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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
COMMISSION FILE NO. 1-13272
OMNIAMERICA, INC.
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
(Name of Small Business Issuer in Its Charter)
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DELAWARE 85-0421409
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
12001 STATE HWY 14 NORTH 87008
CEDAR CREST, NEW MEXICO (Zip Code)
(Address of Principal Executive Offices)
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Issuer's Telephone Number: (505) 281-2197
Securities Registered Under Section 12(b) of the Exchange Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
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Securities Registered Pursuant to Section 12(g) of the Exchange Act:
TITLE OF CLASS
Common Stock, $.01 Par Value
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form 10-KSB, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $62,799,071.
The approximate aggregate market value of voting stock held by
non-affiliates, computed by reference to the average bid and asked prices of
such stock as of September 16, 1998, was $138.6 million. The number of shares of
common stock outstanding as of September 16, 1998, was 15,096,360.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-KSB that are not
historical facts are forward-looking statements ("forward-looking statements")
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which are intended to be covered by the safe
harbors created by those sections. In addition, such forward-looking statements
may be contained in filings made by the Company with the Securities and Exchange
Commission, or press releases or oral statements made from time to time by or
with the approval of an authorized executive officer of the Company. Such
forward-looking statements are necessarily estimates reflecting the best
judgment of the Company's management based upon current information and involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include, but are not limited to, the following
possibilities: increasing competition for tower sites and leasing customers,
increasing difficulty in obtaining zoning and construction permits, difficulties
in integrating acquisitions, changes in regulatory requirements, changes in
telecommunications transmission technology, changes in outsourcing plans of
telecommunications transmission companies and factors inherent in tower
ownership and construction, such as the availability of experienced construction
crews and damage and delays caused by inclement weather. In addition, other
factors which may affect forward-looking statements include those set forth
herein under the caption "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Cautionary Statements" and
appearing elsewhere in this Annual Report and appearing from time to time in
filings made by the Company with the Securities and Exchange Commission. These
risks, uncertainties and other factors should not be construed as exhaustive and
the Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
GENERAL
OmniAmerica, Inc. (formerly Specialty Teleconstructors, Inc.), a Delaware
corporation (together with its subsidiaries, the "Company"), is a leading
provider of wireless communications services and broadcast tower services to the
United States communications industry. The Company's tower services include
owning, leasing, managing and developing multi-use telecommunications sites for
radio and television broadcasting (including high definition television
("HDTV")), paging, cellular, personal communications services ("PCS") and other
wireless technologies; providing wireless infrastructure building and
implementation services primarily for providers of wireless communication
services in the United States; and manufacturing and selling wireless
infrastructure components used in the construction and maintenance of wireless
communication transmitting and receiving facilities. See "-- The Company's Tower
Services."
Strategically, management intends to position the Company to take advantage
of increasing demand from wireless providers and broadcasters for tower space by
expanding its network of tower sites, either owned, leased or managed, and
leasing space to multiple tenants. Adding customers to an existing tower does
not result in materially increased operating expenses for the Company. In
addition, due to the specific configurations required for transmission networks,
significant capital expenditures to install or relocate transmission equipment
and complex regulatory requirements, wireless providers and broadcasters are
generally reluctant to change tower locations. These factors allow the Company
to take advantage of low fixed costs while providing a churn-resistant,
recurring revenue stream by co-locating multiple tenants on its towers. As a
result of the April 23, 1998 merger (the "April Merger") of a wholly-owned
subsidiary of the Company with OmniAmerica Holdings Corporation, a Delaware
corporation ("OmniAmerica Holdings"), and subsequent acquisitions, the Company
now owns or has under definitive acquisition contract over 200 wireless and
broadcast towers providing leased space to third parties. In addition, the
Company has entered into written or
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oral commitments and/or currently is conducting site acquisition or construction
related activities with respect to over 600 new wireless and broadcast towers to
be constructed by the Company pursuant to build-to-suit arrangements or for the
Company's own account.
Concurrent with the implementation of this strategy, the Company will
continue to capitalize on its reputation for quality, on-time construction and
implementation services by building towers for third-party owners, and, in
addition, will continue to manufacture and sell its line of wireless
infrastructure components. During the fiscal year ended June 30, 1998, the
Company's revenues, which include the revenues of OmniAmerica Holdings and its
subsidiaries' tower ownership and leasing services from April 23, 1998, were
approximately $62.8 million, with wireless infrastructure building and
implementation services accounting for approximately 84.5%, sales of wireless
infrastructure components accounting for approximately 13.5% and tower ownership
and leasing services accounting for approximately 2.0%.
