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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 31, 2000
AQUIS COMMUNICATIONS GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-13002 22-3281446
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
1719A Route 10, Suite 300
PARSIPPANY, NJ 07054
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(Address of principal executive office)
Registrant's telephone number, including area code: (973) 560-8000
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(Former name or former address, if changed since last report)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF ASSETS OF SOURCEONE WIRELESS INC., SOURCEONE WIRELESS, L.L.C. AND
SOURCEONE WIRELESS II, L.L.C.
On January 31, 2000 (the "Closing Date"), Aquis Communications Group,
Inc. (the "Company"), through its wholly-owned subsidiary, Aquis Communications,
Inc. (n/k/a Aquis Wireless Communications, Inc.), a Delaware corporation
("Sub"), 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 "Paging Systems"). The 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"). The
Sub 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 "Purchase Agreement"). Due to the Debtors' insufficient
resources to continue operations of the Paging Systems, the Sub and SourceOne
entered into an Agreement Pending Purchase Closing dated as of August 2, 1999
(the "Management Agreement"), pursuant to which the Sub agreed to manage the
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 Purchase Agreement, as amended, authorizing the Debtors to execute and
deliver the 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 Purchase Agreement.
The Company acquired the Paging Systems and associated FCC licenses as
part of the asset purchase transaction. The Company intends to devote the assets
acquired to continue to operate the Paging Systems.
PURCHASE PRICE
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.
The Company and the secured creditors of the Debtors agreed upon the Purchase
Price in an arm's length negotiation.
DESCRIPTION OF SECURITIES ISSUED IN THE PURCHASE TRANSACTION
As part of the Purchase Price, the Company issued 15,000 shares of
Preferred Stock to SourceOne. The holders of the Preferred Stock will be
entitled to receive, prior to the payment of dividends or any other
distributions on any of the Company's common stock, par value $.01 per share
("Common Stock"), or subsequently created classes or series of capital stock
either specifically ranking by their terms junior to the Preferred Stock or not
specifically ranking by their terms senior to or on parity with the Preferred
Stock: (1) preferred dividends ("Dividends") which will begin to accrue at a
rate of $7.50 per share per annum of the Preferred Stock commencing January 31,
2000, the date of issuance of the Preferred Stock; and (2) in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
a liquidation price (the "Liquidation Price") equal to $100 per share of
Preferred Stock, plus all Dividends accrued but unpaid thereon. With respect to
payment of dividends or distributions of assets upon liquidation, dissolution or
winding up of the Company, the Preferred Stock shall rank on parity with any
subsequently created class or series of capital stock of the Company that by its
terms specifically ranks on parity with the Preferred Stock, and shall rank
junior to any subsequently created class or series of capital stock of the
Company specifically ranking by its terms senior to the Preferred Stock.
Dividends on the Preferred Stock shall be cumulative and shall accrue
without interest from the date of issuance. Dividends on the Preferred Stock
shall be payable in cash on the Redemption Date (as such term is defined below).
The Corporation has the right to redeem the Preferred Stock, in whole
or in part, by giving written notice (a "Redemption Notice") to the holders
thereof not less than thirty (30) nor more than sixty (60) days prior to the
redemption date specified in such notice (the "Redemption
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Date"). The redemption price of each share of Preferred Stock is equal to $100,
plus all Dividends accrued but unpaid thereon (the "Redemption Price"). Any
shares of Preferred Stock outstanding as of January 31, 2002 shall be redeemed
by the Company at the Redemption Price.
Holders of the Preferred Stock are not entitled to any voting rights
except as otherwise required by law or hereinafter described. On all matters on
which the holders of the Preferred Stock are entitled to vote by law, the
holders shall be entitled to one vote per share of Preferred Stock, voting
separately as a single class, and the presence, in person or by proxy, of the
holders of a majority of the outstanding shares of Preferred Stock shall
constitute a quorum. In the event that the Company fails to pay the Dividends
due on the Redemption Date, the holders of the Preferred Stock, voting
separately as a class, shall be entitled to elect two additional members of the
Company's board of directors at any annual meeting, at any special meeting
called for such purpose or by the written consent of holders of a majority of
the outstanding shares of Preferred Stock. The term of office of the two
directors elected by the Preferred Stockholders shall automatically terminate
upon the date on which any such past due Dividends have been paid in full.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF ACQUIRED BUSINESS
It is impracticable at the time of the filing of this Current
Report to provide the historical financial information for SourceOne required by
Regulation S-X. Accordingly, the Company will file the required historical
financial statements under cover of an Amendment to this Current Report on Form
8-K as soon as practicable, but in any event, not later than 60 days after the
date on which this Current Report must be filed with the Commission.
(b) PRO FORMA FINANCIAL STATEMENTS OF BUSINESSES
It is impracticable at the time of the filing of this Current
Report to provide the PRO FORMA financial information for SourceOne required by
Regulation S-X. Accordingly, the Company will file the required PRO FORMA
financial statements under cover of an Amendment to this Current Report on Form
8-K as soon as practicable, but in any event, not later than 60 days after the
date on which this Current Report must be filed with the Commission.
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(c) Exhibits (referenced to Item 601 of Regulation S-K)
2.1 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 Amendment to Asset Purchase Agreement dated as of November 15,
1999
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.
2.4 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
4.1 Certificate of Designation, Preferences and Rights of 7 1/2%
Redeemable Preferred Stock of Aquis Communications Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 15, 2000 AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ D. Brian Plunkett
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D. Brian Plunkett
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number
(Referenced to Item
601 of REG. S-K)
2.1 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 Amendment to Asset Purchase Agreement dated as of November 15,
1999
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.
2.4 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
4.1 Certificate of Designation, Preferences and Rights of 7 1/2%
Redeemable Preferred Stock of Aquis Communications Group, Inc.
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AQUIS COMMUNICATIONS, INC., AS PURCHASER
AND
SOURCEONE WIRELESS, INC.
SOURCEONE WIRELESS, L.L.C. AND
SOURCEONE WIRELESS II, L.L.C., AS SELLERS
DATED AS OF AUGUST 2, 1999
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This ASSET PURCHASE AGREEMENT (together with Schedules and
Exhibits, "AGREEMENT") is made as of this 2nd day of August 1999 by and between
Aquis Communications, Inc., a Delaware Corporation ("PURCHASER") and SourceOne
Wireless Inc. ("SOWI"), SourceOne Wireless, L.L.C. ("LLC"), SourceOne Wireless
II, L.L.C. ("LLC II, together with SOWI and LLC, "SELLERS"). SOWI, LLC, LLC II,
and Aquis may sometimes be referred to individually as "PARTY" and collectively
as the "PARTIES." SOWI, LLC, and LLC II may sometimes be referred to
collectively as "SOURCEONE."
RECITALS
A. SourceOne currently operates Commercial Mobile Radio Service
("CMRS") one-way paging systems ("SYSTEMS") on multiple frequencies in numerous
geographic areas throughout the United States pursuant to licenses ("LICENSES")
issued to LLC II by the Federal Communications Commission ("FCC") for provision
of service to subscribers.
B. The largest of these Systems is a one-way paging system ("MIDWEST
SYSTEM") operating pursuant to licenses ("MIDWEST LICENSES") issued by the FCC
in the Paging And Radiotelephone Service on the frequency 931.1875 MHz in the
midwest United States. The Midwest System comprises (a) seventy-five (75)
transmitter sites ("MIDWEST TRANSMITTER SITES") through which SourceOne provides
paging service to certain Subscribers ("MIDWEST SUBSCRIBERS") and (b) fifty-two
(52) other transmitter sites ("OTHER MIDWEST TRANSMITTER SITES"). A list of the
Midwest Transmitter Sites and Other Midwest Transmitter Sites that make up the
Midwest System and the associated Midwest Licenses is attached as Schedule A to
the Management Agreement (defined below).
C. The remaining Systems ("OTHER SYSTEMS") authorized to SourceOne
pursuant to FCC Licenses issued to LLC II on other frequencies ("OTHER
LICENSES") provide service to other Subscribers ("OTHER SUBSCRIBERS").
D. SourceOne also provides paging service to additional subscribers
("ADDITIONAL SUBSCRIBERS") in various geographic areas on systems not licensed
to SourceOne, including through resale and other agreements ("ADDITIONAL
SUBSCRIBER AGREEMENTS"). The term "SUBSCRIBERS" as used hereinafter will be
defined to include Midwest Subscribers and Additional Subscribers.
E. LLC II is wholly owned and controlled by LLC and LLC is, in turn,
controlled by SOWI.
F. On April 29, 1999, SOWI and, on July 2, 1999, LLC (together with
SOWI, "DEBTORS") filed voluntary petitions for relief in the Bankruptcy Court
for the Northern District of Illinois ("BANKRUPTCY COURT") under chapter 11 of
title 11 of the United States Code ("BANKRUPTCY CODE"). Debtors have continued
in the possession of their assets and the management of their business pursuant
to Bankruptcy Code sections 1107 and 1108.
G. This Agreement sets forth the terms and conditions upon which,
subject to Bankruptcy Court approval, Sellers will sell, transfer, assign, and
deliver to Purchaser, and upon which Purchaser will purchase and acquire from
Sellers the Transferred Assets (defined below).
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H. The Closing is conditioned upon, among other things, FCC consent to
assignment of the Midwest Licenses from LLC II to Purchaser pursuant to
applications (together "ASSIGNED APPLICATION") that must be filed with,
processed, and granted by the FCC ("FCC APPROVAL").
I. Pending FCC Approval, and subject to Bankruptcy Court approval of
the Management Agreement, Aquis will operate the Midwest Business (as defined in
the Management Agreement) pursuant to (a) a Special Temporary Authority ("STA")
to acquire de facto control of the Midwest System and (b) a management agreement
("MANAGEMENT AGREEMENT"), substantially in the form attached as Exhibit A.
THE PARTIES AGREE THEREFORE AS FOLLOWS:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 TRANSFERRED ASSETS.
On the terms and subject to the conditions of this Agreement, at the
Closing, Sellers agree to sell, transfer, assign, and deliver to Purchaser and
Purchaser agrees to purchase from the Sellers all of each Seller's right, title,
and interest in and to all of the rights, properties, and assets specified in
this section 1.1 ("TRANSFERRED ASSETS") other than the Excluded Assets:
1.1.1 MIDWEST SYSTEM ASSETS. All Midwest System Assets as defined in
the Management Agreement, other than those specified in Management Agreement
sections 1.1.9 (Retained Employees), 1.1.10 (Bank Accounts), and 1.1.13 (right
to operate).
1.1.2 - 1.1.21 [Intentionally Left Blank]
1.1.22 FCC LICENSES. The Midwest Licenses specified on Schedule A
attached to the Management Agreement.
1.1.23 PREPAID EXPENSES. All prepaid expenses of Sellers as will be
specified.
1.1.24 ACTIONS. All claims, causes of action, and choses in action
related to the Transferred Assets except as provided in section 1.3(i) of this
Agreement.
1.1.25 GOODWILL. All goodwill of Sellers related to the Midwest
Business.
1.1.26 TELEPHONE NUMBERS. The telephone numbers that have been assigned
to or associated with individual paging units (or are available for such
assignment to or association with individual paging units) as part of the
Midwest Business ("TELEPHONE NUMBER INVENTORY") and office telephone and other
utility services related to the Midwest Business.
1.1.27 OTHER SUBSCRIBER ASSETS. All Other Subscriber Assets as defined
in the Management Agreement.
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1.1.28 SCHEDULES. The Transferred Assets, including prepaid expenses
and Telephone Number Inventory will be set forth in Schedules agreed to and
prepared by the Parties at least ten (10) days prior to Closing.
SECTION 1.2 TRANSFERRED ASSETS FREE AND CLEAR.
All of the Transferred Assets will be transferred by Sellers
and acquired by Purchaser free and clear of all liens, claims, encumbrances or
adverse or third-party interests, or restrictions ("ENCUMBRANCES"). The purchase
of the Transferred Assets will be effective as of the Closing Date.
SECTION 1.3 EXCLUDED ASSETS.
Notwithstanding anything to the contrary herein, from and
after the Closing, (i) Sellers will retain all of their existing right, title,
interest in and to all of its assets that are not identified as Transferred
Assets and (ii) the following are excluded from the sale, transfer, and
assignment to Purchaser (together, "EXCLUDED ASSETS"):
(a) The corporate seals, certificates of incorporation,
articles of organization, operating agreements, minute books, stock books, tax
returns, or other records having to do with the organization of Sellers prior to
the Closing Date.
(b) All books and records related to the Excluded Assets and
Excluded Liabilities and that are not necessary to operate the Midwest Business.
(c) The Tax attributes of Sellers (including any Tax refund or
net operating losses).
(d) Claims, reserves, refunds, and other rights in respect of
insurance policies of Sellers.
(e) All cash, cash equivalents, and cash in transit, as of the
Closing Date, subject to Sellers' obligations under the Management Agreement.
(f) All interests in any limited liability company.
(g) Professional retainers paid by Sellers.
(h) The rights which accrue or will accrue to Sellers under
this Agreement.
(i) All claims and causes of action of Debtors' bankruptcy
estates arising under Bankruptcy Code sections 544, 547, 548, 549, 550, and 553
and claims and causes of action specified on Schedule 1.3(i).
(j) Other Systems and Other Licenses.
SECTION 1.4 ASSUMPTION OF CERTAIN LIABILITIES.
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In addition to the consideration provided for in Section 1.6,
at the Closing, Purchaser agrees to assume and discharge or perform when due the
following obligations and liabilities of Sellers expressly set forth in this
Section 1.4 and no others ("ASSUMED LIABILITIES"):
(a) All liabilities and obligations that accrue or are
required to be performed after the Closing Date pursuant to any unexpired leases
or executory contracts ("SECTION 365 CONTRACTS") that are included among the
Transferred Assets and assumed and assigned under Bankruptcy Code section 365
and in accordance with the Approval Order (defined below). Section 365 Contracts
will be identified prior to Closing and the time to assume and assign Section
365 Contracts will be extended to permit assumption and assignment to Purchaser.
(b) All liabilities and obligations that accrue and are
required to be performed after the Closing Date to the extent related to or
arising out of the ownership or operation of the Transferred Business (defined
below) by Purchaser after the Closing.
(c) All liabilities and obligations of Sellers for deferred
revenue, which are revenues billed or received by Seller for services not yet
rendered as of the Closing Date.
(d) All liabilities with respect to return of or performance
required as a result of Deposits and Other Deposits, as those terms are defined
in the Management Agreement.
(e) If Purchaser retains any of Sellers' employees (who are
Retained Employees under the Management Agreement) after the Closing and the
employment of any of those employees is subsequently terminated without cause
within 45 days after the Closing, then Purchaser agrees to pay that employee
severance compensation equal to 90 days of that employee's salary or
compensation.
SECTION 1.5 EXCLUDED LIABILITIES.
(a) LIABILITIES EXPRESSLY EXCLUDED. Except as expressly
provided by Section 1.4 of this Agreement, Purchaser has not assumed and is not
liable or responsible for any of the liabilities, commitments, or obligations of
Sellers, of any kind or nature whether presently in existence or arising in the
future, including, but not limited to, any obligation or liability arising out
of any Seller's employment or termination of any employee ("EXCLUDED
LIABILITIES").
(b) RESPONSIBILITY OF SELLERS. All Excluded Liabilities are
retained by and remain obligations and liabilities of Sellers. It is expressly
understood and agreed that the Parties intend that Purchaser is not considered
to be a successor to any Seller by reason of any theory of law or equity and
that Purchaser has no liability, except as otherwise expressly provided in this
Agreement, for any liability of any Seller.
(c) CURE AMOUNTS. Sellers will pay all cure amounts owing
under any of the Section 365 Contracts that must be paid as a condition to their
assumption or assignment to Purchaser in the amount that (a) the parties to
those contracts agree or (b) the Bankruptcy Court orders to be paid. If
Purchaser identifies that certain Sellers' contract with MCI Telecommunications
Corp. ("MCI CONTRACT") as a Section 365 Contract to be assumed and assigned to
Purchaser, then Purchaser will pay any cure amounts related to the MCI Contract.
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SECTION 1.6 PURCHASE PRICE.
(a) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for
the Transferred Assets is as follows:
(i) The sum of $4,000,000 ("CASH PAYMENT")
subject to adjustments in accordance with
section 1.6(d), by certified or bank check
or by wire transfer payable to Sellers.
(ii) In addition to the Cash Payment set forth
above, Purchaser will deliver to Sellers
$3,375,000 of Aquis 7.5% Cumulative
Preferred Shares in the form attached as
Exhibit __ (the "AQUIS SHARES) subject to
adjustments in accordance with section
1.6(e).
(b) ALLOCATION OF PURCHASE PRICE. Prior to the Closing, the
Parties will agree to the allocation of the Purchase Price for tax and
accounting purposes. This allocation will also provide that $880,000 of the
Aquis Shares will be allocated to equipment located at Other Midwest Transmitter
Sites.
(c) PRE-CLOSING ESCROW. Concurrent with the execution and
delivery of this Agreement, Purchaser will deposit the sum of $200,000 ("ESCROW
FUND") with the escrow agent under the terms of the Escrow Agreement acceptable
to the Parties. At Closing, the Parties agree to direct escrow agent to pay the
Escrow Fund to Sellers. The Escrow Fund will (i) be part of the Purchase Price
and (ii) reduce the Cash Payment. If this Agreement is terminated without a
Closing, then the Escrow Fund will secure Purchaser's obligations, as manager
under the Management Agreement, to remit the Returned Receivables Amount and the
Returned Other Receivables Amount and to pay Outstanding Expenses, as those
terms are defined in the Management Agreement.
(d) PURCHASE PRICE ADJUSTMENTS. The Purchase Price will be
reduced, first from the Cash Payment and then from the Aquis Shares, by the
following amounts:
(i) The amount by which $7.26 million exceeds
the actual Net Service Revenue on the
Take-Over Date (as defined in the Management
Agreement) due to the termination (voluntary
or involuntary) of Subscribers and Other
Subscribers prior to the Take-Over Date, but
for whom billing had not been terminated by
that date.
For this subsection 1.6(d)(i), "NET SERVICE
REVENUE" means (a) all Sellers' revenues
from paging service, rentals, maintenance,
and related charges, BUT excluding revenues
from sale of pagers, parts, and accessories;
tax refunds, insurance claims, or other
similar refunds or recoveries; and late
charges, MINUS (b) payments to third party
service providers and resellers, including
expenses incurred to bill and collect
amounts owed by users of "calling party
pays" services, and payments for any
dispatch services. A form of the calculation
of Net Service Revenues is attached as
Schedule 1.6.(d).
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(e) OTHER PRICE ADJUSTMENTS. The Sellers' failure to sell,
assign, transfer, and deliver the following Transferred Assets will not be a
basis to terminate this Agreement, but will reduce the Aquis Shares portion of
the Purchase Price by the following amounts:
(i) For an unexpired lease ("SITE LEASE") for
use of an Other Midwest Transmitter Site,
Purchaser may, in its sole and absolute
discretion, require that a Site Lease for an
Other Midwest Transmitter Site be assigned
at Closing and, in that event, Purchaser
agrees to pay one-half of the cure amount
required under Bankruptcy Code section 365
to effect the assignment and the amount of
Purchaser's portion of the cure amount will
be deducted from the Aquis Shares portion of
the Purchase Price.
