parent companies' owners, stockholders, predecessors, successors, assigns,
agents, directors, officers, current and former employees, representatives,
divisions, groups, subsidiaries and affiliates, and all persons acting by,
through, under, or in concert with any of them, or any of them (collectively,
"Releasees"), for any rights,
<PAGE>
claims or entitlements Claimant claims to have against Respondent and/or
releasees, known and/or unknown, choate and/or inchoate, which Claimant may now
have, own, or hold, or claim to have, own or hold, or which Claimant at any time
heretofore had, owned or held, or claimed to have, owned, or held, or which
Claimant at any time may have, own, or hold, or claim to have, own or hold
against Respondent and/or releasees, from the beginning of time to the Effective
Date of this Agreement, by reason of any claims arising from or related to
Claimant's employment relationship with Respondent or otherwise, any affiliate
of Respondent and/or releasees, and separation of any employment relationship
and any matters or allegations which are the subject matter of the
aforementioned allegations and contentions or otherwise, including any claims
arising from any alleged violation by releasees of any federal, state or local
statutes, regulations, ordinances or common law causes of action in law and in
equity (and all associated claims for attorneys' fees), including but not
limited to:
A. the Federal Age Discrimination in Employment Act of 1967, as amended;
B. Title VII of the Civil Rights Act of 1964, as amended;
C. 42 U.S.C. Section 1981, as amended;
D. the Federal Equal Pay Act of 1963;
E. the Federal Employee Retirement Income Security Act of 1974, as amended;
including but not limited to, Section 510 claims for discrimination;
F. the Americans With Disabilities Act, as amended;
G. the Family and Medical Leave Act;
H. Executive Order 11246 (applicable to Federal Government contractors and
subcontractors);
I. the Vietnam-Era Veteran's Readjustment Assistance Act of 1974 (applicable
to Federal Government contracts and subcontractors);
J. the Rehabilitation Act of 1973 (applicable to Federal Government contracts
and subcontractors);
<PAGE>
K. the Immigration and Nationality Act, as amended;
L. the Uniform Services Employment and Reemployment Rights Act of 1994;
M. the New Jersey Law Against Discrimination, the New Jersey Conscientious
Employee Protection Act, the New Jersey Family Leave Act, the New Jersey
Workers' Compensation Act, the New Jersey State Wage and Hours law, the New
Jersey Political Activities of Employees law, the New Jersey Jury Duty
Employment Protection law, the New Jersey Lie Detector Test law, the New
Jersey Tobacco Use law, the New Jersey Genetic Testing law;
N. Any Federal, State or local law, rule, statute, ordinance, regulation,
executive order or guideline, including, but not limited to, those laws
specifically described above;
O. Any oral or written contract of employment with Respondent, express or
implied, or any oral or written agreement, express or implied, purporting
to establish terms and conditions of employment or addressing termination
of employment; and
P. Any other Federal, State or local common-law causes of action related to
Claimant's employment with Respondent or separation from employment with
Respondent.
Claimant acknowledges and agrees that this release specifically includes
and resolves any and all claims (in addition to those above) for related costs
and/or attorneys' fees.
3. This Agreement and the releases hereunder are without prejudice to (i)
the Parties' right to enforce the terms and conditions of this Agreement, and
(ii) Claimant's claims for entitlement to pension and welfare benefits
(including but not limited to any monies in Respondent's 401K plan) under either
state or Federal law, and all rights to COBRA coverage (under the terms of that
statute).
4. Claimant acknowledges that he has not heretofore filed any claims
against Releasees in a court of law or other tribunal other than those claims
covered by the above captioned action. To the extent Claimant has previously
filed other claims, he agrees to take all steps necessary to dismiss that action
with prejudice within ten (10) calendar days of signing this Agreement and
agrees that claims raised therein are released and waived by virtue of this
Agreement. Except as
<PAGE>
required by law, Claimant further agrees that no other person, organization or
entity acting on his behalf and/or with his consent shall file such a claim
against Releasees.
5. Respondent represents that it has Director's and Officer's liability
insurance that provides coverage for covered events during the time of the
Claimant's tenure with the Respondent as an Officer, and/or Director. The
Respondent also represents that its Certificate of Incorporation provides for
the indemnification of Officers and Directors under circumstances stated
therein. The Respondent agrees that it will not take any action to abrogate any
rights or privileges that the Claimant currently enjoys under any Director's and
Officer's Liability Policy or Certificate of Incorporation relating to the issue
of defense and/or indemnification and that it will maintain comparable insurance
for a period of no less than three (3) years from the Effective Date of the
Agreement. Claimant also represents that he will abide by all conditions
precedent or obligations thereunder in order to avail himself of such coverage
and/or such defense and indemnification. Except as heretofore provided, it is
the intent of this paragraph that the Claimant stand in no better or no worse
position in terms of defense and indemnification vis-a-vis others that were
Directors and Officers during the Claimant's tenure in such roles with the
Respondent.