(ii) For equipment missing from an Other Midwest
Transmitter Site: $18,000 per site.
SECTION 1.7 CLOSING.
The closing of the purchase and sale provided for in this
Agreement will take place at the offices of Phillips Nizer Benjamin Krim &
Ballon LLP, New York, New York, or such other place as the Parties may agree, on
a date not more than five (5) days after the date upon which all of the
conditions precedent to the Closing stated in Article IV have been satisfied in
full and occurs no later than February 28, 2000. (This closing is sometimes
referred to as the "CLOSING," and the time and date of the Closing are sometimes
referred to as the "CLOSING DATE").
SECTION 1.8 DELIVERIES BY SELLERS AT CLOSING.
At the Closing, Sellers will deliver to Purchaser:
(a) TRANSFER DOCUMENTS. Instrument(s) of conveyance or
bills(s) of sale and assumption and assignment agreements in form and substance
reasonably satisfactory to Purchaser.
(b) CLOSING CERTIFICATES. One or more certificates on behalf
of Sellers, dated as of the Closing Date and signed by an officer, certifying
that Sellers have performed and complied with all of the conditions set forth in
Sections 4.1 and 4.2 of this Agreement, and the receipt of all necessary
authorizations and incumbency matters.
(c) APPROVAL ORDER. A certified copy of the Approval Order.
(d) LLC II. Certificates of good standing of LLC II dated
within five (5) days of the Closing Date from the jurisdiction of organization
of LLC II together with certificates bringing down to date the information
contained in each certificate dated not earlier than five days prior to the
Closing Date.
(e) All such other certificates, documents, endorsements,
instruments, and opinions of counsel as Purchaser may reasonably request for the
purpose of (A) vesting in Purchaser good and valid title to the Transferred
Assets, free and clear of all Encumbrances, (B)
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transferring the Section 365 Contracts, and (C) enabling Purchaser to operate
the Midwest Business and the business of providing service to Other Subscribers
using the Other Subscriber Assets (together with the Midwest Business,
"TRANSFERRED BUSINESS").
SECTION 1.9 DELIVERIES BY PURCHASER AT CLOSING.
At the Closing, Purchaser will deliver to Sellers:
(a) CASH CONSIDERATION. The Cash Payment less the Escrow Fund
and the Closing Adjustments, which amount will be paid at the Closing by wire
transfer as directed in writing by Sellers.
(b) AQUIS SHARES. Original stock certificates for the Aquis
Shares, bearing the appropriate legend.
(c) CLOSING CERTIFICATES. One or more certificates on behalf
of Purchaser, dated as of the Closing Date and signed by an officer, certifying
that Purchaser has performed and complied with all of the conditions set forth
in Sections 4.1 and 4.3 of this Agreement, and the receipt of all necessary
authorizations, and incumbency matters.
(d) GOOD STANDING. Certificates of good standing of Purchaser
dated within five (5) days of the Closing Date from the jurisdiction of
organization of Purchaser.
(e) AQUIS SHARES ISSUER. Certified certificate of
incorporation of the issuer of Aquis Shares and certificates, documents,
endorsements, instruments, and opinions of counsel as Sellers may reasonably
request to determine the valid issuance of the Aquis Shares.
SECTION 1.10 REGULATORY OBLIGATIONS.
At Closing, Sellers will confirm in a manner reasonably
satisfactory to Purchaser, that all obligations specified in Sections
6.10(i)-(iv) and (vi) of the Management Agreement that accrue prior to the Take
Over Date ("REGULATORY OBLIGATIONS") have been paid or satisfied. Absent such
confirmation, Purchaser will withhold from the Cash Payment funds sufficient, in
Purchaser's reasonably exercised judgment, to satisfy the unpaid Regulatory
Obligations and the Parties will cooperate and consult with the FCC (or
administrators of the programs governing those Regulatory Obligations) to
determine and pay those obligations from the heldback monies. Promptly after
determination and payment of those Regulatory Obligations, Purchasers will remit
any remaining amount of heldback monies to Sellers. If heldback monies are
insufficient to satisfy those unpaid obligations, then Sellers will pay that
deficiency. Under no circumstances will Purchaser be obligated to pay any
Regulatory Obligations.
SECTION 1.11 FURTHER ASSURANCES.
At any time and from time to time after the Closing, at the
request of any Party and without further consideration, the other Party will
execute and deliver such other instruments of sale, transfer, assignment, and
confirmation and take such action as the requesting Party may reasonably deem
necessary or desirable in order to more effectively transfer and assign the
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Transferred Assets and to effectuate the terms of and transactions contemplated
in this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF SELLERS.
As an inducement for Purchaser to enter into and perform its
obligations under this Agreement, Sellers make the following representations and
warranties to Purchaser. Sellers represent and warrant to Purchaser that each of
the following representations and warranties is correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing with
the same effect as if these representations and warranties had been made at and
as of the Closing Date.
(a) ORGANIZATION. Each Seller is a legal organization, duly
formed, validly existing, and in good standing under the laws of the state of
its organization (except for SOWI due solely to SOWI's failure to pay franchise
taxes), and is licensed or qualified to do business and is in good standing
under the laws of each state in which it operates. Correct and complete copies
of the organizational documents, each as amended to date, of each Seller have
been delivered by each Seller to Purchaser. Such organizational documents are in
full force and effect.
(b) POWER AND AUTHORITY. Subject to the entry of the Approval
Order, each Seller has full and lawful power and authority to execute and
deliver, and to perform its obligations under, this Agreement and to own all of
the Transferred Assets and to carry on the activities of the Transferred
Business as presently conducted and to own, hold, and operate the properties
that it owns and holds. The execution and delivery of this Agreement and the
other agreements, certificates, and documents executed pursuant to this
Agreement by each Seller has been duly authorized, and such agreements,
certificates, and documents are valid and binding upon each Seller in accordance
with their respective terms.
(c) NO CONFLICTS OR VIOLATIONS. Upon entry of the Approval
Order and the grant of the FCC Approval, neither the execution and delivery of
this Agreement by each Seller, nor the performance by each Seller in
consummating the transactions contemplated by this Agreement will, with or
without the giving of notice or passage of time (or both), conflict with,
violate any provisions of, result in the breach of, constitute a default under,
or create or impose any Encumbrance or condition on any Transferred Asset under:
(i) any organizational documents of any Seller, including, as applicable,
certificates of incorporation, articles of organization, by laws, or operating
agreements; (ii) any federal, state, or local state law, ordinance, regulation,
or rule or any order, writ, injunction, judgment, license, franchise, permit, or
decree of any governmental authority or arbitration tribunal by which any Seller
or any Transferred Assets are or may be bound; or (iii) any contract, indenture,
instruments, agreement, mortgage, lease, right or other obligation or
restriction to which any Seller is a party or by which any Seller or the
Transferred Assets are or may be bound.
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(d) GOVERNMENTAL APPROVALS. Except for the FCC Approval and
the Approval Order, no consent, approval, authorization of, or declaration or
filing with any governmental authority or other third party is required in
connection with the (a) execution or delivery of this Agreement by any Seller,
(b) sale of the Transferred Assets and operation of the Transferred Business as
currently operated by Sellers and the continued operation of the Transferred
Business by Purchaser as currently operated, or (c) the consummation by Sellers
of the transactions contemplated by this Agreement.
(e) TITLE TO TRANSFERRED ASSETS. Sellers have good and
marketable title to all Transferred Assets. At the Closing, Purchaser will
acquire good and marketable title to the Transferred Assets, free and clear of
any Encumbrances.
The Transferred Assets other than the Other Midwest
Transmitter Sites (a) constitute all of the properties, assets, and rights that
have been used in the conduct of the Transferred Business and which are
necessary to the operation of the Transferred Business; (b) generate all of
Sellers' Net Service Revenue (as defined in Section 1.6(d)(i) of this
Agreement); and (c) are in compliance with FCC regulations. There are no assets
of Sellers not included in the Transferred Assets other than the Other Midwest
Transmitter Sites which are material to the operation of the Transferred
Business and the absence of which would have a material adverse effect on the
Transferred Business. The Transferred Assets are now and will be at the Closing
Date located at each Seller's places of business where they were previously used
in the operation of the Transferred Business and will not be removed from those
locations unless Sellers receive Purchaser's prior written consent to such
action, which consent is subject to Purchaser's sole and absolute discretion.
(f) MANAGEMENT AGREEMENT REPRESENTATIONS AND WARRANTIES. Each
seller restates and incorporates into this Agreement each representation and
warranty set forth in section 6 of the Management Agreements as if set forth in
full in this Section 2.1.
(g) LIMITED PURPOSE SELLER. LLC II represents that (a) it was
formed for the limited purpose of holding the Licenses, including the Midwest
Licenses, (b) it has not conducted or operated any business, (c) its
organizations documents limit its activities to holding the Licenses, (d) it has
at all time complied with its organizational documents which limit its
activities to holding the Licenses, (e) it has no creditors and does not know of
any claims or liabilities asserted against it. Promptly after the execution of
this Agreement, LLC II will deliver to Purchaser certified copies of its
organizational documents and financial statements acceptable to Purchaser in
support of the representations of this Section 2.1(g).
(h) INVESTMENT INTENT; RESTRICTED SECURITIES. Immediately upon
each Seller's acquiring its percentage of the Aquis Shares, each Seller will
transfer such shares to its creditors pursuant to Bankruptcy Court order. Each
Seller agrees and each creditor will be advised (and the Bankruptcy Court order
will provide) that each acquiror of Aquis Shares is acquiring them solely for
its own account and not with the view to, or for resale in connection with, any
distribution thereof, other than as may be permitted under applicable law
without registration under the Securities Act. Sellers understand (a) that the
Aquis Shares have not been and are not being registered under the Securities Act
by reason of specified exemptions therefrom, which depend upon, among other
things, the bona fide nature of its investment intent
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as expressed herein and as explicitly acknowledged hereby, and (b) that the
Aquis Shares are "Restricted Securities" under the federal securities laws
inasmuch as they are being acquired from Purchaser in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited sets of circumstances. Seller agrees that the Aquis Shares
may not be sold, transferred, offered for sale, pledged, hypothecated, or
otherwise disposed of without registration under the Securities Act except as
may be permitted under applicable law. The Aquis Shares will bear appropriate
legends restricting transfer. Purchaser understands and agrees that delivery of
the Aquis Shares to Sellers creditors pursuant to Bankruptcy Court order will
not constitute a transfer in violation of this Section 2.1(h).
SECTION 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
As an inducement for Sellers to enter into this Agreement and
perform their obligations hereunder, Purchaser makes the following
representations and warranties to Seller. Purchaser represents and warrants to
Sellers that each of the following representations and warranties is correct and
complete as of the date hereof and will be correct and complete as of the
Closing, with the same effect as if said representations and warranties had been
made as of the Closing Date.
(a) ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly formed, validly existing, and in good standing under of the laws of the
State of Delaware and is licensed to do business and is in good standing under
the laws of each state in which it operates. Correct and complete copies of the
Purchaser's organizational documents, each as amended to date, have been
delivered to Sellers. Such organizational documents are in full force and
effect.
(b) POWER AND AUTHORITY. Purchaser has full and lawful
corporate power and authority to enter into this Agreement and purchase the
Transferred Assets.
(c) FORESTALLMENTS. Purchaser is not a party to or subject to
any contract or agreement or any judgment, order, writ, injunction, or decree of
any court or governmental body which will prevent its performance of its
obligations under this Agreement.
(d) AUTHORIZATION. The execution and delivery of this
Agreement and the other agreements, certificates, and documents contemplated by
or referred to in this Agreement have been duly authorized by Purchaser's
directors as required under the laws of the State of Delaware, and no other
corporate action is required for the approval of this Agreement or such other
agreements, certificates, and documents executed and delivered by Purchaser, all
of which are valid and binding upon Purchaser in accordance with their
respective terms.
(e) NO CONFLICTS OR VIOLATIONS. Subject to the conditions of
this Agreement, neither the execution nor delivery of this Agreement, nor the
performance of Purchaser in consummating the transactions contemplated by this
Agreement will conflict with or result in a violation or breach of, or default
under, any terms or provisions of (i) the corporate charter or bylaws of
Purchaser; (ii) any terms or provisions of any agreement or instrument to which
Purchaser is a party or by which it is bound; or (iii) any federal. state or
local law, ordinance,
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regulation, or rule or any order, writ, injunction, judgment, license,
franchise, permit, or decree of any governmental authority or arbitration
tribunal by which Purchaser is or may be bound.
(f) APPROVALS. Except for the FCC Approval, no consent,
approval, or authorization of or declaration or filing with any governmental
authority is required in connection with the execution or delivery of this
Agreement by Purchaser or the consummation by Purchaser of the transactions
contemplated by this Agreement.
(g) FCC QUALIFICATION. Purchaser is legally qualified to hold
the Midwest Licenses.
ARTICLE III
COVENANTS
SECTION 3.1 COVENANTS OF SELLERS.
Except as otherwise consented to by Purchaser, throughout the
period commencing on the date hereof and ending on the Closing Date, Sellers
covenant that they will do the following:
(a) ACCESS. Sellers will give to Purchaser and Purchaser's
counsel, Accountants, or other representatives full access (during normal
business hours) to all properties, documents, contracts, books, records, and
other data of the Transferred Business and the Transferred Assets; PROVIDED,
HOWEVER, that all information received by Purchaser and its representatives will
be held in confidence by each of them, and, provided further, that if the
transaction contemplated hereby is not consummated, all data of every kind and
nature and all copies of documents taken by any of those persons will, upon
request, be returned to Sellers and not otherwise utilized by Purchaser, and
provided further that information publicly available or previously known by
Purchaser or later acquired from third parties having no obligation of
confidentiality to Seller need not be held in confidence.
(b) COMPLIANCE WITH LAWS. Sellers will comply with and perform
all material obligations and duties imposed upon it by all federal and state
laws and all rules, regulations, and orders imposed by federal or state
governmental authorities,
(c) NOTICE OF CERTAIN EVENTS. By written notice to Purchaser,
Sellers will notify Purchaser of the commencement of any litigation against any
Seller or the Transferred Business or of the existence of adverse business
conditions threatening the continued, normal business operations of the
Transferred Business.
(d) LEASES; LICENSES. Sellers will continue to meet all
obligations under all Assigned Contracts, the Midwest Licenses, and other leases
and contracts, consistent with the terms of the Management Agreement.
(e) SATISFACTION OF CONDITIONS. Sellers will use their best
efforts to assure, as soon as is reasonably practicable, the satisfaction of the
conditions to the effectiveness of the transactions contemplated in this
Agreement.
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(f) GOOD STANDING. Each Seller (except for SOWI as to payment
of franchise fees) will maintain in good standing its corporate existence under
the laws of the state in which it is incorporated or organized and not adopt or
propose any change to its organizational documents except a change that would
not have any adverse effect on the transactions contemplated in this Agreement.
(g) TAX RETURNS, FILINGS, AND PAYMENTS. Each Seller will
prepare and timely file all Tax returns for periods ending on or prior to the
Closing Date and will pay all Taxes for periods ending on or prior to the
Closing Date. All personal property transfers, documentary, sales, use,
registration, value added, and other similar taxes (including interest,
penalties and additions to any such tax) incurred in connection with the
transactions contemplated hereby ("TRANSFER TAXES") will be borne by Sellers,
and Sellers will indemnify Purchaser for any such Tax incurred by Purchaser as a
result of Sellers' failure to pay any such Tax.
(h) COMPLIANCE WITH WARN. Prior to the Closing Date, no Seller
will effectuate a "plant closing" or "mass layoff," as those terms are defined
in WARN, affecting any of Sellers' employees and requiring a notice to employees
pursuant to WARN, without notification to Purchaser in advance.
(i) APPROVAL ORDER. Upon execution of this Agreement, Debtors
will promptly request entry of the Procedure Order and the Approval Order.
SECTION 3.2 COVENANTS OF PURCHASER.
Except as otherwise consented to by Sellers, Purchaser
covenants that, throughout the period commencing on the date hereof and ending
on the Closing Date, it will:
(a) GOOD STANDING. Maintain its existence as a corporation
validly existing and in good standing under the laws of the State of Delaware;
(b) SATISFACTION OF CONDITIONS. Use its best efforts to
assure, as soon as is reasonably practicable, the satisfaction of the conditions
to the effectiveness of the transactions contemplated in this Agreement;
(c) FINOVA CONSENT. Upon execution of this Agreement, promptly
seek the FINOVA Consent.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS AND PURCHASER.
The respective obligations of each Party to effect the
transactions contemplated by this Agreement are subject to the satisfaction at
or prior to the Closing Date of the following conditions:
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(a) No statute, rule, regulation, executive order, decree,
ruling, or preliminary or permanent injunction exists or has been enacted,
entered, promulgated, or enforced by any federal or state court or governmental
authority that prohibits, restrains, enjoins, or restricts the consummation of
the transactions contemplated by this Agreement that has not been withdrawn or
terminated;
(b) No Action exists or has commenced by or before any
federal, state, or local or any foreign government, governmental, regulatory, or
administrative authority, agency, or commission or any court, tribunal or
judicial or arbitral body against Purchaser or Seller, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
that, in the reasonable good faith determination of any Party, is likely to
render it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 4.1 shall not apply to any Party
that has directly or indirectly solicited or encouraged any such Action.
(c) The Approval Order, FCC Approval, and the FINOVA Consent
are obtained.
SECTION 4.2 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.
All obligations of Purchaser to close under this Agreement are
subject to the fulfillment of each of the following conditions, prior to or at
the Closing:
(a) The representations and warranties made by Sellers
contained herein are true and correct at and as of the time of the Closing, with
the same effect as though such representations and warranties were made at and
as of such time, except for the representations and warranties set forth in
Sections 6.1, 6.2, and 6.3 of the Management Agreement concerning Other Midwest
Transmitter Sites.
(b) Sellers, on or before the Closing, have performed and
complied with all terms, covenants, and conditions required by this Agreement to
be performed or complied with at or before the Closing.
(c) Sellers deliver to Purchaser a certificate, dated the
Closing Date and signed by an appropriate officer of Seller, certifying as to
the fulfillment of the conditions set forth in Subsections (a) and (b) of this
Section 4.2.
(d) The FINOVA Consent, the FCC Approval, and the Approval
Order are obtained.
(e) On or before October 15, 1999, Sellers will deliver to
Purchaser audited financial statements of Sellers with auditors' consents as of
the fiscal years ending December 31, 1996, 1997, and 1998 and for the period
from January 1, 1999 through June 30, 1999. For the audited financial statements
of Sellers for the fiscal year ending December 31, 1998 and for the period from
January 1, 1999 through June 30, 1999, Purchaser agrees to pay the following
portion of the reasonable costs and expenses of this audit at the Closing: (a)
one-half of the first $30,000 and (b) all reasonable audit costs and expenses
over $30,000 (together, "PURCHASER'S
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AUDIT PAYMENT"). If the Closing does not occur due to Purchaser's default, then
Purchaser will pay the Purchaser's Audit Payment.
(f) There has not been commenced, threatened, or received any
proceeding, or notice thereof, that results or could result in the citation of
any Seller or the Transferred Business for violation of zoning ordinances in
connection with the use of the Seller's locations or requiring the cessation of
such use.
(g) Sellers deliver such other documents, opinions, and
certificates as are reasonably requested by counsel for Purchaser.
SECTION 4.3 CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE.
All obligations of Sellers to close under this Agreement are
subject to the fulfillment of each of the following conditions prior to or at
the Closing:
(a) The representations and warranties made by Purchaser
contained herein are true and correct at and as of the time of the Closing, with
the same effect as though such representations and warranties were made at and
as of such time.
(b) Purchaser, on or before the Closing, has performed and
complied with all terms, covenants, and conditions required by this Agreement to
be performed or complied with at or before the Closing.
(c) Purchaser delivers to Sellers a certificate, dated the
Closing Date and signed by an appropriate officer of Purchaser, certifying as to
the fulfillment of the conditions set forth in Subsections (a) and (b) of this
Section 4.3.
(d) The FCC Approval and the Approval Order are obtained.
(e) Sellers' receipt of the Purchase Price in accordance with
Section 1.6.
ARTICLE V
TERMINATION
SECTION 5.1 GROUNDS FOR TERMINATION.
Notwithstanding anything in this Agreement to the contrary,
this Agreement may be terminated in any of the following ways at any time before
the Closing Date only as follows:
(a) By mutual written consent of Sellers and Purchaser.
(b) By the Purchaser if any Seller has (i) misstated any
material representation or been in breach of any material warranty contained
herein and such misrepresentation or warranty breach has not been cured within 5
days after notice from the Purchaser or (ii) been in breach of any material
covenant, undertaking or restriction contained herein and such breach has not
been cured within 5 days after notice from the Purchaser.
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(c) By the Sellers if Purchaser has (i) misstated any material
representation or been in breach of any material warranty contained herein and
such misrepresentation or warranty breach has not been cured within 5 days after
notice from the Sellers or (ii) been in breach of any material covenant,
undertaking or restriction contained herein and such breach has not been cured
within 5 days after notice from the Sellers.
(d) By a Party, if a condition to Closing applicable to it
hereunder has not been satisfied by the Closing Date (or such earlier date as
specified herein) or waived in writing by that Party.
(e) By Sellers or Purchaser if the Approval Order has not been
obtained by September 30, 1999.
(f) By Purchaser if FINOVA Consent has not been obtained by
August 6, 1999.
(g) By Sellers or Purchaser if the FCC Approval has not been
obtained by February 15, 2000, unless otherwise agreed to in a writing signed by
the Parties.
(h) By Sellers or Purchaser if the Closing has not occurred by
February 28, 2000, but a Party cannot terminate this Agreement under this
Section 5.1(h) if that Party's material breach prevented the Closing.
(i) By Purchaser if (i) a trustee or examiner under chapter 7
or chapter 11 of the Bankruptcy Code is appointed for either of the Debtors or
(ii) LLC II becomes subject to a case under the Bankruptcy Code.
(j) By Purchaser if the Bankruptcy Court does not enter a
Procedure Order which approves the amount of the Breakup Fee in accordance with
Section 6.1.
(k) Automatically, if (a) the STA is terminated prior to
Closing; (b) FCC Approval is denied; (c) the Management Agreement is terminated
prior to Closing; or (d) Sellers accept a Superior Bid (as defined below).
(l) Notwithstanding the provisions of this Section 5.1,
Purchaser may not terminate this Agreement based on a non-willful breach of the
representations and warranties set forth in Sections 6.1, 6.2, and 6.3 of the
Management Agreement concerning any Other Midwest Transmitter Site.
SECTION 5.2 CONSEQUENCES OF TERMINATION.
If the Agreement is terminated pursuant to Section 5.1, all
further obligations of the Parties will terminate and the Escrow Fund, with
interest, will be returned to Purchaser and no Party will have any liability to
any other Party or its respective directors, officers, employees, or agents,
except for any obligation of Sellers to pay the Break-up Fee (as described in
Section 6.1 below).
SECTION 5.3 BROKERS.
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Except for Houlihan, with whom Sellers have entered into a
separate compensation agreement, and which compensation will be paid by Sellers,
Sellers and Purchaser represent and warrant each to the other that they have not
dealt with any broker, sales person, or finder in connection with this
transaction. Sellers and Purchaser each agree to indemnify, defend, and hold
harmless from and against any loss, cost, liability, or expense suffered or
incurred by the other party as a result of a claim or claims for brokerage
commissions, finder's fees or other similar fees from any party or firm that is
based on the act or omission of the party in breach of the above warranty.
ARTICLE VI
CONSENTS
SECTION 6.1 PROCEDURE ORDER.
No later than ten (10) days after execution of this Agreement,
Debtors will file a motion with the Bankruptcy Court requesting entry of an
order in form and substance reasonably acceptable to Purchaser ("PROCEDURE
ORDER"), which, among other things; (a) sets forth the procedures for notice and
approval of this Agreement; (b) sets forth bid procedures and provides overbid
protections by requiring that any initial competing bid for the Transferred
Assets must exceed the Purchase Price by $375,000; (c) approves the Management
Agreement; and (d) if Sellers accept another bid for the Transferred Assets
("SUPERIOR BID") authorizes and directs the payment of a break-up fee of
$375,000 ("BREAK-UP FEE") to Purchaser immediately upon receipt of a downpayment
or other monetary consideration from the entity providing the Superior Bid.
SECTION 6.2 APPROVAL ORDER.
Concurrently with the filing of the motion requesting the
Procedure Order, Debtors will file a motion with the Bankruptcy Court requesting
entry of an order (in form and substance acceptable to Purchaser) which among
other things, (i) approves the Agreement; (ii) authorizes the sale of the
Transferred Assets free and clear of Encumbrances; and (iii) approves assumption
and assignment of the Section 365 Contracts.
SECTION 6.3 CONSENT OF LENDER.
Sellers and Purchaser acknowledge and agree that Purchaser's
ability to consummate the purchase of the Transferred Assets and complete the
transactions contemplated hereunder are subject to and contingent upon the
written consent of FINOVA Capital Corporation for Purchaser to enter into this
Agreement ("FINOVA CONSENT"), the senior lender under a credit facility with
Purchaser, which FINOVA Consent is in the sole, absolute discretion of FINOVA
Capital Corporation. This consent is not a financing contingency.
SECTION 6.4 FCC APPROVAL.
Purchaser and Sellers will, promptly after the date hereof,
prepare and file with the FCC the applications ("Assignment Applications")
necessary to obtain by "Final Order" FCC consent to the DE JURE assignment of
the Midwest Licenses to Purchaser. "Final Order" means an order or written
action by the FCC granting the Assignment Applications, which order or action
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(i) is no longer subject to administrative or judicial reconsideration, review
or appeal; and (ii) which, if challenged, has been reaffirmed or upheld or the
challenge has been withdrawn and the applicable period for seeking further
administrative or judicial reconsideration, review or appeal has expired without
the filing of any action, petition, request for further review or further
challenge. Purchaser and Sellers will each prepare their respective portions of
the Assignment Applications and FCC fees associated therewith will be paid
equally by Purchaser and Sellers. Purchaser and Sellers will cooperate and use
their reasonable efforts to prosecute and obtain grant of the Assignment
Applications by Final Order, including, but not limited to, provision of any
additional information requested by the FCC. FCC Approval for purposes of this
Agreement will only occur upon FCC grant of the Assignment Applications by Final
Order.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 INDEMNIFICATION.
(a) Sellers will indemnify Purchaser and agree to hold
Purchaser harmless from and against any and all damages, losses, costs, and
expenses (including reasonable counsel fees and expenses in connection with the
contest of any claim) paid or incurred by Purchaser and arising out of (i) any
and all inaccurate representations or breaches of covenant or warranty made by
any Seller under this Agreement or in any Exhibit, Schedule, certificate, list,
or other instrument delivered pursuant to this Agreement or (ii) arising out of
any and all claims made against Purchaser for any liability that Purchaser did
not assume pursuant to Section 1.5 hereof.
(b) Purchaser will indemnify Sellers and agrees to hold
Sellers harmless from and against any and all damages, losses, costs, and
expenses (including reasonable counsel fees and expenses in connection with the
contest of any claim) paid or incurred by Sellers and arising out of any and all
inaccurate representations or breaches of covenant or warranty made by Purchaser
under this Agreement or in any Exhibit, Schedule, certificate, list, or other
instrument delivered pursuant hereto.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action asserting a claim based upon any cause
enumerated in this Section 7.1, the indemnified party will, if it claims the
benefits of indemnification pursuant to this Section 7.1 with respect to such
action, notify the indemnifying party of the commencement thereof. Upon receipt
of such notice, the indemnifying party has the option of either assuming the
defense of such action (and the cost thereof) with counsel reasonably
satisfactory to both the indemnified and the indemnifying parties or
participating in the defense of such action at the sole expense of the
indemnifying party. In the event of the indemnifying party's assumption of the
defense of such action, counsel selected by the indemnified party may at the
election of the indemnified party participate in any such defense, at the sole
expense of the indemnified party. No settlement or compromise to be paid by the
indemnifying party will be entered into without the written consent of the
indemnifying party, which consent will not be unreasonably withheld.
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(d) The indemnity provided in this Section 7.1 is limited in
time such that no party may assert a claim in respect of such indemnity at any
time after twelve (12) months after the Closing Date.
(e) Notwithstanding anything in this Section 7.1 to the
contrary, no Party may assert a claim for indemnity pursuant to Section 7.1
unless the aggregate of all such claims by such indemnified party against such
indemnifying party exceeds $100,000, in which event the indemnifying party's
obligation will apply to all indemnified losses in excess of such amount.
(f) Notwithstanding the provisions of this Section 7.1,
Purchaser will have no claim for indemnification against any Seller based on a
non-willful breach of the representations and warranties set forth in Sections
6.1, 6.2, and 6.3 of the Management Agreement concerning any Other Midwest
Transmitter Site.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 EXPENSES.
Purchaser and Seller will each pay their respective counsel,
accountants, and other expenses incurred in connection with the negotiation and
consummation of the transactions contemplated in this Agreement.
SECTION 8.2 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
The Parties each agree that if for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, all information
disclosed to the other party pursuant to this Agreement or in furtherance of it
will remain confidential, unless otherwise in the public domain, and each Party
will not use or furnish or divulge the same to any other person.
SECTION 8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) All representations, covenants and warranties made by
Sellers and Purchaser in this Agreement or in any Exhibit, Schedule,
certificate, list, or other instrument delivered pursuant hereto will survive
the Closing for a period of twelve (12) months.
(b) Notwithstanding any right of Purchaser to fully
investigate the affairs of Sellers relating to the Transferred Business and
notwithstanding any knowledge of facts determined or determinable by Purchaser
pursuant to such investigation or right of investigation, Purchaser has the
right to rely fully upon the representations, warranties, covenants, and
agreements of Sellers contained in this Agreement or in any document delivered
or to be delivered pursuant to this Agreement by any Seller or any of the
Sellers' representatives (including, but not limited to, Houlihan or any
accountant or attorney representing Seller), in connection with the transactions
contemplated by this Agreement. Each warranty, representation, agreement, and
covenant contained herein is independent of all warranties, representations,
agreements, and covenants contained herein or in any Exhibit, Schedule,
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certificate, list or other instrument or documents (whether or not covering
identical or related subject matter) and must be independently and separately
complied with and satisfied.
SECTION 8.4 EMPLOYEES.
Purchaser has the unlimited right, but not the obligation, to
seek and secure the employment of any employee of any Seller, and Sellers shall
reasonably assist Purchaser in such efforts, but Sellers will not be required to
incur any expense thereby and, further, Sellers do not warrant or guarantee the
availability to Purchaser of any of the current employees of any Seller.
SECTION 8.5 RISK OF LOSS.
From the date hereof through the Closing Date, if any
Transferred Asset is destroyed or damaged by fire or any other cause, other than
use, wear, or loss in the ordinary course of business, Sellers will give written
notice to Purchaser as soon as practicable (but in no event later than 5 days)
after discovery by any Seller of such damage, destruction, or loss. Purchaser
will have the option of (a) having such Transferred Asset delivered to it at the
Closing in its destroyed or damaged condition in which event the Purchase Price
will be reduced by the amount allocated to such Transferred Asset (to the extent
of such damage or destruction), as mutually agreed by the parties, (b) excluding
such Transferred Asset from this Agreement, in which event the Purchase Price
shall be reduced by the amount allocated to such Transferred Asset, as mutually
agreed by the parties, or (c) replacing or repairing such Transferred Asset (any
replacement will be deemed a Transferred Asset) at Sellers' expense.
SECTION 8.6 NOTICES.
All notices and other communications under this Agreement will
be in writing and be deemed given and effective (a) when delivered personally to
the recipient (b) when sent to recipient by electronic facsimile if during
recipient's normal business hours, otherwise on the next Business Day (with
receipt electronically confirmed and with a hard copy sent within one business
day by any other means described in this paragraph), or (c) on the first
Business Day following the day sent to the recipient for next Business Day
(morning delivery) by a nationally recognized overnight courier. Notices will be
sent to the Parties at the following addresses or facsimile telephone numbers
(or to such other address as a Party may have specified by notice given to the
other Parties pursuant to this provision).
(a) IF TO PURCHASER:
Aquis Communications Group, Inc.
1719A Route 10
Suite 300
Parsippany, New Jersey 07054
Attention: John X. Adiletta, President
Facsimile: 973-560-8078
WITH A COPY (WHICH WILL NOT CONSTITUTE NOTICE) TO:
Phillips Nizer Benjamin Krim & Ballon LLP
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666 Fifth Avenue
New York, New York 10103
Attention: Monte Engler, Esq.
Facsimile: 212-262-5152
(b) IF TO SELLERS:
SourceOne Wireless, Inc.
1040 South Milwaukee Avenue
Wheatley, Illinois 60090
Attention: David P. Harris
Facsimile: 847-465-5575
WITH A COPY (WHICH WILL NOT CONSTITUTE NOTICE) TO:
Hopkins & Sutter
Three First National Plaza
Chicago, Illinois 60602
Attention: Mark A. McDermott
Facsimile: 312-558-5190
AND A COPY (WHICH WILL NOT CONSTITUTE NOTICE) TO:
O'Connor & Hannon, LLP
1919 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20006-3483
Attn: Audrey P. Rasmussen
Facsimile: 202-466-2198
SECTION 8.7 MISCELLANEOUS.
(a) SEVERABILITY. If any term or provision of this Agreement
is to any extent, invalid or unenforceable, then this Agreement will not be
affected thereby, and each term and provision of the Agreement will be valid and
enforced to the fullest extent permitted by law.
(b) ASSIGNMENT. Neither Purchaser nor any Seller may assign
this Agreement or any rights hereunder prior to the Closing without the prior
written consent of the other party, but Purchaser may assign its rights
hereunder to one or more of its affiliates. After the Closing, the terms,
provisions, covenants and conditions of this Agreement will bind and benefit the
Parties to and their respective heirs, successors, personal representatives, and
assigns, including, as to Sellers, any trustee who is appointed in the Debtors'
chapter 11 cases or in any subsequent chapter 7 cases under the Bankruptcy Code.
(c) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which, when so executed and delivered, will be an
original instrument, and such counterparts, together, will constitute a single
agreement.
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(d) NO WAIVER. No waiver of any breach or default under this
Agreement will be considered valid unless in writing and signed by the Party
giving such waiver, and no such waiver shall be deemed a waiver of any
contemporaneous or subsequent breach or default of the same or similar nature.
Any Party may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Management Agreement, together with Exhibits and Schedules referred to or
attached to this Agreement and the Management Agreement, contain the entire
agreement among the Parties and supersede any other agreement, whether written
or oral, among the Parties relating to the transactions contemplated in this
Agreement with respect to the subject matter contained herein. This Agreement
cannot be amended except by a written instrument executed by the Parties that
specifically states that it is intended to amend this Agreement. No
representations, promises, warranties, covenants, understandings or undertakings
exist except as expressly set forth in this Agreement.
(f) GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to the choice of law doctrine of such state. For so long as
Debtors are subject to the jurisdiction of the Bankruptcy Court, the Parties
elect as the sole judicial forum for adjudication of any dispute between Sellers
and Purchaser arising under or related to this Agreement, and consent to
jurisdiction of, the Bankruptcy Court. After Debtors are no longer subject to
Bankruptcy Court jurisdiction, the Parties elect as the sole judicial forum for
adjudication of any matters arising under or related to this agreement, and
consent to the jurisdiction of, the Courts of the County of New York, State of
New York and the Southern District of New York.
(g) TITLES AND HEADINGS. Titles and headings are inserted for
convenience and do not form part of the Agreement.
Signed: AQUIS COMMUNICATIONS, INC.
August , 1999
By: /s/ John X. Adiletta
--------------------
Name: John X. Adiletta, President
Title: President
Signed: SOURCEONE WIRELESS, INC.
August , 1999
By: /s/ David P. Harris
-------------------
Name: David P. Harris
Title: DIP Manager
Signed: SOURCEONE WIRELESS L.L.C.
August , 1999
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By: /s/ David P. Harris
-------------------
Name: David P. Harris
Title: DIP Manager
Signed: SOURCEONE WIRELESS II, L.L.C.
August , 1999
By: /s/ Steven J. Zabel
-------------------
Name: Steven J. Zabel
Title: Chief Financial Officer
<PAGE>
Exhibit 2.2
AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement (the "Amendment") is made
as of this 15th day of November 1999 by and between Aquis Communications, Inc.,
a Delaware Corporation ("Purchaser") and SourceOne Wireless, Inc. ("SOWI),
SourceOne Wireless, L.L.C. ("LLC"), SourceOne Wireless II, L.L.C. ("LLC II," and
together with SOWI and LLC, the "Sellers"). SOWI, LLC, LLC II and Aquis may
sometimes be referred to individually as "Party" and collectively as the
"Parties." SOWI, LLC and LLC II may sometimes be referred to collectively as
SourceOne.
RECITALS
A. WHEREAS as of August 2, 1999, the Parties entered into that certain
Asset Purchase Agreement (the "Purchase Agreement") under which the Sellers
agreed to sell, and the Purchaser agreed to purchase, certain of Sellers'
assets.
B. WHEREAS the Parties have agreed upon the Purchase Price for the
Midwest Business as stated herein.
AGREEMENTS
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereby agree to amend the Purchase
Agreement as follows.
1 PURCHASE PRICE. Section 1.6(a) of the Purchase Agreement ("PURCHASE
PRICE") is hereby deleted and replaced in its entirety with the following: "The
purchase price ("PURCHASE PRICE") for the Transferred Assets is as follows: (i)
the sum of $2.25 million ("Cash Payment") by certified or bank check or by wire
transfer payable to Sellers plus (ii) a total of $1.5 million of Aquis 7.5%
Cumulative Preferred Shares in the form attached as Exhibit B with the
cumulative dividends payable at redemption and a required redemption on the
second anniversary of issuance (the "AQUIS SHARES").
2. PRE-CLOSING ESCROW. Section 1.6(c) of the Purchase Agreement
("Pre-Closing Escrow") is hereby modified by requiring the deposit of the Escrow
Fund upon entry of the Approval Order.