6. Respondent, on behalf of itself, the Releasees, their collective
predecessors, successors and assigns, hereby unconditionally releases,
discharges and acquits Claimant, his successors, heirs, executors,
administrators, and assigns from all actions, claims, causes of action, charges,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, demands, or any other type
of relief of any nature whatsoever, whether known or unknown, whether statutory
or common law, whether federal, state, or local, which the
<PAGE>
Respondent, the Releasees or any of them, has asserted or could have asserted,
now has, or ever had, against Claimant, his successors, heirs, executors,
administrators, and assigns from the beginning of the world to the Effective
Date. The paragraph is not intended to release personal, non-employment related
claims of the current and/or former owners, stockholders, directors, officers or
employees.
7. It is the purpose of the mutual waiver and release paragraphs of this
Agreement for the parties to effect a full general release of each other, except
with respect to specifically stated exceptions or obligations stated hereunder.
8. Should Claimant file a claim against Releasees with an agency or
tribunal other than a court of law which claim arose prior to or on the date
Claimant signs this Agreement and/or which claim related in any way to
Claimant's employment with Respondent, separation from employment with
Respondent and/or any matters or allegations which are the subject of the
aforementioned allegations and contentions or otherwise, Claimant agrees to
irrevocably and unconditionally release, acquit, and forever discharge Releasees
from any and all liability which may result from that claim (including
attorney's fees, costs actually incurred, and liquidated damages), of any nature
whatsoever, and he will not participate in any recoveries which may result from
that claim. This release includes, but is not limited to, any claims arising
from any alleged violation by Releasees of any federal, state or local statutes,
regulations, ordinances or common law causes of action in law and in equity,
including but not limited to, those causes of action listed above.
9. Claimant acknowledges that he has not heretofore filed any such claims
against Releasees, and Respondent acknowledges that it has not heretofore filed
any claims against Claimant. To the extent Claimant has previously filed such a
claim, Claimant agrees to release,
<PAGE>
acquit and forever discharge the Releasees from any and all liability which may
result from that claim, of any nature whatsoever, and will not participate in
any recoveries which may result from that claim. To the extent Respondent has
previously filed such a claim, Respondent agrees to release, acquit and forever
discharge Claimant from any and all liability which may result from that claim,
of any nature whatsoever, and will not participate in any recoveries which may
result from that claim.
10. Claimant agrees that he will be responsible for any income tax
liability which may be imposed on the receipt of consideration provided
hereunder including the Settlement Amount. Claimant also agrees to indemnify
Respondent against and hold Respondent harmless from any and all liability for
withholding taxes imposed by any federal, state or local taxing authority, as
well as liability for any fines, penalties and interest which may be imposed on
Respondent on the consideration including, the Settlement Amount, in the event
of such determination by any taxing authority.
11. Claimant agrees that he will not voluntarily assist others in bringing
any type of claims against any of the Releasees, involving any matter allegedly
occurring and/or occurring in the past up to the date of this Agreement, or
involving and based upon any claims which are the subject of this Agreement,
unless otherwise permitted or required by law or legal process (including
subpoenas). Claimant acknowledges and agrees that his employment with Respondent
has ended, that he will never knowingly apply for employment with Respondent or
any subsidiary or affiliate and that he will not be so employed or have any
business relationship with Respondent, unless requested to do so by the
Respondent. Claimant further agrees that he is waiving any claim which he may
have to reinstatement with Respondent under any contractual, statutory or common
law cause of action. Claimant and Respondent (on behalf of itself and its
<PAGE>
Managerial Level employees, and Directors ), agrees that each shall not defame,
slander, or libel each other. Further, the Claimant agrees to assist the
Respondent by making himself reasonably available and by complying with the
reasonable requests of Respondent and Respondent's counsel, in the event that
Respondent needs his testimony or other assistance while defending any claim,
action or lawsuit brought by or against the Respondent or its affiliates,
subsidiaries, employees, officers and directors, concerning any matter about
which the Claimant has knowledge provided that Respondent shall pay for all
reasonable disbursements approved in advance, and shall pay Claimant a per diem
rate of $1,500 for his time spent with respect to assistance. Respondent also
agrees to pay reasonable attorney's fees for Claimant's counsel should separate
counsel be reasonably necessary.