3. PURCHASE PRICE ADJUSTMENTS. Sections 1.6(d) ("Purchase Price
Adjustments") and 1.6(e) ("Other Price Adjustments") of the Purchase Agreement
are hereby deleted in their entirety.
<PAGE>
4. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which, when so executed and delivered, will be an original
instrument, and such counterparts, together, will constitute a single agreement.
5. AMENDMENTS. Except as modified by this Amendment, all other terms
and provisions of the Purchase Agreement shall remain in full force and effect.
AQUIS COMMUNICATIONS, INC.
By: /s/ JOHN X. ADILETTA
---------------------------------
John X. Adiletta, President
SOURCEONE WIRELESS, INC.
By: /s/ DAVID P. HARRIS
---------------------------------
David P. Harris, DIP Manager
SOURCEONE WIRELESS, L.L.C.
By: /S/ DAVID P. HARRIS
---------------------------------
David P. Harris, DIP Manager
SOURCEONE WIRELESS II, L.L.C.
By: /S/ STEVEN J. ZABEL
---------------------------------
Steven J. Zabel, CFO
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AGREEMENT PENDING PURCHASE CLOSING
This AGREEMENT PENDING PURCHASE CLOSING ("Management Agreement") dated
as of this 2nd day of August, 1999 ("Execution Date") is made and entered into
by and among SourceOne Wireless Inc. ("SOWI"), SourceOne Wireless, L.L.C.
("LLC"), SourceOne Wireless II, L.L.C. ("LLC II") and Aquis Communications, Inc.
("Aquis"). SOWI, LLC, LLC II and Aquis may sometimes be referred to hereinafter
individually as "Party" and collectively as the "Parties." SOWI, LLC and LLC II
may sometimes be referred to collectively hereinafter as "SourceOne."
RECITALS
WHEREAS, SourceOne currently operates Commercial Mobile Radio Service
("CMRS") one-way paging systems ("Systems") on multiple frequencies in numerous
geographic areas throughout the United States pursuant to licenses ("Licenses")
issued to LLC II by the Federal Communications Commission ("FCC").
WHEREAS, the largest of these Systems is a one-way paging system
("Midwest System") operating pursuant to licenses ("Midwest Licenses") issued by
the FCC in the Paging And Radiotelephone Service on the frequency 931.1875 MHz
in the midwest United States. The Midwest System is made up of one hundred and
twenty-seven (127) 931.1875 MHz transmitter sites: (i) seventy-five (75)
("Midwest Transmitter Sites") of which are clearly currently operational and
used by SourceOne to provide paging service to certain subscribers ("Midwest
Subscribers"); and (ii) fifty-two (52) ("Other Midwest Transmitter Sites") of
which may not currently be operational, but SourceOne has no knowledge that such
Other Midwest Transmitter Sites have been off the air for ninety (90) or more
continuous days as represented by SourceOne herein, and have been used to
provide paging service to Midwest Subscribers. A list of the Midwest Transmitter
Sites and Other Midwest Transmitter Sites that make up the Midwest System and
associated Midwest Licenses is attached hereto as Schedule A.
WHEREAS, the remaining Systems ("Other Systems") authorized to
SourceOne pursuant to FCC Licenses issued to LLC II on other frequencies ("Other
Licenses") provide service to other subscribers ("Other Subscribers").
WHEREAS, SourceOne also provides paging service to additional
subscribers ("Additional Subscribers") in various geographic areas on systems
not licensed to SourceOne, including through resale and other agreements
("Additional Subscriber Agreements"). The term "Subscribers" as used hereinafter
will be defined to include Midwest Subscribers and Additional Subscribers.
WHEREAS, LLC II is wholly owned and controlled by LLC and LLC is, in
turn, controlled by SOWI.
<PAGE>
WHEREAS, On April 29, 1999, SOWI, and on July 2, 1999, LLC (together
with SOWI "Debtors") filed voluntary petitions for relief in the Bankruptcy
Court for the Northern District of Illinois ("Bankruptcy Court") under chapter
11 of title 11 of the United States Code ("Bankruptcy Code"). Debtors have
continued in the possession of their assets and the management of their business
pursuant to Bankruptcy Code sections 1107 and 1108.
WHEREAS, as part of Debtors' bankruptcy cases, either simultaneously
herewith or promptly after the Execution Date, Aquis, SOWI, LLC and LLC II will
execute an asset purchase agreement ("Purchase Agreement") pursuant to which
Aquis will purchase the: (i) Midwest System, including the Midwest Licenses, the
Midwest Subscribers and all assets used in the operation of the Midwest System;
(ii) the Other Subscribers and certain other assets used by SourceOne in the
operation of the Other Systems; and (iii) the Additional Subscribers and certain
other assets used by SourceOne in the provision of service to Additional
Subscribers pursuant to Additional Subscriber Agreements.
WHEREAS, the Purchase Agreement requires (or will require) that the
Parties obtain requisite prior FCC consent to assignment of the Midwest Licenses
from LLC II to Aquis pursuant to applications (collectively "Assignment
Application") that must be filed with, processed and granted by the FCC before
the Parties can consummate sale of the assets and DE JURE assignment of the
Midwest Licenses to Aquis at a closing ("Purchase Closing") to be conducted by
the Parties pursuant to the Purchase Agreement.
WHEREAS, based on representations by SourceOne that SourceOne's dire
financial circumstances severely threaten SourceOne's ability to continue to
operate the Midwest System, Aquis has agreed to step in and assume day-to-day
operational and management control of the Midwest System and related
responsibilities pursuant to this Management Agreement until Purchase Closing.
WHEREAS, LLC II and Aquis have sought and obtained Special Temporary
Authority ("STA") for Aquis to acquire DE FACTO control of the Midwest System
pending filing and FCC grant of the Assignment Application and DE JURE
assignment of the Midwest Licenses to Aquis at Purchase Closing. This STA will
enable Aquis to provide the functions specified in this Management Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, mutually agree as follows.
1. ASSUMPTION OF MIDWEST BUSINESS. At 12:01 AM on a date to be mutually
agreed by the Parties no more than five (5) Business Days after Bankruptcy Court
approval of this Management
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Agreement ("Take-Over Date"): (i) SourceOne will transfer and Aquis will acquire
DE FACTO control of the Midwest System and assume full day-to-day operational
and management responsibilities for operation of the Midwest System, including
provision of service to Midwest Subscribers; and (ii) Aquis will commence
provision of service to Additional Subscribers pursuant to Additional Subscriber
Agreements. The functions referred to in subsections (i) and (ii) hereof will be
referred to collectively hereinafter as the "Midwest Business." In order to
effectuate this transfer, the Parties hereby agree to take the following
actions:
1.1. USE OF MIDWEST SYSTEM ASSETS. On the Take-Over Date,
SourceOne will transfer to Aquis SourceOne's rights to use, have access to and
control over each and every asset utilized by SourceOne in the operation of the
Midwest Business ("Midwest System Assets"), including, but not limited to the
following:
1.1.1. All transmission equipment located at the
Midwest Transmitter Sites, Other Midwest Transmitter Sites, or at any other
location utilized in the operation of the Midwest System.
1.1.2. The paging terminals and all associated
hardware and software utilized in the Midwest System and the "calling party
pays" platform, software and associated hardware ("CPP") used as part of the
Midwest Business to provide service to Subscribers.
1.1.3. The satellite control facilities utilized in
the Midwest System, including but not limited to any earth station facilities,
satellite space, associated wireline or wireless transmission facilities,
hardware and software, whether owned by SourceOne or utilized by SourceOne
pursuant to existing agreements with third parties.
1.1.4. All site leases, licenses or other agreements
("Site Agreements") pursuant to which SourceOne operates transmission equipment
at each of the Midwest Transmitter Sites and Other Midwest Transmitter Sites, it
being Aquis's understanding that SourceOne does not currently own the sites or
supporting structures at any of the Midwest Transmitter Sites or Other Midwest
Transmitter Sites.
1.1.5. All rights to interconnection with the public
switched telephone network ("PSTN") utilized by SourceOne in the operation of
the Midwest Business, whether pursuant to
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agreement, tariff or otherwise.
1.1.6. Certain leases, licenses or other agreements
("Office Agreements") for office space related to, or at which SourceOne
currently operates, the Midwest Business as specified at Schedule 0 hereto.
1.1.7. All office equipment, furniture and fixtures,
computer equipment, tools, vehicles, and other personal property ("Personal
Property") utilized by SourceOne in any way in connection with the Midwest
Business.
1.1.8. All software and licenses and other agreements
to utilize software ("Software") utilized by SourceOne in any way in connection
with the Midwest Business.
1.1.9. Those SourceOne employees specified on
Schedule 0 hereto ("Retained Employees"), it being expressly understood that:
(i) as of the Take-Over Date, SourceOne will terminate the employment of any
other SourceOne employees currently involved in operation of the Midwest
Business and/or reassign such other employees to operation of the Other Systems
with SourceOne assuming full and complete responsibility for all actions, costs,
expenses, claims and liabilities of any nature whatsoever associated with such
termination and/or reassignment of non-Retained Employees; and (ii) to the
extent that SourceOne will pay "stay bonuses" to Retained Employees, SourceOne
will only pay such "stay bonuses" on or after Purchase Closing, or as otherwise
provided in a Bankruptcy Court order.
1.1.10. All bank accounts ("Bank Accounts") utilized
by Source One in the operation of the Midwest Business.
1.1.11. All customer lists and goodwill for
Subscribers (collectively "Customer Lists").
1.1.12. All deposits ("Deposits") held by SourceOne
for Subscribers.
1.1.13. The right to operate the Midwest System in
accordance with the Midwest Licenses as the Midwest Licenses may be modified by
LLC II pursuant to the request of Aquis, subject only to LLC II's ongoing
obligations imposed as the DE JURE FCC licensee of the Midwest Licenses.
1.1.14. All inventory, pagers and other equipment
and/or items held for resale or lease (or already leased
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to Subscribers) by SourceOne.
1.1.15. On the Take-Over Date, all accounts
receivable held or owned by SourceOne for Subscribers, including all rights to
receive compensation from "calling party pays" agreements and all accrued but
unbilled revenue from operation of the Midwest Business (collectively, "Accounts
Receivable"), will be turned over to Aquis as manager for administration and
collection. SourceOne represents that accrued but unbilled revenues are not
older than thirty-one (31) days except that accrued but unbilled revenues for
July, 1999, are not older than forty (40) days. The Accounts Receivable
transferred on the Take-Over Date ("Take-Over Receivables") will be specified on
a schedule agreed to by the Parties and will be valued with the following
discount factors ("Discount Factors") as follows:
(a) 100% of the face amount of Accounts Receivable outstanding
including accrued but unbilled revenue for 30 days or less
before the Take-Over Date;
(b) 70% of the face amount of Accounts Receivable outstanding for
between 31 and 60 days before the Take-Over Date;
(c) 40% of the face amount of Accounts Receivable outstanding for
between 61 and 90 days before the Take-Over Date;
(d) 0% of the face amount of Accounts Receivable outstanding for
more than 90 days before the Take-Over Date; and
(e) 95% of the net amount of those certain Accounts Receivable
owed by ESBI and Ameritech and related to "calling party pays"
service.
If the Purchase Agreement closes, the Accounts Receivable will be transferred to
Aquis as Purchaser under the Purchase Agreement. If the Management Agreement is
terminated and the Purchase Closing has not occurred, then Aquis will return to
SourceOne accounts receivable from the Midwest Business whose value (after
adjustment by the Discount Factors) is not less than the discounted value of the
Take-Over Receivables less the "Net Service Revenue Adjustment" amount
("Returned Receivables Amount") subject to the first priority lien thereon in
favor of Foothill Capital Corporation, as agent. If the discounted value of the
Take-Over Receivables exceeds the Returned Receivables Amount, then Aquis
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will promptly pay SourceOne the difference subject to the first priority lien
thereon in favor of Foothill Capital Corporation, as agent. If the discounted
value of the Take-Over Receivables is less than the Returned Receivables Amount,
then such difference ("Excess Returned Receivables") will be promptly paid by
Source One to Aquis as a fee in addition to any other fees provided in this
Management Agreement. The Net Service Revenue Adjustment amount under this
Section 0 is calculated as follows: (discounted value of the Take-Over
Receivables divided by $7.26 million) TIMES actual Net Service Revenue (as
defined in Purchase Agreement Section 1.6(d)(i)).
1.1.16. All contract rights ("Contracts") held by
SourceOne and utilized in connection with the Midwest Business, such as
Additional Subscriber Agreements, agreements related to "calling party pays",
and subscriber agreements with Subscribers.
1.1.17. All books, records, models and spreadsheets
(whether in hard copy or computerized form) kept in the ordinary course and
useful, in the sole discretion of Aquis, in the operation of the Midwest
Business, including sales and marketing information and Retained Employee files.
1.1.18. All corporate names, logos, trade names,
trademarks and copyrights of SourceOne and all other intellectual property owned
by or licensed to SourceOne, used in connection with operation of the Midwest
Business.
1.1.19. Any other assets, privileges, rights, claims
or credits of every kind, character and description, whether tangible,
intangible, real, personal, or mixed and wherever located, owned, leased by
SourceOne or used, or held for use in connection with the Midwest Business as of
the Take-Over Date ("Other Assets").
1.2. NO ASSUMPTION OF LIABILITIES BY AQUIS. It is expressly understood
and agreed that the Parties intend that Aquis is not and will not be considered
to be a successor to SourceOne by reason of any theory of law or equity.
1.3. TITLE TO MIDWEST SYSTEM ASSETS. Subject to Aquis's right to use,
have access to and control over the Midwest System Assets pursuant to Section 0
hereof, title to the Midwest System Assets will remain with SourceOne during the
Term of this Management Agreement (as hereinafter defined). Title will pass to
Aquis at Purchase Closing pursuant to the Purchase Agreement; subject, however,
to the provisions of Section 0 hereof.
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1.4. GOOD FAITH COOPERATION. SourceOne agrees to cooperate in good
faith, use its best efforts and timely take (or omit to take) any additional
action that Aquis reasonably believes is necessary to: (i) effectuate the DE
FACTO transfer of control of the Midwest System and allow Aquis to assume
day-to-day operational and management control of the Midwest System; (ii) allow
Aquis to assume provision of service to Additional Subscribers pursuant to
Additional Subscriber Agreements; and (iii) allow Aquis to carry out any other
related responsibilities with respect to the Midwest Business specified in this
Management Agreement.
2. OPERATION OF THE MIDWEST BUSINESS.
2.1. AQUIS RESPONSIBILITIES. On the Take-Over Date, Aquis will
assume day-to-day operational and management control of the Midwest System using
the Midwest System Assets. Aquis will exercise a reasonable standard of care
normally exercised by operators of similar CMRS one-way paging systems in
similar circumstances; provided, however, that the Parties explicitly recognize
that Debtors' Chapter 11 bankruptcy may result in significant obstacles that may
prevent Aquis from meeting this standard of care. Aquis will use its reasonable
best efforts consistent with sound commercial practice to provide for the
successful operation of the Midwest System and Aquis will render or obtain all
services and perform or cause to be performed all duties necessary or
appropriate for the operation of the Midwest System. Aquis will also continue
provision of service to Additional Subscribers pursuant to Additional Subscriber
Agreements. Aquis's duties will including the following:
2.1.1. Operate the Midwest System for provision of
service to existing and new Midwest Subscribers in compliance with the Midwest
Licenses and applicable FCC Rules (as hereinafter defined).
2.1.2. Provide service to existing and new Additional
Subscribers pursuant to Additional Subscriber Agreements.
2.1.3. Analyze the existing technical configuration
of the Midwest System and, subject to Section 0 hereof, plan and implement any
expansion, modification or reduction of the Midwest System that Aquis believes
in its sole and unfettered discretion will increase the economic, efficient
operation of the Midwest System.
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2.1.4. Analyze the Other Midwest Transmitter Sites to
determine whether transmitting equipment at those sites (such equipment at each
site referred to as "Other Midwest Transmitter Site Equipment") is operational
and that the representations made by SourceOne at Section 0, 0 and 0 hereof
("Other Midwest Transmitter Site Representations") with respect to the Other
Midwest Transmitters Sites and all Other Midwest Transmitter Site Equipment are
accurate. To the extent that: (i) Aquis determines that any or all of the Other
Midwest Transmitter Site Representations are not accurate; or (ii) Aquis, in its
sole and unfettered discretion, determines that operation cannot and/or should
not be timely recommenced at any Other Midwest Transmitter Site in accordance
with FCC Rules for any reason whatsoever; then Aquis may instruct SourceOne to
modify the Midwest Licenses for any such Other Midwest Transmitter Site(s).
Aquis's sole remedy in the event SourceOne does not modify the Midwest Licenses
as instructed will be the Purchase Price (as defined in the Purchase Agreement)
adjustments specified at Section 1.6(e) of the Purchase Agreement.
2.1.5. Supervise, manage and train the Retained
Employees and other administrative, technical and sales staff, if any, necessary
for the operation of the Midwest Business.
2.1.6. Administer the invoicing and collection of all
accounts of Subscribers, including new subscribers to the Midwest System and new
Additional Subscribers, and Accounts Receivable; collect and receive all
payments on such accounts; and arrange for the billing and collection of all
other revenues, fees, charges or other compensation ("Revenues") due in
connection with the Midwest Business.
2.1.7. Arrange for the payment of all expenses and
fees, if any, incurred in connection with the Midwest Business after the
Take-Over Date during the Term of this Management Agreement (as hereinafter
defined) ("Expenses").
2.1.7.1.The Parties agree that Expenses will be
pro rated as of the Take-Over Date with SourceOne retaining sole responsibility
for payment of Expenses prior to the Take-Over Date and Aquis assuming
responsibility for payment of Expenses after the Take-Over Date in accordance
with this Management Agreement and subject to Section 0 hereof.
2.1.8. Maintain the Customer List and files
concerning subscriber agreements for all Subscribers; and
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2.1.9. Maintain appropriate property, casualty,
liability and other insurance for the Midwest System.
2.1.10. Maintain appropriate office recordkeeping,
bookkeeping and accounting procedures.
2.1.11. Return to any Subscribers any Deposits
transferred to Aquis pursuant to Section 0; provided, however, that the Parties
expressly agree that Aquis undertakes no responsibility for or liability to
return to any Subscriber any Deposit held by SourceOne prior to the Take-Over
Date that is not transferred by SourceOne to Aquis as of the Take-Over Date
pursuant to Section 0 hereof.
2.1.12. In providing services in connection with
operation of the Midwest Business, Aquis may make arrangements to consolidate
the provision of such services with other stations owned, operated or managed by
Aquis.
2.1.13. The Parties agree that Aquis will not enter
into any contracts or other agreements during the Term of this Management
Agreement (as hereinafter defined) that would result in an obligation to pay
expenses and fees in connection with the Midwest Business beyond the Purchase
Termination Date (as hereinafter defined); provided, however, that Aquis may
enter into such contracts and agreements upon the prior written consent of
SourceOne, such consent in SourceOne's sole discretion, and upon prior written
notice to Foothill Capital Corporation pursuant to written instructions that
Foothill Capital Corporation will provide to Aquis and SourceOne promptly after
the Execution Date; provided, however, that nothing herein shall be deemed to
constitute consent of Foothill Capital Corporation to the use of its collateral
to pay expenses incurred under such contracts and agreements after the Purchase
Termination Date (as hereinafter defined). The Parties agree that in no event
will Aquis have any liability whatsoever to pay any Expenses incurred after the
Purchase Termination Date (as hereinafter defined).
2.2. SOURCEONE OBLIGATIONS.
2.2.1. As the FCC DE JURE licensee of the Midwest
Stations pending Purchase Closing, SourceOne will exercise the minimum amount of
supervision necessary as an FCC DE JURE licensee subject to Aquis's DE FACTO
control of the Midwest System authorized by the FCC pursuant to the STA.
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2.2.2. SourceOne designates Steve Zabel as officer of
LLC II, LLC and SOWI, who SourceOne represents and warrants will be available at
all times to assist Aquis in the operation of the Midwest Business pursuant to
this Management Agreement, including, but not limited to, signing any FCC
application or other written submissions that Aquis believes, in its sole and
unfettered discretion and as the party in DE FACTO control of the Midwest
System, should be submitted. SourceOne may specify alternate officers of LLC II,
LLC and/or SOWI upon prior written consent of Aquis.
2.2.3. SourceOne will cooperate with Aquis and use
its best efforts to assist Aquis in the operation of the Midwest Business as
specified herein, including, but not limited to:
2.2.3.1. Assisting Aquis in modifying any
signature cards related to the Bank Accounts to be transferred to Aquis pursuant
to this Management Agreement to make authorized representatives of Aquis the
sole parties authorized to conduct transactions with respect to such Bank
Accounts.
2.2.3.2. Fully cooperating with Aquis in its
review of the Other Midwest Transmitter Sites specified at Section 0 hereof and,
to the extent requested by Aquis in Aquis's sole and unfettered discretion, use
reasonable best efforts to assist in recommencement of operation of Other
Midwest Transmitter Site Equipment at the Other Midwest Transmitter Sites,
including, but not limited to: (i) replacement of nonfunctional or nonexistent
Other Midwest Transmitter Site Equipment with other equipment owned by
SourceOne; (ii) assisting Aquis in dealing with owners of Other Midwest
Transmitter Sites; and (iii) assisting Aquis in negotiating with any equipment
manufacturers or other entities with loans or other interests in Other Midwest
Transmitter Site Equipment.
2.3. ADDITIONAL OBLIGATIONS.
2.3.1. In addition to its other obligations under
this Management Agreement:
2.3.1.1.In the event Aquis is unable to pay all
Expenses from Revenues, funds available in Bank Accounts to be transferred to
Aquis and/or collection of any Accounts Receivable transferred to Aquis, then
Aquis will provide funds to pay such Expenses subject to the provisions of this
Section 0.
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2.3.1.2.In the event that Aquis is unable to pay
for any capital improvements that Aquis believes, in its sole and unfettered
discretion, should be made to the Midwest System or Midwest System Assets
("Capital Improvements"), and Aquis is unable to pay for such Capital
Improvements from Revenues, funds available in Bank Accounts to be transferred
to Aquis and/or collection of any Accounts Receivable transferred to Aquis, then
Aquis will provide funds to pay such Capital Expenditures subject to the
provisions of this Section 0. If: (i) Aquis pays for any Capital Improvement out
of its own funds or provides equipment to operate the Midwest System; and (ii)
the Purchase Closing does not occur, then Aquis may remove, at its expense,
those Capital Improvements and equipment on or after the Purchase Termination
Date (as hereinafter defined).
2.4. SOURCEONE INSPECTION. During the Term of this Management
Agreement (as hereinafter defined), SourceOne may, upon reasonable prior written
request to Aquis and at a reasonable time and place, inspect Aquis's operation
of the Midwest Business and/or the records maintained by Aquis in connection
with the operation of the Midwest Business.
3. OTHER SUBSCRIBERS ON OTHER SYSTEMS.
3.1. TRANSFER OF OTHER SUBSCRIBER ASSETS. Even though Aquis
will not acquire DE facto control of or provide any management responsibilities
for SourceOne's Other Systems pursuant to this Management Agreement, as of the
Take-Over Date, SourceOne will also transfer to Aquis SourceOne's rights to use,
have access to and control over the following ("Other Subscriber Assets"):
3.1.1. All customer lists and goodwill ("Other
Customer List") for all of SourceOne's Other Subscribers, regardless of the
SourceOne Other System on which those subscribers receive service.
3.1.2. All deposits ("Other Deposits") held by
SourceOne for Other Subscribers on Other Systems.
3.1.3. On the Take-Over Date, all accounts receivable
held or owned by SourceOne for Other Subscribers, including all rights to
receive compensation from "calling party pays" agreements and all accrued but
unbilled revenue from operation of the Other Subscriber Business (as hereinafter
defined) (collectively, "Other Accounts Receivable"), will be turned over to
Aquis as manager for administration and collection. SourceOne represents that
accrued but unbilled revenues are not
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older than thirty-one (31) days except that accrued but unbilled revenues for
July, 1999, are not older than forty (40) days. The Other Accounts Receivable
transferred on the Take-Over Date ("Take-Over Other Receivables") will be
specified on a schedule to be agreed to by the Parties and will be valued with
the following discount factors ("Discount Factors") as follows:
(a) 100% of the face amount of Other Accounts Receivable
outstanding including accrued but unbilled revenue for 30 days
or less before the Take-Over Date;
(b) 70% of the face amount of Other Accounts Receivable
outstanding for between 31 and 60 days before the Take-Over
Date;
(c) 40% of the face amount of Other Accounts Receivable
outstanding for between 61 and 90 days before the Take-Over
Date;
(d) 0% of the face amount of Other Accounts Receivable outstanding
for more than 90 days before the Take-Over Date; and
(e) 95% of the net amount of those certain Other Accounts
Receivable owed by ESBI and Ameritech and related to "calling
party pays" service.
If the Purchase Agreement closes, the Other Accounts Receivable will be
transferred to Aquis as Purchaser under the Purchase Agreement. If the
Management Agreement is terminated and the Purchase Closing has not occurred,
then Aquis will return to SourceOne accounts receivable for Other Subscribers
whose value (after adjustment by the Discount Factors) is not less than the
discounted value of the Take-Over Other Receivables less the "Net Service
Revenue Adjustment" amount ("Returned Other Receivables Amount") subject to the
first priority lien thereon in favor of Foothill Capital Corporation, as agent.
If the discounted value of the Take-Over Other Receivables exceeds the Returned
Other Receivables Amount, then Aquis will promptly pay SourceOne the difference
subject to the first priority lien thereon in favor of Foothill Capital
Corporation, as agent. If the discounted value of the Take-Over Other
Receivables is less than the Returned Other Receivables Amount, then such
difference ("Excess Returned Other Receivables") will be promptly paid by
SourceOne to Aquis as a fee in addition to any other fees provided by this
Management Agreement. The Net Service Revenue Adjustment amount under this
Section 0 is calculated as follows: (discounted value of the
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Take-Over Other Receivables divided by $7.26 million) TIMES actual Net Service
Revenue (as defined in Purchase Agreement Section 1.6(d)(i)).
3.1.4. Any pagers and related equipment owned by
SourceOne and leased to Other Subscribers as of the Take-Over Date ("Leased
Pagers").
3.2. AQUIS ACTIONS REGARDING OTHER SUBSCRIBERS. As of the
Take-Over Date:
3.2.1. It is Aquis's understanding that as of the
Take-Over Date, SourceOne may terminate operation of the Other Systems.
Accordingly, as of the Take-Over Date, Aquis may, in its sole and unfettered
discretion, take whatever action Aquis believes necessary with respect to the
Other Subscribers, including but not limited to arranging for Other Subscribers
to become Additional Subscribers who obtain service under existing Additional
Subscriber Agreements. Arrangements by Aquis to continue provision of service to
Other Subscribers during the Term of this Management Agreement (as hereinafter
defined), if any, will be referred to as "Other Subscriber Business".
3.2.2. Aquis will invoice, collect and receive
payment on all accounts of Other Subscribers, including Other Accounts
Receivable, during the Term of this Management Agreement (as hereinafter
defined).
3.2.3. Aquis will return to any Other Subscriber any
Other Deposits transferred to Aquis pursuant to Section 0 hereof; provided,
however, that the Parties expressly agree that Aquis undertakes no
responsibility for or liability to return to any Other Subscriber any Other
Deposit held by SourceOne prior to the Take-Over Date that is not transferred by
SourceOne to Aquis as of the Take-Over Date pursuant to Section 0 hereof.
3.2.4. Aquis will retain any Leased Pagers returned
by Other Subscribers during the Term of this Management Agreement (as
hereinafter defined).
3.2.5. Aquis will pay all expenses and fees, if any,
associated with the Other Subscriber Business ("Other Subscriber Expenses") and
Aquis will retain all revenues associated with or arising from the Other
Subscriber Business ("Other Subscriber Revenues") as provided in Section 0
hereof.
3.3. TITLE TO OTHER SUBSCRIBER ASSETS. Subject to
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Aquis's right to use, have access to and control over the Other Subscriber
Assets pursuant to Section 0 hereof, title to the Other Subscriber Assets will
remain with SourceOne during the Term of this Management Agreement (as
hereinafter defined). Title will pass to Aquis at Purchase Closing pursuant to
the Purchase Agreement; subject, however, to the provisions of Section 0 hereof.
4. COMPENSATION. In addition to other consideration provided for in
this Management Agreement and the Purchase Agreement, Aquis will retain as
compensation for services provided hereunder:
4.1. All "Midwest Cash Flow," if any, obtained from operation
of the Midwest Business during the Term of this Management Agreement (as
hereinafter defined). Midwest Cash Flow is defined as Revenues plus Accounts
Receivable collected by Aquis during the Term of this Management Agreement (as
hereinafter defined) plus credit balances in Bank Accounts as of the Take-Over
Date, if any, less Expenses and Capital Improvements not paid for directly by
Aquis; and
4.2. All "Other Subscriber Cash Flow," if any, obtained from
operation of the Other Subscriber Business during the Term of this Management
Agreement (as hereinafter defined). Other Subscriber Cash Flow is defined as
Other Subscriber Revenues plus Other Subscriber Accounts Receivable collected by
Aquis during the Term of this Management Agreement (as hereinafter defined) less
Other Subscriber Expenses.
5. IF NO PURCHASE CLOSING. In the event that the Purchase Agreement
terminates without Purchase Closing, the following provisions apply:
5.1. RETURN OF MIDWEST SYSTEM ASSETS. As of the date of
termination of the Purchase Agreement without Purchase Closing ("Purchase
Termination Date"), Aquis will return to SourceOne the rights to use, have
access to and control over all Midwest System Assets in existence as of the
Purchase Termination Date and SourceOne will retain title thereto.
5.2. RETURN OF DE FACTO CONTROL OF MIDWEST SYSTEM. SourceOne
and Aquis will immediately take all action necessary, including but not limited
to termination of the STA, to return to SourceOne as of the Purchase Termination
Date the DE FACTO control over the Midwest System that was transferred to Aquis.
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5.3. TERMINATION OF AQUIS OPERATION OF MIDWEST BUSINESS. As of
the Purchase Termination Date, Aquis will cease operating the Midwest Business
pursuant to Section 0 hereof and, at the request of SourceOne, will terminate
employment of any Retained Employees.
5.4. RETURN OF OTHER SUBSCRIBER ASSETS. As of the Purchase
Termination Date, Aquis will return to SourceOne the rights to use, have access
to and control over all Other Subscriber Assets in existence as of the Purchase
Termination Date and SourceOne will retain title thereto; except that if Aquis
made arrangements for continued provision of service to Other Subscribers
pursuant to any arrangement other than converting such Other Subscribers to
become Additional Subscribers under SourceOne Additional Subscriber Agreements
in existence as of the Take-Over Date, Aquis has the right, but not the
obligation, to retain such Other Subscribers without returning them to SourceOne
and without compensation to SourceOne.
5.5. CONDITION OF ASSETS. Subject to Sections 0 and 0 hereof,
the Parties expressly recognize and agree that the Midwest System Assets and
Other Subscriber Assets may have been modified during the ordinary course of
operation of the Midwest System Assets and Other Subscriber Assets
(collectively, "Asset Change") during Aquis's use thereof in accordance with
this Management Agreement. Aquis will return to SourceOne the Midwest System
Assets and Other Subscriber Assets in the form as of the Take-Over Date, except
ordinary wear and tear and other modifications contemplated by the first
sentence of this Section 0. Aquis will have no liability of any nature
whatsoever for any Asset Change unless and to the extent such Asset Change was
caused by a breach of Aquis's duty of care as set forth in Section 0 hereof.
5.6. MIDWEST SYSTEM FINAL ACCOUNTING.
5.6.1. Within thirty (30) Business Days after the
Purchase Termination Date, Aquis will provide SourceOne with a final accounting
("Final Accounting") specifying in reasonable detail:
5.6.1.1.The total of any Revenues accrued and
related to the Midwest Business during the Term of this Management Agreement (as
hereinafter defined) ("Outstanding Revenues").
5.6.1.2.The total of any Expenses incurred
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with respect to the Midwest Business during the Term of this Management
Agreement (as hereinafter defined) ("Outstanding Expenses").
5.6.1.3.To the extent necessary, Outstanding
Revenues and Outstanding Expenses will be pro rated as of the Take-Over Date and
the Purchase Termination Date.
5.6.2. If Outstanding Revenues exceed Outstanding
Expenses after deducting any prior withdrawals of Midwest Cash Flow by Aquis,
then the difference will be considered "Outstanding Profit" and:
5.6.2.1.SourceOne will pay the Outstanding Profit
to Aquis as additional Midwest Cash Flow earned by Aquis pursuant to Section 0
hereof; or
5.6.2.2.SourceOne's obligation to pay the
Outstanding Profit to Aquis may be satisfied by allowing Aquis, at Aquis's
option, to retain possession of the Outstanding Revenues, credit balances in
Bank Accounts as of the Purchase Termination Date and the right to collect
Accounts Receivable using, to the extent available and at Aquis's expense, the
books and records and systems of SourceOne; and
5.6.2.3.SourceOne's obligation to pay the
Outstanding Profit and Excess Returned Receivables to Aquis is secured by: (i) a
first priority lien and security interest in the Accounts Receivable (exclusive
of the Returned Receivables Amount) and credit balances in Bank Accounts as of
the Purchase Termination Date; and (ii) a senior, first-priority lien and
security interest under Bankruptcy Code section 364(d)(1) in the Accounts
Receivable (exclusive of the Returned Receivables Amount) and credit balances in
Bank Accounts as of the Purchase Termination Date and, further, this obligation
to Aquis will be an allowed super-priority administrative expense claim under
Bankruptcy Code section 364(c)(1), having priority over any and all
administrative expense or priority claims specified in, or ordered under,
Bankruptcy Code sections 330, 331, 503(b), 506(c), or 507(b), except that this
claim will be subordinate to the claim of Foothill Capital Corporation arising
under Sections 364 or 507(b) of the Bankruptcy Code and the Carve-Out, as
defined in the final debtor-in-possession financing order. The Bankruptcy Court
order approving this Management Agreement will provide that the lien and
security interest in this Section 0 will be perfected upon entry of such
Bankruptcy Court order and without the need for filings or other actions by any
of the Parties.
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5.7. RETURNED RECEIVABLES AMOUNT. Within thirty (30) Business
Days after the Purchase Termination Date: (i) Aquis will remit the Returned
Receivables Amount and the Returned Other Receivables Amount and pay any
deficiency as described in Sections 0 and 0 hereof. This obligation is not
subject to setoff or deduction.
5.8. DEFERRED REVENUE ADJUSTMENT. The Parties will agree in
writing as to the amount of deferred revenues as of the Take-Over Date and the
Purchase Termination Date. If deferred revenues on the Take-Over Date are less
than on the Purchase Termination Date (as calculated in the same manner as of
the Take-Over Date), then Aquis will pay the difference to SourceOne, subject to
Aquis's right to setoff this obligation against any SourceOne obligation owed to
Aquis.
5.9. RETURNED SOURCEONE DEPOSITS. The Parties will agree in
writing as to the amount of any SourceOne deposits held by third parties as of
the Take-Over Date and the Purchase Termination Date. If such deposits on the
Take-Over Date are higher than on the Purchase Termination Date (as a result of
return of any such deposits to Aquis or the use of any such deposits by or for
the benefit of Aquis), then Aquis will pay the difference to SourceOne within
thirty (30) Business Days after the Purchase Termination Date.
5.10. OTHER FINAL ACCOUNTING.
5.10.1. Within thirty (30) Business Days after the
Purchase Termination Date, Aquis will provide SourceOne with a final accounting
("Other Final Accounting") specifying in reasonable detail:
5.10.1.1. The total of any Other Subscriber
Revenues accrued and related to the Other Subscriber Business during the Term of
this Management Agreement (as hereinafter defined) ("Outstanding Other
Subscriber Revenues").
5.10.1.2. The total of any Other Subscriber
Expenses incurred with respect to the Other Subscriber Business during the Term
of this Management Agreement (as hereinafter defined) ("Outstanding Other
Subscriber Expenses").
5.10.1.3. To the extent necessary, Outstanding
Other Subscriber Revenues and Outstanding Other Subscriber Expenses will be pro
rated as of the Take-Over Date and
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the Purchase Termination Date.
5.10.2. If Outstanding Other Subscriber Revenues
exceed Outstanding Other Subscriber Expenses after deducting any prior
withdrawals of Other Subscriber Cash Flow by Aquis, then the difference will be
considered "Outstanding Other Subscriber Profit" and:
5.10.2.1. SourceOne will pay the Outstanding Other
Subscriber Profit to Aquis as additional Other Subscriber Profits earned by
Aquis pursuant to Section 0 hereof; or
5.10.2.2. SourceOne's obligation to pay the
Outstanding Other Subscriber Profit to Aquis may be satisfied by allowing Aquis,
at Aquis's option, to retain possession of the Outstanding Other Subscriber
Revenue, credit balances in Bank Accounts as of the Purchase Termination Date
and the right to collect Other Subscriber Accounts Receivable using, to the
extent available and at Aquis's expense, the books and records and systems of
SourceOne; and
5.10.2.3. SourceOne's obligation to pay the
Outstanding Other Subscriber Profit and the Excess Returned Other Receivables to
Aquis is secured by: (i) a first priority lien and security interest in the
Other Subscriber Accounts Receivable (exclusive of the Returned Other
Receivables Amount) and credit balances in Bank Accounts as of the Purchase
Termination Date; and (ii) a senior, first-priority lien and security interest
under Bankruptcy Code section 364(d)(1) in the Other Subscriber Accounts
Receivable (exclusive of the Returned Other Receivables Amount) and credit
balances in Bank Accounts as of the Purchase Termination Date and, further, this
obligation to Aquis will be an allowed super-priority administrative expense
claim under Bankruptcy Code section 364(c)(1), having priority over any and all
administrative expense or priority claims specified in, or ordered under,
Bankruptcy Code sections 330, 331, 503(b), 506(c), or 507(b), except that this
claim will be subordinate to the claim of Foothill Capital Corporation arising
under Sections 364 or 507(b) of the Bankruptcy Code and the Carve-Out, as
defined in the final debtor-in-possession financing order. The Bankruptcy Court
order approving this Management Agreement will provide that the lien and
security interest in this Section 0 will be perfected upon entry of such
Bankruptcy Court order and without the need for filings or other actions by any
of the Parties.