12. For and in consideration of the mutual covenants and promises contained
herein, during the term of this Agreement, and for a period of five (5) years
thereafter, neither Claimant nor any family member (defined for this purpose to
include his spouse and children) or company, partnership or trust in which
Claimant (or such family member) owns five (5%) percent or more of its equity or
voting interests or for which Claimant serves as an employee, agent, officer,
director, or partner will: (i) for the purposes of subparagraphs (ii) or (iii)
hereafter, acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights or options to acquire any voting securities of Respondent in
excess of 14.9% of the Respondent's issued and outstanding voting securities;
(ii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are interpreted in the proxy
rules of the Securities and Exchange Commission), or seek to advise or influence
any person or entity with respect to the voting of any voting securities of
Respondent, or (iii) form, join or in any way participate in a "group" within
the meaning of
<PAGE>
Section 13 (d) (3) of the Securities Exchange Act of 1934 with respect to any
voting securities of Respondent for the purpose of seeking to control the
management, Board of Directors or policies of Respondent. Further, the parties
acknowledge that Respondent would not have an adequate remedy at law for money
damages in the event that this covenant were not performed in accordance with
its terms and therefore Claimant agrees that Respondent shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity.
13. This Agreement shall not in any way be construed as an admission by
Respondent of any acts of wrongdoing whatsoever against Claimant or any other
person, and Respondent specifically disclaims any liability to Claimant or any
other person, on the part of itself, its affiliates, its officers, employees,
agents or parents.
14. Claimant represents that he has not heretofore assigned or transferred,
or purported to assign or transfer, to any person or entity, any claim or any
portion of a claim covered by this Agreement.
15. Claimant represents and acknowledges that in executing this Agreement
he does not rely, and has not relied, upon any representation or statement made
by Respondent, or any of the Releasees or their agents, representatives or
attorneys with regard to the subject matter, basis, content or effect of this
Agreement or otherwise.
16. Claimant acknowledges that prior to the execution of this Agreement, he
sought the advice and counsel of his attorney regarding the contents of this
Agreement and that he was advised to do so in writing. Claimant acknowledges
that he has entered into this Agreement knowingly, voluntarily and of his own
free will.
<PAGE>
17. Claimant acknowledges that he has been given a reasonable period of
time of approximately twenty-one (21) days in which to consider the terms of
this Agreement . To the extent Claimant wishes to execute this Agreement prior
to the conclusion of the twenty-one (21) day period, Claimant acknowledges that
he will only do so in a knowing and voluntary manner and of his own free will.
18. Claimant acknowledges that for a period of seven (7) days following the
execution of this Agreement, he may revoke the Agreement and the Agreement shall
not become effective or enforceable until the revocation period has expired
("Effective Date"). Notice of Revocation must be given to Ginger D. Schroder at
Buchanan Ingersoll, P.C., 268 Main Street, Suite 201, Buffalo, New York 14202.
Claimant acknowledges that he shall not receive any of the benefits or
consideration provided in this Agreement until the seven day revocation period
has expired and the Agreement has not been revoked and all other conditions to
payment of the Settlement Amount and other consideration have been satisfied.
19. The parties agree that any changes to this Agreement, material or
immaterial, will not restart the running of the twenty-one (21) day period
referred to above. If Claimant revokes this Agreement, it shall be null and void
and the obligations or entitlements of both parties under this Agreement shall
be eliminated.
20. This Agreement shall be binding upon Claimant and upon his heirs,
administrators, representatives, executors, successors and assigns, and shall
inure to the benefit of Respondent and any of the Releasees and each of them,
and to their successors and assigns.
21. This Agreement is made in the State of New Jersey and shall in all
respects be interpreted, enforced and governed under the laws of said State,
without regard to its choice of
<PAGE>
law provisions, as well as the laws of the United States of America. The
language of all parts of this Agreement shall in all cases be construed as a
whole and according to its fair meaning.
22. Should any word, phrase, sentence, paragraph, clause or provision of
this Agreement be declared or be determined by any court or other tribunal to be
illegal or invalid, the validity of the remaining parts, terms or provision
shall not be affected thereby and said illegal or invalid part, term, or
provision shall be deemed not to be a part of this Agreement.