5.11. Aquis has no claims against Foothill Capital Corporation
or its collateral, including without limitation,
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claims arising under Sections 503, 506, or 552 of the Bankruptcy Code, except as
expressly set forth in Sections 0 and 0 of this Management Agreement.
6. REPRESENTATIONS AND WARRANTIES OF SOURCEONE. To induce Aquis to
enter into this Management Agreement, SourceOne hereby represents and warrants
to Aquis that:
6.1. LICENSES. SourceOne is the BONA FIDE licensee of the
Midwest Licenses and Midwest System. The Midwest Licenses for the Midwest
Transmitter Sites are, and, to the best of SourceOne's actual knowledge the
Midwest Licenses for the Other Midwest Transmitter Sites are, valid, in good
standing, in full force and effect and constitute: (i) all licenses, permits,
and authorizations required by the Communications Act of 1934, as amended (the
"Act") and all rules and regulations promulgated by the FCC thereunder ("FCC
Rules"), for the construction and operation of the Midwest System; and (ii) all
of the licenses, permits and authorizations issued by the FCC to SourceOne for
or in connection with the Midwest System. Except for the Midwest Licenses, there
are no permits, licenses or other authorizations currently held by SourceOne, or
required by law to be held by SourceOne, with respect to ownership of the
Transferred Assets (as defined in the Purchase Agreement) or operation of the
Midwest Business, except where failure to hold such a permit, license or other
authorization would not reasonably be expected to materially affect ownership of
the Transferred Assets (as defined in the Purchase Agreement) or conduct of the
Midwest Business.
6.2. MIDWEST SYSTEM CONSTRUCTION AND OPERATION. The Midwest
System was timely and properly constructed in substantial accord with its
licensed parameters, and, since commencement of operations, the Midwest System
comprised of the Midwest Transmitter Sites has operated and currently is, and,
to the best of SourceOne's actual knowledge, the Midwest System comprised of the
Other Midwest Transmitter Sites has operated and currently is operating in
compliance with all applicable laws, rules and regulations, including the Act
and FCC Rules. The Midwest System currently provides one-way paging service to
at least one unaffiliated subscriber from each of the Midwest Transmitter Sites
and no Midwest Transmitter Site has been off the air for ninety (90) or more
continuous days.
6.3. OTHER MIDWEST TRANSMITTER SITES. SourceOne has no
knowledge that the Other Midwest Transmitter Sites have been off the air for
ninety (90) or more continuous days.
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6.4. NO ADVERSE CONDITION. SourceOne has no knowledge of any
condition imposed by the FCC on the Midwest System or Midwest Licenses which is
neither: (i) set forth on the face of the Midwest Licenses as provided by
SourceOne to Aquis or as available to the public on FCC databases; nor (ii)
applicable to the CMRS industry generally.
6.5. NO PENDING ACTION. There is no pending or, to SourceOne's
knowledge, threatened action by the FCC or any other federal, state or local
governmental authority or third party: (i) to suspend, revoke, terminate or
challenge the Midwest System, any Midwest License, the Midwest Business or the
Other Subscriber Business; or (ii) that could preclude SourceOne from entering
into or consummating the transactions specified in this Management Agreement and
the Purchase Agreement.
6.6. EXCLUSIVE USE. The Midwest Licenses grant SourceOne the
exclusive use of the frequency 931.1875 MHz within the service area defined in
FCC Rules. SourceOne is not a party to any intercarrier, frequency or facilities
sharing agreement of any kind that might in any way affect Aquis's rights to
operate (under this Management Agreement) or acquire (under the Purchase
Agreement) the Midwest System and/or the Transferred Business (as defined in the
Purchase Agreement).
6.7. ORDERS AND DECREES. Neither SourceOne, the Midwest
System, the Midwest Licenses, the Midwest Business, nor the Other Subscriber
Business are subject to any judicial or administrative order, or any ordinance
or zoning restriction, which would materially and adversely affect or impose any
condition on SourceOne, the Midwest System, the Midwest Licenses, the Midwest
Business or the Other Subscriber Business.
6.8. LITIGATION. There is no judicial or administrative
action, suit or proceeding, pending or, to SourceOne's knowledge, threatened
against or relating to SourceOne, the Midwest System, the Midwest Licenses, the
Midwest Business or the Other Subscriber Business before the FCC or any federal,
state or local court, arbitration tribunal or governmental authority which
could, individually or in the aggregate: (i) result in the voluntary or
involuntary transfer of any of the Midwest System or the Midwest Licenses; or
(ii) adversely affect any or all of SourceOne, the Midwest System, the Midwest
Licenses, the Midwest Business or the Other Subscriber Business or the
transactions contemplated in this Management Agreement or the Purchase
Agreement. SourceOne knows of no facts establishing a reasonable basis for any
such action,
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suit, proceeding or any governmental investigation relating to the same.
6.9. COMPLIANCE WITH LAWS. SourceOne is in compliance, in all
material respects, with all applicable laws, regulations and administrative
orders of: (i) the United States, including, without limitation, the FCC; (ii)
any state; and (iii) any municipality, county, or other subdivision of any of
the foregoing, to which SourceOne, the Midwest System, the Midwest Licenses, the
Midwest Business or the Other Subscriber Business may be subject.
6.10. TAXES AND REQUIRED FILINGS. With respect to the Midwest
System, the Midwest Licenses and the Midwest Business, SourceOne has filed all
federal, state, local, foreign and other tax returns and reports of every nature
required to be filed and has paid or will pay all taxes and other assessments
due (other than certain Illinois and Chicago telecommunications taxes which
accrued prior to the filing of SourceOne's bankruptcy petition), including, but
not limited to the following FCC-mandated requirements: (i) universal service;
(ii) Telecommunications Relay Service ("TRS"); (iii) North American Numbering
Plan ("NANPA"); (iv) Local Number Portability ("LNP"); (iv) Equal Employment
Opportunity ("EEO"); (v) ownership information; (vi) regulatory fees; and (vii)
FCC submissions in connection with electronic filing requirements, including but
not limited to submissions required in connection with the FCC's Universal
Licensing System ("ULS").
6.11. THIRD PARTY AND GOVERNMENTAL CONSENTS. Aside from the
STA and approval by the Bankruptcy Court, no approval, consent, waiver, order or
authorization of, or registration, qualification, declaration, or filing with,
or notice to, any federal, state or local governmental authority or other third
party is required on the part of SourceOne in connection with the execution or
performance of this Management Agreement.
6.12. MIDWEST SYSTEM. The Midwest System Assets other than the
Other Midwest Transmitter Sites: (i) constitute all of the properties, assets,
and rights that have been used in the conduct of the Midwest Business and which
are necessary to the operation of the Midwest Business; and (ii) together with
the Other Subscriber Assets, generate all of SourceOne's Net Service Revenue (as
defined in Section 1.6(d)(i) of the Purchase Agreement). There are no assets of
SourceOne not included in the Midwest System Assets other than the Other Midwest
Transmitter Sites that are material to the operation of the Midwest Business and
the absence of which would have a material adverse effect on
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the Midwest Business.
7. REPRESENTATIONS OF AQUIS. As of the Take-Over Date, Aquis knows of
no material statement or omission of SourceOne that gives rise to any: (i)
material breach of its representations, warranties, or covenants under this
Management Agreement or in connection with the purchase transaction; or (ii)
basis on which the FCC would not issue its consent to assignment of the Midwest
Licenses to Aquis.
8. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each Party represents
to each other Party as appropriate that: (i) it is a legal organization, duly
organized and validly existing under the laws of the state of its organization;
(ii) it has all necessary power, authority and capacity to enter into and
perform the terms of this Management Agreement; (iii) this Management Agreement
has been authorized by all necessary action; (iv) this Management Agreement has
been duly executed by it and constitutes a valid and binding agreement
enforceable in accordance with its terms; and (v) the execution, delivery and
performance of this Management Agreement does not conflict with the Party's
organizational documents or any indenture, mortgage, deed of trust, agreement or
other instrument by which the Party is bound, and does not violate any law or
regulation, or order or decree of any court applicable to the Party.
9. FCC COMPLIANCE. The Parties agree to comply with all applicable FCC
Rules governing the Midwest Licenses and operation of the Midwest System and
specifically agree as follows:
9.1. Aquis may not represent itself as the DE JURE licensee of
the Midwest System, but Aquis may represent itself as the party in DE FACTO
control of the Midwest System.
9.2. No Party will represent itself as the legal
representative of any other Party before the FCC, but each Party will cooperate
with the other Parties with respect to matters concerning implementation of this
Management Agreement, the Midwest Licenses and the Midwest System.
9.3. In addition to all other obligations imposed on SourceOne
pursuant to this Management Agreement, SourceOne will cooperate with Aquis and
take all actions necessary to keep the Midwest Licenses valid and in full force
and effect and SourceOne will use its best efforts and cooperate with Aquis in
submission to the FCC or any other governmental authority all reports,
applications, renewals, filings or other documents necessary to
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keep the Midwest Licenses valid and in full force and effect during the Term of
this Management Agreement.
9.4. SourceOne and Aquis are familiar with a DE JURE
licensee's responsibilities under the Act and FCC Rules. Nothing in this
Management Agreement is intended to diminish or restrict: (i) SourceOne's
remaining obligations as DE JURE licensee of the Midwest System; or (ii)
SourceOne's obligations as DE JURE and DE FACTO licensee of the Other Systems.
All Parties desire that this Management Agreement be carried out in compliance
with FCC Rules. In the event that the FCC determines that any provision of this
Management Agreement violates any FCC Rule, regulation or policy, the Parties
will make good faith efforts immediately to correct the problem to bring this
Management Agreement into compliance consistent with the intent of the Parties.
10. SOURCEONE COVENANTS. In view of the fact that Aquis anticipates
committing substantial resources to meeting its obligations pursuant to this
Management Agreement and must rely on the maintenance of the Midwest Licenses
and Midwest System to carry out its responsibilities hereunder, SourceOne
covenants and agrees that it:
10.1. Aside from claims asserted prior to SourceOne's
bankruptcy cases and those previously allowed by the Bankruptcy Court, will not
permit any liens or encumbrances to attach to the Midwest Licenses, the Midwest
System, the Midwest Business or the Other Subscriber Business and, if any such
liens and encumbrances arise, SourceOne will immediately cure and remove all
such liens and encumbrances to the extent possible;
10.2. Will not take any action that would jeopardize the
Midwest Licenses, the Midwest System, the Midwest Business or the Other
Subscriber Business or the rights of Aquis under this Management Agreement or
the Purchase Agreement;
10.3. Will immediately notify Aquis of any pending or
threatened action by the FCC or any other governmental agency, court or third
party to suspend, revoke, terminate or challenge the Midwest Licenses, the
Midwest System, the Midwest Business or the Other Subscriber Business or to
investigate the operation thereof; and
10.4. Will not interfere with Aquis's exercise or performance
of its rights and obligations pursuant to this Management Agreement.
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11. INDEMNIFICATION.
11.1. INDEMNIFICATION BY SOURCEONE. SourceOne will defend,
indemnify and hold Aquis, any subsidiary or affiliate thereof, and its
respective successors, officers, directors and controlling persons (the
"Indemnified Aquis Group") harmless from and against any and all losses,
liabilities, damages, costs or expenses (including reasonable attorney's fees,
penalties and interest) payable to or for the benefit of, or asserted by, any
party resulting from, arising out of, or incurred as a result of: (i) the breach
of any representation made by SourceOne herein or in accordance herewith; (ii)
the breach of any warranty or covenant made by SourceOne herein or in accordance
herewith; (iii) any claim, whether made before or after the Take-Over Date, or
any litigation, proceeding or governmental investigation, whether commenced
before or after the Take-Over Date, arising out of the business of operating the
Systems prior to the Take-Over Date, or otherwise arising out of any act or
occurrence prior to, or any state of facts existing as of the Take-Over Date
(regardless of whether or not disclosed or known to Aquis as of the Take-Over
Date) arising from any act or omission of SourceOne; or (iv) SourceOne's failure
to pay, perform or discharge any of its obligations, liabilities, agreements or
commitments. Notwithstanding the provisions of this Section 0, Aquis will have
no claims for indemnification against SourceOne based on a non-willful breach of
the representations and warranties set forth in Sections 0, 0 and 0 of this
Management Agreement as they relate to Other Midwest Transmitter Sites.
11.2. INDEMNIFICATION BY AQUIS. Aquis will defend, indemnify
and hold SourceOne, and its respective successors, officers, directors and
controlling persons (the "Indemnified SourceOne Group") harmless from and
against all direct losses, liabilities, damages, costs or expenses (including
reasonable attorney's fees, penalties and interest) payable to or for the
benefit of, or asserted by, any party resulting from, arising out of, or
incurred as a result of: (i) the breach of any representation made by Aquis
herein or in accordance herewith; (ii) the breach of any warranty or covenant
made by Aquis herein or in accordance herewith; or (c) any claim, whether made
after the Take-Over Date, or any litigation, proceeding or governmental
investigation arising out of Aquis's operation of the Midwest Business or
Aquis's acting as reseller on the Other Systems pursuant to this Management
Agreement after the Take-Over Date.
11.3. SURVIVAL OF COVENANTS AND WARRANTIES. This Section 0 of
this Management Agreement will survive the
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termination of this Management Agreement, and will be fully enforceable at law
or in equity against such other Party and its successors and assigns for a
period of one (1) year after the termination of this Management Agreement. Any
investigation at any time made by or on behalf of (or any disclosure to) any
Party will not diminish in any respect whatsoever its right to rely on the
representations and warranties of any other Party.
11.4. NOTICE OF CLAIMS.
11.4.1. Each Party will give prompt written
notice to any other Party of any claim against the Party giving notice which
might give rise to a claim by it against the other Party based upon the
indemnity provisions contained herein, stating the nature and basis of the claim
and the actual or estimated amount thereof;
11.4.2. Failure to give notice under Section 0 hereof
will not affect the obligation of the indemnifying Party to provide
indemnification in accordance with the provisions of this Section 0 unless, and
only to the extent that, such indemnifying Party is actually prejudiced thereby.
11.4.3. In the event that any action, suit or
proceeding is brought against any member of the Indemnified SourceOne Group or
the Indemnified Aquis Group with respect to which any Party may have liability
under the indemnification provisions contained herein, the indemnifying Party
will have the right, at its sole cost and expense, to defend such action in the
name of or on behalf of the indemnified Party.
11.4.4. In connection with such action, suit or
proceeding which might give rise to a claim by one Party against another Party
based on the indemnity provisions in this Section 0, the Parties will render to
each other such assistance as may reasonably be required in order to ensure the
proper and adequate defense of any such action, suit or proceeding.
11.4.5. An indemnified Party will have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying Party, if representation of such indemnified Party by the counsel
retained by the indemnifying Party would be inappropriate because of actual or
potential differing interests between such indemnified Party and any other Party
represented by such counsel.
11.4.6. No Party will make any settlement of any
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claim which might give rise to liability of another Party under the
indemnification provisions contained herein without the written consent of such
other Party, which consent such other Party covenants will not be unreasonably
withheld.
11.5. Notwithstanding the provisions of this Section 0, Aquis
will not have a claim for indemnification against SourceOne based on a
nonwillful breach of the representations and warranties set forth in Sections 0,
0 and 0 hereof.
12. TERM AND TERMINATION.
12.1. TERM. The "Term" of this Management Agreement will
commence on the Take-Over Date and end on the Termination Date as defined in
Section 0 hereof.
12.2. TERMINATION. This Management Agreement will
automatically terminate on the day ("Termination Date") upon any of the
following events occurs:
12.3. Purchase Closing, in the event that Purchase Closing
occurs pursuant to the Purchase Agreement;
12.4. Termination of the Purchase Agreement on the Purchase
Termination Date in the event that Purchase Closing does not occur pursuant to
the Purchase Agreement;
12.5. The loss, revocation or expiration without renewal of
all Midwest Licenses;
12.6. Otherwise, as mutually agreed by the Parties in writing.
13. NOTICES. All notices or other communications which may be given or
made pursuant hereto will be in writing and delivered by hand delivery, courier
or facsimile transmission to the following:
If to SourceOne: with copy to:
David P. Harris Audrey P. Rasmussen, Esquire
SourceOne Wireless, Inc. O'Connor & Hannan
1040 S. Milwaukee Ave. 1919 Pennsylvania Ave., N.W.
Wheeling, IL 60090 Suite 800
Fax: (847) 465-5575 Washington, DC 20006
Fax: (202) 466-2198
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If to Aquis: with copy to:
Mr. John X. Adiletta Richard S. Becker, Esquire
Aquis Communications, Inc. Richard S. Becker &
1719A Route 10; Suite 300 Associates, Chartered
Parsippany, NJ 07054 1915 I St., N.W.; 8th Fl.
Fax: (973) 560-8060 Washington, DC 20006
Fax: (202) 296-7458
Each Party may designate by notice in writing a new address for it and/or its
attorney to which any notice or communication may thereafter be given. Each
notice or communication will be deemed sufficiently given and received for all
purposes at such time as it is delivered to the addressee or at such time as
delivery is refused by the addressee upon presentation.
14. AMENDMENT. This Management Agreement may not be amended, modified
or changed except in writing signed by all Parties hereto.
15. SUCCESSORS AND ASSIGNS. Aquis may assign its rights and delegate
its duties under this Management Agreement with the consent of SourceOne, which
consent may not be unreasonably withheld or delayed; provided, however, that
Aquis may assign this Management Agreement to an affiliate or subsidiary of
Aquis without SourceOne's prior consent and solely upon notice to SourceOne that
the Aquis affiliate or subsidiary agrees to be bound by the terms of this
Management Agreement and thereupon Aquis will have no further obligations
hereunder. SourceOne may not assign its rights or delegate its duties under this
Management Agreement without the prior consent of Aquis, which consent may be
denied in Aquis's sole and unfettered discretion. This Management Agreement will
be binding upon and inure to the benefit of the Parties hereto, and their
respective heirs, representatives, successors and permitted assigns.
16. GOVERNING LAW. This Management Agreement will be governed by and
construed in accordance with the laws of the State of New York without giving
effect to its principles of conflict of laws.
17. SEVERABILITY. In the event that any provision of this Management
Agreement is held to be invalid, void, or illegal by the FCC, any governmental
authority or court of competent jurisdiction, the remaining provisions of the
Management Agreement will remain in full force and effect and this Management
Agreement will be construed reasonably to preserve the original intent of
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the Parties hereto insofar as practical.
18. INTERPRETATION. This Management Agreement is to be construed fairly
and simply and not strictly for or against any of the Parties hereto. The
section headings contained herein are for convenience of reference only, are not
part of this Management Agreement, and will not affect the meaning or
interpretation of any provision hereof.
19. ENTIRE AGREEMENT. This Management Agreement and the Purchase
Agreement constitute the entire agreement between the Parties with respect to
the transactions contemplated hereby, and supersede all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein, except as may otherwise be specified in this Management Agreement
and/or the Purchase Agreement.
20. BUSINESS DAYS. "Business Days" for the purposes of this Management
Agreement will be considered days on which federally-chartered banks in New York
are open to the public for transaction of business.
21. COUNTERPARTS. This Management Agreement may be executed in as many
counterparts as may be required, and all counterparts will collectively
constitute a single agreement.
22. SCHEDULES. The Parties agree that they will cooperate and use their
reasonable best efforts to generate the Schedules of Midwest System Assets and
Other Subscriber Assets no later than ten (10) Business Days prior to the
Purchase Closing.
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IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Management Agreement as of the Execution Date first written above.
SOURCEONE WIRELESS II, L.L.C.
By: /s/ Steven J. Zabel
---------------------
Name: Steven J. Zabel
Title: Chief Financial Officer
SOURCEONE WIRELESS, L.L.C.
By: /s/ David P. Harris
---------------------
Name: David P. Harris
Title: DIP Manager
SOURCEONE WIRELESS, INC.
By: /s/ David P. Harris
---------------------
Name: David P. Harris
Title: DIP Manager
AQUIS COMMUNICATIONS, INC.
By: /s/ John X. Adiletta
---------------------
Name: John X. Adiletta
Title: President and Chief Executive Officer
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Exhibit 2.4
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: Chapter 11
Case Nos. 99 B 13841 and 20953
SOURCEONE WIRELESS, INC., and (Jointly Administered)
SOURCEONE WIRELESS, LLC, Hon. Eugene R. Wedoff
Hearing Date: November 18, 1999
Debtors. Hearing Time: 10:00 a.m.
ORDER (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
This matter initially came before the Court on the Motion dated July
30, 1999 ("Motion") filed by Source0ne Wireless, Inc. and Source0ne Wireless,
LLC (together, "Debtors") concerning the sale of substantially all of the
Debtors' Assets pursuant to sections 363 and 365 of title 11 of the United
States Code, 11 U.S. C. Sections 101, ET SEQ. ("Bankruptcy Code"), and which,
among other things, sought approval of the Asset Purchase Agreement dated as of
August 2, 1999, as amended by the Amendment dated as of November 15, 1999
("Purchase Agreement") (substantially in the form attached to the Motion)
between Aquis Communications, Inc. ("Aquis") and the Debtors and Source0ne
Wireless II, LLC.
In conjunction with the Motion, the Debtors filed an Emergency Motion
dated July 30, 1999, to approve an Agreement Pending Purchase Closing
("Management Agreement") with Aquis. As recited in the Emergency Motion, due to
the Debtors' insufficient resources to continue operations and its lenders
unwillingness to continue post petition financing, Aquis agreed, on an emergency
basis, to manage the Debtors' midwest operations, including bank accounts
related to that business, and to assume certain financial responsibilities as
set forth in the Management Agreement pending the closing of the Purchase
Agreement. The Emergency Motion was granted by order dated August 4, 1999.
<PAGE>
The Court also entered an order dated August 3, 1999, preliminarily
granting the Motion and, among other things, approving the form and manner of
service of the Notice of Proposed Sale ("Sale Notice") and setting a schedule
for filing and considering objections to the Motion. The Official Committee of
Unsecured Creditors ("Committee") filed an objection to the Motion. No other
objections to the Motion were filed. The Debtors filed a Memorandum dated August
23, 1999, in response to the Committee's Objection. The Debtors' primary secured
lender, Foothill Capital Corporation, as agent ("Foothill"), submitted its
Response dated August 23, 1999, in support of the sale to Aquis (or higher
bidder) and in support of and supplementing the Debtors' Memorandum. Two other
secured lenders, Glenayre Electronics, Inc. ("Glenayre") and Associates Capital
Corporation ("Associates") filed Responses to the Committee's Objection and
adopted the Debtors' Memorandum as supplemented by Foothill's Response.
After a hearing, the Court entered a final order dated September 9,
1999 ("Procedures Order"), which, among other things, (a) granted the Motion;
(b) approved certain sale procedures for the sale and assignment of the
Transferred Assets (as defined in the Purchase Agreement) and the Debtors' other
assets ("Other Assets") identified in the Procedures Order and the Sale Notice;
(c) provided certain bid protections and outlined procedures ("Section 365
Procedures") for the treatment of executory contracts and unexpired leases; and
(d) recognized lienholders' rights to credit bid pursuant to Bankruptcy Code
section 363(k).
A hearing was held on September 16, 1999 ("Hearing") at which the
Debtors conducted an auction of the Transferred Assets and the Other Assets. At
the Hearing, Aquis was the only bidder for the Transferred Assets and certain
other bidders made offers for the Other Assets, The other bidders whose offers
were the highest for the Other Assets are identified on .EXHIBIT A and separate
orders approving those offers are being submitted to the Court.
At the Hearing, representatives of secured lenders advised the Court
that those lenders had reached an agreement on the allocation of the Purchase
Price under the Purchase Agreement. After the Hearing, disputes arose between
the Debtors and Foothill, on the one hand, and Aquis, on the other hand,
concerning purchase price adjustments pursuant to Section 1.6(d) of the Purchase
Agreement. The status hearing on entry of this Order was continued numerous
times as
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the parties attempted to resolve this dispute. The parties have resolved this
dispute upon the terms stated in the Amendment, which is attached as EXHIBIT B
and provides a Purchase Price comprised of a $2.25 million Cash Payment and
delivery of $1.5 million of Aquis Shares.
The Court has considered the pleadings, objections, memoranda, and
other submissions concerning the foregoing, the evidence proffered or adduced
at, the arguments of counsel made at, and the record of the hearings related to
the foregoing proceedings. Therefore, after due deliberation, the Court has
determined that just cause for the relief granted in this Order. is established,
and
THE COURT HEREBY MAKES THE FOLLOWING FINDINGS OF FACT AND CONCLUSIONS
OF LAW:
JURISDICTION
A. This Court has jurisdiction over this matter under sections 157 and
1334 of title 28 ("Title 28") of the United States Code. The matters determined
under this Order are core proceedings under section 157(b)(2) of Title 28. The
statutory predicates for the relief granted by this Order are, among others,
sections 363 and 365 of title 11 of the Bankruptcy Code.
NOTICE
B. Proper, timely, adequate, and sufficient notice of the Motion, the
proposed sale, the Sale Notice, the Procedures Order, and the Hearing has been
provided in accordance with applicable law and rules and no other or further
notice of those pleadings or proceedings, or entry of this Order is required
except as required under the Section 365 Procedures.
C. Under the circumstances, a reasonable opportunity to object or be
heard has been afforded to all interested persons and entities, including all
entities who claim interests in the Transferred Assets and Other Assets.
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JUSTIFICATION FOR SALE
D. The Debtors have established sound business justifications for the
proposed sale of the Transferred Assets to Aquis and the Other Assets as set
forth in EXHIBIT A, including, but not limited to, the Debtors' financial
condition and the diminution in value or loss of the Transferred Assets and the
Other Assets if they are not promptly sold as provided in the Purchase Agreement
and under this Order. The closing of the transactions contemplated by the
Purchase Agreement and the sale of the Other Assets are in the best interest of
the Debtors, their estates and creditors, and other parties.
E. Under the circumstances, the thorough marketing process engaged in
by the Debtors and their professionals and the procedures followed under the
Motion and Procedures Order have provided the Debtors adequate opportunity to
maximize the sales price for the Transferred Assets and Other Assets.
F. Aquis' offer under the terms and conditions of the Purchase
Agreement and as approved by this Order, is the highest and best offer for the
Transferred Assets. Without limiting the foregoing, the Purchase Price (as
defined in the Purchase Agreement) constitutes full and adequate consideration
and reasonably equivalent value for the Transferred Assets.
G. The offers of the bidders ("Other Bidders") for the Other Assets, as
identified in EXHIBIT-A, upon the terms of the Procedures Order and as approved
by this Order, are the highest and best offers for the Other Assets. The bid
prices constitute full and adequate consideration and reasonably equivalent
value for the Other Assets.
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H. Pursuant to Section 363(f)(2) of the Bankruptcy Code, each of
Foothill, Glenayre, Associates, and Newcourt Financial USA, Inc. d/b/a Fujitsu
Financial Services ("Fujitsu") have expressly or impliedly consented to the sale
of the Transferred Assets.
I. The terms and conditions of the sale of the Transferred Assets and
Other Assets and the transactions authorized by this Order are fair and
reasonable.
J. The transactions contemplated in the Purchase Agreement and the
Motion, as approved, and implemented by this Order, are in compliance with and
satisfy all applicable provisions of the Bankruptcy Code, including section 363
and, upon satisfaction of the Section 365 Procedures, section 365. The Debtors
may sell the Transferred Assets and Other Assets free and clear of all
Encumbrances as provided below.
K. A portion of the Other Assets for which Leavitt Communications, Inc.
("Leavitt") was the highest offeror in the bid amount of $24,000 ("Leavitt
Proceeds") are assets that would otherwise have been part of the Transferred
Assets. Aquis consented to the sale to Leavitt and the payment of the Leavitt
Proceeds to Debtors (subject to Foothill's first priority security interest in
those proceeds) in exchange for a reduction of the cash portion of the Purchase
Price (as defined in the Purchase Agreement) by the amount of the Leavitt
Proceeds received by Debtors.
SECTION 365 PROCEDURES
L. Pursuant to the Purchase Agreement and section 365 of the Bankruptcy
Code, the Debtors will assume and assign Section 365 Contracts (as defined in
the Purchase Agreement) to Aquis. The assumption and assignment will be
effective as of the Closing Date (as defined in the Purchase Agreement).
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M. As soon as practicable after entry of this Order, the Debtors and
Aquis will specify the Section 365 Contracts and will file with the Court and
serve by mail on each non-debtor party to a written Section 365 Contract a
notice ("Assumption Notice") (a) stating the Debtors' intention to assume and
assign the non-debtor party's Section 365 Contract as of the Closing of the
Purchase Agreement, (b) specifying the amount and manner of payment to cure
defaults and permit assumption and assignment as required under Bankruptcy Code
section 365; (c) describing the adequate assurance of future performance of the
assignee, (d) setting a hearing before the Court on not less than five (5)
business days notice ("Assumption Hearing") to consider objections, if any, to
the cure amounts and to authorize assumption and assignment of the Section 365
Contracts, (e) advising the non-debtor party to the Section 365 Contract that,
if no objection is made by the Assumption Hearing, the cure amount in the
Debtors' Assumption Notice will govern and the non-debtor party will be barred
from asserting any other claim against the Debtors or Aquis regarding the
Section 365 Contract.
N. Notwithstanding the entry of this Order, the order entered pursuant
to the Section 365 Procedures and providing for the assumption and assignment of
the Section 365 Contracts will constitute a determination of those contracts and
leases to be assumed and assigned in connection with the sale of all or
substantially all of the Debtors' assets.
GOOD FAITH
O. The Purchase Agreement was negotiated and entered into by the
parties in good faith, from arm's length bargaining positions, and without
collusion. Aquis is not an insider, as that term is defined in section 101(31)
of the Bankruptcy Code. Each of Aquis and the Other Bidders is a purchaser in
good faith, with respect to the Transferred Assets and the Other Assets
6
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respectively, as that term is used in the Bankruptcy Code, and, as such, is
entitled to the full protection of section 363(m) of the Bankruptcy Code as the
transferee of the Transferred Assets and the Other Assets. Aquis will be acting
in good faith pursuant to section 363(m) of the Bankruptcy Code in closing the
transactions contemplated by the Purchase Agreement in accordance therewith,
including the assignment of the Section 365 Contracts in accordance with the
Section 365 Procedures at any time after the entry of this Order.
P. The Debtors have full corporate power and authority necessary to
enter into the Purchase Agreement, any related agreement and all other documents
contemplated by the Purchase Agreement or such other related agreements, and the
sale of the Transferred Assets by the Debtors has been duly and validly
authorized by all necessary corporate power and authority necessary to
consummate the transactions contemplated by the Purchase Agreement. No consents
or approvals, other than this Order, are required for Debtors to consummate such
transactions.
BASED ON THE FOREGOING, THIS COURT ORDERS, ADJUDGES, AND DECREES AS
FOLLOWS:
1. The Purchase Agreement (a copy of which is attached as EXHIBIT B)
and all transactions contemplated thereby be, and hereby are, approved in all
respects, and the Debtors are authorized and directed to enter into, and to
implement and perform their obligations under, the Purchase Agreement and to
take such other actions as are reasonably necessary to effectuate the terms of
the Purchase Agreement.
2. The Debtors are authorized and directed pursuant to, among others,
sections 363(b) and (f) of the Bankruptcy Code to sell the Transferred Assets to
Aquis and the Other Assets to the Other Bidders free and clear of any and all
liens, claims, (including any and all "claims" as defined in section 101(5) of
the Bankruptcy Code and any and all rights and claims under any
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bulk transfer statutes and similar laws ("Claims")), mortgages, guarantees,
security agreements, security interests, pledges, hypothecations, charges,
obligations, rights, restrictions, interests, and encumbrances in or with
respect to any of the Assets (including without limitation any options or rights
to purchase such Transferred Assets or Other Assets and any mechanic's or tax
liens), whether imposed by agreement, understanding, law, equity, or otherwise
(collectively, "Encumbrances"), except. as specifically provided in the Purchase
Agreement and this Order, with all such Encumbrances to attach only to the
proceeds of sale and the interest earned thereon with the same priority,
validity, force and effect as they now have in or against the Transferred Assets
and Other Assets.
3. The Debtors are authorized and directed at the Closing Date to
deliver, in accordance with the terms of the Purchase Agreement, bills of sale
and such other documentation that may be necessary or reasonably requested by
Aquis to evidence the transfers contemplated by the Purchase Agreement and this
Order.
4. On the Closing Date, the Debtors' creditors are authorized and
directed to execute such documents and take all other actions as may be
necessary to release their Encumbrances in or against the Assets, if any, as
such Encumbrances may have been recorded or may otherwise exist.
5. The Debtors have received the Leavitt Proceeds subject to Foothill's
first priority security interest in those proceeds and the cash portion of the
Purchase Price is reduced by the amount of the Leavitt Proceeds received by the
Debtors.
6. The Debtors are authorized and directed to implement and satisfy the
Section 365 Procedures and to assume and assign the Section 365 Contracts to
Aquis on the Closing Date.
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7. In connection with the assumption and assignment of the Section 365
Contracts and as specifically provided in the Purchase Agreement, the Debtors
will cure any outstanding defaults that must be cured, except for the Debtors'
contract with MCI Telecommunications, Inc. All payments and other actions to
cure any outstanding defaults with respect to the Section 365 Contracts will be
specified in the Assumption Notice and neither the Debtors nor Aquis will be
required to take any other action or to make any other payment with respect to
the cure of outstanding defaults under the Section 365 Contracts. All non-debtor
parties to the Assigned Agreements are hereby enjoined and forever barred from
asserting any claim or default which may exist under such Assigned Agreement
except (a) as specified in the Assumption Notice or (b) if the non-debtor party
objects to the cure amount, then as specified a Court order or agreement among
that non-debtor party, Aquis, and the Debtors.
8. Upon compliance with the Section 365 Procedures, the entry of the
Assumption Order, and assignment to Aquis, on the Closing Date, the Section 365
Contracts will be valid and binding and in full force and effect and enforceable
in accordance with their terms, and, pursuant to section 365(k) of the
Bankruptcy Code, the Debtors and their estates will be relieved from any further
liability with respect to the Section 365 Contracts.
9. The sale, conveyance, and assignment of the Transferred Assets and
the assumption and assignment of the Section 365 Contracts in accordance with
the Section 365 Procedures, pursuant to this Order and the Purchase Agreement
will be binding upon the Debtors, Aquis, all creditors and shareholders of the
Debtors, all persons having or asserting a Claim against, any Encumbrance
against, or any interest in, the Debtors or any of the Transferred Assets, all
parties to the Section 365 Contracts, and all parties to any actions or
proceedings that
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directly or indirectly contest the power or authority of any of the Debtors to
assume and assign the Section 365 Contracts or to sell, assign and convey the
Transferred Assets pursuant to the Purchase Agreement and this Order, or that
seek to enjoin any such assumption, sale, assignment, or conveyance.
10. Except for the Assumed Liabilities . expressly assumed under the
Purchase Agreement and Aquis' obligations under the Management Agreement, Aquis
will not be liable for any Claims against the Debtors or any of their
predecessors or affiliates, and Aquis will have no successor or vicarious
liabilities of any kind or character whether known or unknown as of the Closing
Date, now existing or hereafter arising, whether fixed or contingent, with
respect to the Debtors. Under no circumstances will Aquis be deemed a successor
of or to the Debtors for any Claim or Encumbrances against the Debtors or the
Transferred Assets. The sale, transfer, assignment, and delivery of the
Transferred Assets will not be subject to any such Claims, Encumbrances,
liabilities, or obligations, and all such Claims, Encumbrances, liabilities and
obligations will remain with the Debtors (except that nothing in this Paragraph
9 (sic) will in any way expand or increase the liabilities of the Debtors),
except that Aquis will assume the Debtors' obligations under the Section 365
Contracts to the extent such obligations arise after the Closing Date. All
persons holding Claims or Encumbrances will be forever barred and are hereby
enjoined from asserting, prosecuting, or otherwise pursuing such Claims or
Encumbrances against Aquis or the Transferred Assets with respect to any Claim
such person had, has or may have against the Debtors, their estates, their
principals, shareholders, or the Transferred Assets, and following the Closing
Date no creditor of the Debtors will interfere with Aquis' title to or use and
enjoyment of the Transferred Assets based on or related to such creditor's Claim
against the Debtors or any actions that the Debtors may take in their chapter 11
cases.
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11. This Order (a) is and will be effective as a determination that, on
the Closing Date, all Encumbrances existing as to the Transferred Assets prior
to the, Closing Date have been unconditionally released, discharged, and
terminated and (b) is and will be binding upon and will govern the acts of all
entities including, without limitation, all filing agents, filing officers,
title agents, title companies, recorders or mortgages, recorders of deeds,
registrars of deeds, administrative agencies, governmental departments,
secretaries of state, federal, state, and local officials, and all other persons
and entities who may be required by operation of law, the duties of their
office, or contract, to accept, file, register or otherwise record or release
any documents or instruments, or who may be required to report or insure any
title or state of title in or to any of the Assets.
12. If any person or entity that has filed financing statements,
mortgages, mechanic's liens, LIS PENDENS or other documents or agreements
evidencing Encumbrances in or against the Transferred Assets has not delivered
to the Debtors prior to the Closing Date, in proper form for filing and executed
by the appropriate parties, termination statements, instruments of satisfaction,
or releases of all Encumbrances which the person or entity has with respect to
the Assets, the Debtors are hereby authorized and directed to execute and file
such statements, instruments, releases and other documents on behalf of the
person or entity with respect to the Transferred Assets.
13. All entities who are presently, or on the Closing Date may be, in
possession of any of the Transferred Assets are hereby directed to surrender
possession of the Transferred Assets to Aquis on the Closing Date.