23. As used in this Agreement, the singular or plural shall be deemed to
include the other whenever the context so indicates or requires.
24. The Parties hereto shall take such further action and execute such
further instruments or documents as may be reasonably necessary to effectuate
the purpose and intent of this Agreement.
25. This Agreement sets forth the entire Agreement among the parties
hereto, and fully supersedes any and all prior Agreements or understandings
between the parties hereto pertaining to the subject matter hereof. The failure
of either Respondent or Claimant to require the performance of any term or
obligation of this Agreement or the waiver by either Respondent or Claimant of
any breach of this Agreement, shall not prevent any subsequent enforcement of
such term or obligation and shall not be deemed a waiver of any subsequent
breach. No modification or waiver of any provision of this Agreement shall be
effective unless in writing and signed by Respondent and Claimant.
26. All notices, requests, demands or other communications hereunder must
be in writing and shall be deemed to have been duly given if delivered by hand,
mailed within the continental United States by certified or registered mail,
postage prepaid, return receipt requested, or by a
<PAGE>
reputable overnight courier such as federal express, addressed to the party to
whom the notice is directed at the "Notice Address" of such party. The Notice
Address of each party is:
If to Respondent: Aquis Communications Group, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
with a copy to: Buchanan Ingersoll, P.C.
268 Main Street, Suite 201
Buffalo New York, 14202
Attn: Ginger D. Schroder
AND
Buchanan Ingersoll, P.C.
One Oxford Centre, 20th Floor
301 Grant Street
Pittsburgh, PA 15219-1410
Attn: Bryan Lawrence
If to Claimant: John X. Adiletta
42 Timber Rock Trail
Bernardsville, New Jersey 07924
with a copy to: Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
Attn: Martin E. Karlinsky, Esq.
27. This Agreement may be executed through the use of separate signature
pages in multiple originals and in counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
Agreement, binding on all parties, notwithstanding that all parties are not
signatories to the same counterpart. The parties shall exchange original signed
Agreements as soon as practicable following delivery and execution as aforesaid.
PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES
A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS
<PAGE>
AQUIS COMMUNICATIONS GROUP, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
ATTORNEYS FOR RESPONDENT
By:
-------------------------------
Ginger D. Schroder
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
268 Main Street - Ste. 201
Buffalo, NY 14202
(716) 853-2332
CLAIMANT JOHN X. ADILETTA
Date:
------------------------ ----------------------------------
ATTORNEY(S) FOR CLAIMANT
----------------------------------
Tal B. Marnin, Esq.
CAMHY KARLINSKY & STEIN LLP
Attorneys for Claimant
16th Floor
1740 Broadway
New York, N.Y. 10019
(212) 977-6600
<PAGE>
STATE OF NEW YORK }
ss.
COUNTY OF NEW YORK }
I HEREBY CERTIFY that on this day before me, an officer duly qualified to
take acknowledgments, personally appeared Claimant, JOHN X. ADILETTA, personally
known to me or who has produced (type of identification) and has
acknowledged before me that he executed the foregoing freely and voluntarily
for the purpose therein expressed, who did take an oath.
WITNESS my hand and official seal at said County and State, this __ day of
____________, 2000.
-------------------------------
-------------------------------
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Registration Nos. 333-07737 and 333-24355) and on Form
S-8 (Registration No. 333-11141) of Aquis Communications Group, Inc. of our
report dated March 28, 2000, except for Note 22 for which the date is April 12,
2000 and our report dated February 12, 1999 on Bell Atlantic Paging, Inc.
relating to the financial statements which appear in this Form 10K.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 973
<SECURITIES> 0
<RECEIVABLES> 5,872
<ALLOWANCES> 939
<INVENTORY> 228
<CURRENT-ASSETS> 7,406
<PP&E> 17,561<F1>
<DEPRECIATION> (7,100)<F1>
<TOTAL-ASSETS> 39,324
<CURRENT-LIABILITIES> 11,300
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 13,070
<TOTAL-LIABILITY-AND-EQUITY> 13,070
<SALES> 791
<TOTAL-REVENUES> 30,368
<CGS> 947
<TOTAL-COSTS> 36,424
<OTHER-EXPENSES> 1,692
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,004
<INCOME-PRETAX> (10,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,879)
<EPS-BASIC> (0.76)
<EPS-DILUTED> (0.76)
<FN>
<F1>Fixed assets are reported net of accummulated depreciation in the balance
sheet.
</FN>
</TABLE>