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14. On the Closing Date, this Order will be construed and constitute
for any and all purposes a full and complete general assignment, conveyance and
transfer of the Transferred Assets or a bill of sale transferring good and
marketable title in such Transferred Assets to Aquis. Each and every federal,
state, and local governmental agency or department will be, and it hereby is,
directed to accept any and all documents and instruments necessary and
appropriate to consummate the transactions contemplated by the Purchase
Agreement, including, without limitation, documents, and instruments for
recording in any governmental agency or department required to transfer to Aquis
the names and any and all licenses under the Debtors' ownership necessary for
the operations that are associated with the Transferred Assets, and any
termination statements under the Uniform Commercial Code.
15. The transfer of the Transferred Assets pursuant to the Purchase
Agreement and this Order is deemed to be a transfer pursuant to section 1146(c)
of the Bankruptcy Code and, accordingly, will not be taxed under any law
imposing a sales tax, stamp tax, or similar tax.
16. The hens of Foothill, Glenayre, Associates, and Fujitsu will be
deemed to attach to the Purchase Price proceeds with the same validity, extent,
and priority as existed prior to the Closing. The Debtors are hereby authorized
and directed to pay or cause to be paid the following amounts to the following
persons contemporaneously with the Closing:
a. To Fujitsu, in full satisfaction of its liens on the Debtors'
interest in Calling Party Pays property, $44,222 of the Aquis
Shares.
b. To Glenayre, in full satisfaction of its liens on the Debtors'
interest in Calling Party Pays property, $40,871 of the Aquis
Shares.
c. To Associates, in full satisfaction of its liens on the Debtors'
interest in Calling Party Pays property, $16,146 of the Aquis
Shares.
d. To Glenayre, in full satisfaction of its liens on the Debtors'
interest in the equipment located at the Midwest Transmitter
Sites and the Other
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Midwest Transmitter Sites, $259,129 of the Aquis Shares and
$150,000 of the Cash Payment.
e. To Associates, in full satisfaction of its liens on the Debtors'
interest in the equipment located at the Midwest Transmitter
Sites and the Other Midwest Transmitter Sites, $133,854 of the
Aquis Shares and $75,000 of the Cash Payment.
f. To Foothill, in full satisfaction of its liens on the Debtors'
interest in the Transferred Assets, the remainder of the Purchase
Price.
All such payments and distributions to the foregoing parties will be and are
hereby deemed to be final and irrevocable, notwithstanding anything to the
contrary contained in the Motion, the Purchase Agreement, the Order, or any
subsequent order entered or plan confirmed in the Debtors' case.
17. Pursuant to the Management Agreement and notwithstanding any other
agreement or instruction, prior to the Closing of the Purchase Agreement and
while the Management Agreement is in effect, Foothill will not seek to direct
funds from the Debtors' bank accounts managed by Aquis, including any lockbox
account, without further Court order; provided, however, that this restriction
is not applicable to the debtor-in-possession operating and payroll accounts.
18. This Order will be binding upon, and will inure to the benefit of,
the Debtors and Aquis and their respective successors and assigns, including,
without limitation, any trustee, responsible person, estate administrator,
representative or similar person hereinafter appointed for or in connection with
any of the Debtors' estates or affairs in this or any subsequent case under the
Bankruptcy Code involving any of the Debtors.
19. Nothing herein constitutes: a) a finding of good faith with respect
to; or b) authorization for the Debtors to assume, or to assume and assign to
Aquis or any other party: i) that certain Subordination Agreement dated
September 8, 1997 among SourceOne Wireless, Inc., Foothill, Sol Friedman and
Wheeling Realty Corporation (the "Subordination Agreement"); or ii)
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that certain lease agreement between SourceOne Wireless, Inc. and Wheeling
Realty Corporation dated June 8, 1994, as amended on May 1, 1996 and January 2,
1997 (the "Lease"). Further, neither the Transferred Assets nor the Other Assets
include either the Subordination Agreement or the Lease.
20. Nothing contained in any chapter 11 plan of reorganization (or
liquidation) confirmed in these cases or the order of confirmation confirming
any such plan or order of dismissal will conflict with or derogate the
provisions of the Purchase Agreement or the terms of this Order.
21. This Court retains jurisdiction over the parties for the purpose of
enforcing the provisions of this Order.
22. After the execution of this Order by this Court, with respect to
the Purchase Agreement, Aquis will be entitled to the protection of section
363(m) of the Bankruptcy Code. The transactions contemplated by the Purchase
Agreement are undertaken by Aquis in good faith, as that term is used in section
363(m) of the Bankruptcy Code, and, accordingly, the reversal or modification on
appeal of this Order and the authorization to consummate the transactions
provided herein will not affect the validity of any transfer under the Purchase
Agreement and this Order to Aquis, unless such transfer is duly stayed pending
such appeal.
23. The officers and authorized employees of the Debtors will be, and
they hereby are, authorized and empowered to execute and deliver any and all
documents, and to do any and all acts, as reasonably may be necessary, to
implement the terms of the Purchase Agreement as modified and approved by this
Order.
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24. The Purchase Agreement and any related agreements, documents and
other instruments may be modified, amended, or supplemented by the parties
thereto, in a writing signed by the parties, and in accordance with the terms
thereof without further order of the Court, provided that any such modification,
amendment, or supplement is not material.
25. This Order will be entered without delay and notwithstanding
Federal Rule of Bankruptcy Procedure 7062, this Order will be effective and
enforceable immediately upon entry.
Dated: November 18, 1999. ENTERED: November 18, 1999
/s/ EUGENE R. WEDOFF
--------------------------------
UNITED STATES BANKRUPTCY JUDGE
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
7 1/2% REDEEMABLE PREFERRED STOCK
OF
AQUIS COMMUNICATIONS GROUP, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
I, D. Brian Plunkett, Treasurer of Aquis Communications Group, Inc., a
corporation (the "Corporation") organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on November 16, 1999, adopted the following resolution
creating a series of 100,000 shares of 7 1/2% Redeemable Preferred Stock, par
value $.01 per share, designated as 7 1/2% Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation is
hereby created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
1. DESIGNATION AND NUMBER. The designation of the series of preferred
stock fixed by this resolution shall be "7 1/2% Redeemable Preferred Stock" (the
"7 1/2% Preferred Stock") and the number of shares constituting such series
shall be 100,000.
2. RANK. The 7 1/2% Preferred Stock shall rank: (i) prior to all of the
Corporation's Common Stock, par value $.01 per share ("Common Stock"), (ii)
prior to any class or series of capital stock of the Corporation hereafter
created either specifically ranking by its terms junior to the 7 1/2% Preferred
Stock or not specifically ranking by its terms senior to or on parity with the
7 1/2% Preferred Stock (collectively with the Common Stock, "Junior
Securities"); (iii) on parity with any class or series of capital stock of
the Corporation hereafter created specifically ranking by its terms on parity
with the 7 1/2% Preferred Stock ("Parity Securities"); and (iv) junior to any
class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms senior to the 7 1/2% Preferred Stock
("Senior Securities"), in each case, as to payment of dividends or as to
distributions of assets upon liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (all such distributions being
referred to collectively as "Distributions").
<PAGE>
3. DIVIDENDS.
(i) The dividend rate of the 7 1/2% Preferred Stock shall be
computed at a rate of $7.50 per share per annum from the date of the issuance of
the 7 1/2% Preferred Stock. Dividends shall be payable in cash out of funds
legally available therefor on the Redemption Date (as hereinafter defined).
Dividends on shares of 7 1/2% Preferred Stock shall be cumulative and shall
accrue (whether or not declared), without interest, from the date of issuance.
On the Redemption Date, all dividends which shall have accrued on each share of
7 1/2% Preferred Stock outstanding on the applicable record date shall
accumulate and be deemed to become "due." Any dividend which shall not be paid
on the Redemption Date shall be deemed to be "past due" (a "Cumulated Dividend")
until such Cumulated Dividend shall have been paid.
(ii) The Board of Directors shall declare and pay dividends on
the shares of 7 1/2% Preferred Stock out of funds legally available therefor
(after giving effect to the payment of all requisite dividends on Senior
Securities).
(iii) In order to determine the holders of the 7 1/2%
Preferred Stock entitled to receive dividends, the Corporation shall fix a
record date not more than 60 days prior to any Redemption Date. If any such
Redemption Date should fall on a day that is not a Business Day, then the
Corporation shall pay the applicable dividend on the next succeeding Business
Day. "Business Day" shall mean a day other than a Saturday, Sunday on other day
on which any national securities exchange or quotation system on which the
Common Stock of the Corporation is traded or quoted is authorized or required by
law to close.
(iv) The Corporation shall not: (A) pay or declare and set
apart for payment any dividends or Distributions on the Corporation's Junior
Securities, other than dividends payable in the form of additional shares of the
same Junior Security as that on which such dividend is declared, or (B) redeem,
purchase, or otherwise acquire any shares of Junior Securities or any right,
warrant or option to acquire any Junior Securities, unless full cumulative
dividends (whether or not declared or due) have been, or contemporaneously are,
paid or declared and set apart for such payment on the 7 1/2% Preferred Stock
for all quarterly dividend periods terminating on or prior to the date of
payment of such cumulative dividends..
(v) No full dividends shall be paid or declared and set apart
for payments on any class or series of Parity Securities for any period unless
full cumulative dividends (whether or not declared or due) have been, or
contemporaneously are, paid or declared and set apart for such payment on the
7 1/2% Preferred Stock for all quarterly dividend periods terminating on or
prior to the date of payment of such full cumulative dividends. No full
dividends shall be paid or declared and set apart for payment on the 7 1/2%
Preferred Stock for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the
Parity Securities, for all dividend periods terminating on or prior to the
date of payment of such full cumulative dividends. When dividends are not
paid in full upon the 7 1/2% Preferred Stock and the Parity Securities, all
dividends paid or declared and set apart for payment upon shares of 7 1/2%
Preferred Stock and the Parity Securities shall be paid or declared and set
apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the 7 1/2% Preferred Stock and the
Parity Securities shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of 7 1/2%
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<PAGE>
Preferred Stock and the Parity Securities bear to each other (without taking
into account the dividends so paid and those so declared and set apart for
payment).
(vi) No dividends shall be declared or paid or set apart for
payment on the 7 1/2% Preferred Stock for any period unless at the time of such
declaration or setting apart for payment, full cumulative dividends have been or
simultaneously are declared paid (or declared and a sum sufficient for the
payment thereof set apart for such payment) on any then outstanding Senior
Securities.
4. Voting Rights
(i) Except as may otherwise be provided herein or required by law, the
holders of the shares of 7 1/2% Preferred Stock ("Holders") shall not be
entitled to any vote in respect of such shares.
(ii) On all matters on which the 7 1/2% Preferred Stock is entitled to
vote by law, the Holders shall be entitled to one vote per share of 7 1/2%
Preferred Stock, voting separately as a single class, and the presence, in
person or by proxy, of the Holders of a majority of the outstanding shares of
the 7 1/2% Preferred Stock shall constitute a quorum.
(iii)In the event that the Corporation fails to pay the Cumulated
Dividends on the Redemption Date, the Holders of the 7 1/2% Preferred Stock,
voting separately as a class, shall be entitled to elect two directors. Such
right to vote for the election of such two directors may be exercised at any
annual meeting or at any special meeting called for such purpose as hereinafter
provided or at any adjournment thereof, or by the written consent, delivered to
the Secretary of the Corporation of the holders of a majority of all outstanding
shares of 7 1/2% Preferred Stock, until any such Cumulated Dividends have been
paid in full at which time the term of office of the two directors so elected
shall terminate automatically. So long as such right to vote continues and
unless such rights has been exercised by written consent of the holders of a
majority of the outstanding shares of 7 1/2% Preferred Stock as hereinabove
authorized), the Secretary of the Corporation may call, and upon the written
request of the holders of record of a majority of the outstanding shares of
7 1/2% Preferred Stock addressed to him at the principal office of the
Corporation shall call, a special meeting of the holders of such shares for
the election of such two directors as provided herein. Such meeting shall be
held within 30 days after delivery of such request to the Secretary, at the
place and upon the notice provided by law and in the By-laws for the holding
of meetings of stockholders. No such special meeting or adjournment thereof
shall be held on a date less than 30 days before an annual meeting of
stockholders or special meeting in lieu thereof. If at any such annual or
special meeting or any adjournment thereof the holders of a majority of the
then outstanding shares of 7 1/2% Preferred Stock entitled to vote in such
election shall be present or represented by proxy, then the authorized number
of directors shall be increased by two, and the holders of the 7 1/2%
Preferred Stock shall be entitled to elect the two additional directors.
Directors so elected shall serve until the next annual meeting or until their
successors shall be elected and shall qualify, unless the term of office of
the persons so elected as directors shall have terminated under the
circumstances set forth in the second sentence of this Clause (iii). In case
of any vacancy occurring among the directors elected by the holders of the
7 1/2% Preferred Stock as a class, the remaining director(s) who shall have
been so elected by the Holders of 7 1/2% Preferred Stock as a class shall
cease to serve as directors
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before their terms shall expire, the Holders of the 7 1/2% Preferred Stock then
outstanding and entitled to vote for such directors may, by written consent as
hereinabove provided or at a special meeting of such holders called as provided
above, elect successors to hold office for the unexpired terms of the directors
whose places shall be vacant.
5. LIQUIDATION PRICE. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
amount that shall be paid to a Holder of each share of 7 1/2% Preferred Stock
shall be $100.00 and an additional sum equal to all Cumulated Dividends on a
share of 7 1/2% Preferred Stock (the "Liquidation Price"), and no more. Upon any
liquidation, dissolution or winding-up of the Corporation, the Holders will be
entitled to be paid, after payment or provision for payment of the debts and
other liabilities of the Corporation and after payment or provision for payment
is made upon any Senior Securities, but before any Distribution or payment is
made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Price of all shares outstanding, and the Holders will not be
entitled to any further payment. If, upon any such liquidation, dissolution or
winding-up of the Corporation, the Corporation's assets to be distributed among
the Holders and the holders of Parity Securities (the "Parity Holders") are
insufficient to permit payment in full to such Holders and the Parity Holders of
the aggregate amount which they are entitled to be paid, then the available
assets to be distributed will be distributed ratably among such Holders and
Parity Holders based upon the aggregate Liquidation Price of the 7 1/2%
Preferred Stock and the aggregate liquidation preference of any Parity
Securities held by each such holder and Parity Holder, respectively. The
Corporation will mail written notice of such liquidation, dissolution or
winding-up, not less than 30 days prior to the payment date stated therein, to
each Holder of record. Neither the consolidation or merger of the Corporation
into or with any other corporation or any other person, nor the sale or transfer
by the Corporation of all or any part of its assets, nor the reduction of the
capital stock of the Corporation will be deemed to be a liquidation, dissolution
or winding-up of the Corporation within the meaning of paragraphs 2 and 5.
6. REDEMPTION.
(i) The Corporation may, at its option, redeem shares of the 7 1/2%
Preferred Stock, in whole or in part, out of funds legally available therefor,
by action of the Board of Directors, on any Dividend Payment Date, at a
redemption price of $100.00 per share, plus all Cumulated Dividends on a share
of 7 1/2% Preferred Stock, upon notice and in the manner set forth in, and
subject to the conditions of, this paragraph 7.
(ii) On January 31, 2002, the Corporation shall redeem all
outstanding shares of the 7 1/2% Preferred Stock, at a redemption price of
$100.00 per share, plus all Cumulated Dividends on a share of 7 1/2% Preferred
Stock, upon notice and in the manner set forth in, and subject to the conditions
of, paragraph 7.
(iii) Priority of Redemption. None of the shares of any class or
series of Parity Securities or Junior Securities shall be redeemed, repurchased
or otherwise acquired unless full Cumulated Dividends have been, or
contemporaneously are, paid or declared and set apart for such payment on the
7 1/2% Preferred Stock for all dividend periods terminating on or prior to the
date of payment of such full Cumulated Dividends. None of the shares of 7 1/2%
Preferred Stock shall be redeemed, repurchased or otherwise acquired unless full
Cumulative Dividends
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<PAGE>
have been, or contemporaneously are, paid or declared and set apart for payment
on the Parity Securities or Senior Securities, for all dividend periods
terminating on or prior to the Redemption Date of 7 1/2% Preferred Stock.
7. PROCEDURES FOR REDEMPTION. The 7 1/2% Preferred Stock shall be
redeemed pursuant to subparagraph 6 in the following manner:
(A) Shares of 7 1/2% Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall have
(upon compliance with any applicable provisions of the laws of the State of
Delaware) the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of the Preferred Stock.
(B) In the event of a redemption of shares of 7 1/2% Preferred Stock
pursuant to paragraph 6, notice of redemption of shares of 7 1/2% Preferred
Stock shall be given by the Corporation, not less than 30 nor more than 60 days
prior to the Business Day designated in such notice (the "Redemption Date"), by
first class mail to Holders at their respective addresses then appearing on the
records of the Corporation. Such notice of redemption shall specify the
Redemption Date, the redemption price plus the Cumulated Dividends on a shares
of 7 1/2% Preferred Stock, if any (the "Redemption Price"), the total number of
shares of 7 1/2% Preferred Stock to be redeemed and, if fewer than all the
shares held by such Redeemable Holder, the number of shares to be redeemed from
such holder, and the place or places of payment. On or before the Redemption
Date, each Holder shall surrender to the Corporation or its designated agent, at
such place as it may designate in the redemption notice, certificates, duly
endorsed for transfer, evidencing the number of shares of 7 1/2% Preferred Stock
held by such Holder and being redeemed. Upon such surrender, the Holder shall be
entitled to receive payment of the Redemption Price without interest.
(C) If, on the Redemption Date, (1) notice of redemption has been
mailed or delivered as provided herein, (2) the Corporation has deposited with
an independent paying agent funds necessary to pay the amount due for all shares
of 7 1/2% Preferred Stock subject to such redemption, and (3) all such funds are
available for the sole purpose of paying such amount, then, unless the
Corporation defaults on the payment of the Redemption Price, all shares of
7 1/2% Preferred Stock subject to redemption shall, whether or not certificates
for such shares have been surrendered for cancellation, be deemed to be no
longer outstanding for any purpose and all rights with respect to such shares
shall cease, except the right of the Holder to receive the redemption price,
without interest.
(D) If the Corporation shall not have funds legally available for
redemption of shares to be redeemed pursuant to subparagraph 6(i) on the
Redemption Date, the notice of redemption shall be null and void and at such
time as the Corporation shall have funds legally available for redemption of
such shares and shall determine to redeem the 7 1/2% Preferred Stock on the
terms and conditions set forth in subparagraph 6(i), a new notice of redemption
to Holders shall be required to effect such redemption.
(E) If the funds of the Corporation legally available for the
redemption of all shares of the 7 1/2% Preferred Stock to be redeemed pursuant
to paragraph 6(ii), are insufficient
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<PAGE>
to redeem the total number of outstanding shares of the 7 1/2% Preferred Stock
so required to be redeemed, such funds will be used promptly, and redemptions
pursuant to such paragraph 6(ii) hereof, shall be made ratably among such
holders, and in any event, within 90 days after such funds become legally
available to redeem the balance of such shares or such portion thereof for which
funds are then legally available, on the basis set forth above.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by D. Brian Plunkett, its Treasurer
Date: January 27,2000
AQUIS COMMUNICATIONS GROUP, INC.
By: /s/ D. BRIAN PLUNKETT
--------------------------
D. Brian Plunkett, Treasurer