The wireless communications industry has changed dramatically in the last
decade, as the rapid development of technological advances, including the advent
of digital technology, and increased licensing of band space by the Federal
Communications Commission ("FCC") have resulted in a proliferation of cellular
telephones, paging devices and similar equipment for business and personal use.
This burgeoning use of wireless communications has resulted in an increased
demand for transmission antennas, which generally results in additional demand
for transmission towers. Meanwhile, local authorities are increasingly seeking
by zoning restrictions and other means to limit the number of towers erected,
particularly in densely populated areas, augmenting a trend toward co-location
of multiple tenants on transmission towers.
Many wireless carriers, which traditionally have owned and operated their
own transmission tower assets, are responding to industry changes by evaluating
the benefits of entering into "build-to-suit" arrangements, in which an
independent tower company builds a group of tower sites which are then leased to
the wireless carrier. The independent tower company owns, leases and operates
the wireless tower infrastructure, often with multiple carriers as tenants on a
given tower. The build-to-suit program offers an end-to-end solution to wireless
carriers and is designed to reduce carriers' capital expenditures and overhead
associated with the traditional methods of acquiring, owning and managing
wireless tower networks. In addition, by entering into a build-to-suit program
involving co-location, a wireless carrier can be perceived as responding to
community concerns regarding tower proliferation, thus improving its community
image. Currently, several wireless carriers have either entered into, or are
negotiating toward entering into, build-to-suit agreements with the Company.
However, there can be no assurance that the Company will successfully enter into
additional significant build-to-suit agreements with any wireless carrier or
that it will be able to reach definitive agreements with the owners of
attractive sites or develop the sites in a cost-effective manner.
Wireless carriers also are considering the benefits of outsourcing their
wireless tower infrastructure in order to raise capital and reduce operating
leverage. A recent example of outsourcing by a wireless carrier is the Company's
acquisition of 52 towers and the exclusive right to manage an additional 3 sites
from Arch Communications Group, Inc. ("Arch") with an arrangement allowing the
Company to acquire up to an additional 80 towers from Arch. See "-- History."
The Company intends to continue the pursuit of other carrier outsourcing
opportunities and acquire additional towers, however, there can be no assurance
that the Company will successfully enter into additional transactions to acquire
outsourced towers.
Many broadcasters face an FCC mandate requiring the introduction of HDTV,
which requires digital technology, beginning in 1999. In order to comply,
station owners subject to the mandate must outlay significant capital to install
new equipment capable of transmitting digital signals, while maintaining
existing analog-related structures and services. The digital equipment will
generally require more tower space than the existing analog transmission
equipment and, in some instances, stronger and taller towers will be required.
As a result, broadcasters owning their own towers may require that their tower
tenants relocate. Alternatively, broadcasters may seek to place digital
transmission equipment on leased tower space. It is anticipated that the
erection, modification and replacement of broadcast towers will accelerate in
response to demand from broadcasters that are required to install digital
television transmission equipment. As a result of the April Merger, the Company
owns a 33 1/3% equity interest in Kline Iron & Steel Co., Inc. ("Kline"), a
diversified steel fabricator that also fabricates broadcasting towers. The
Company is working with broadcasters to
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outsource their tower projects, thereby offering broadcasters an end-to-end
solution designed to reduce capital expenditures while allowing them to conform
to government mandates to deploy digital television signals on a timely basis.
However, it is possible that technological advances in antenna design may
mitigate the need for new transmission towers in the future.
As the Company focuses on its strategy of leasing tower space to wireless
providers and broadcasters by building, buying and managing towers to expand its
own tower network, revenues and earnings from its third-party installation
services and its wireless infrastructure components operations are likely to
decline. Management believes that the decline in revenues and earnings from its
installation services and its components operations will be mitigated over time
by the recurring revenue stream expected from its tower leasing operations.
COMPANY STRUCTURE
The Company is a holding company which conducts its business and operations
primarily through its subsidiaries. The Company's principal operating
subsidiaries include OmniAmerica Towers, Inc., a Delaware corporation (formerly
known as OmniAmerica, Inc.), OmniAmerica Development Corp., a Nevada
corporation, OmniAmerica Holdings Corporation, a Delaware corporation, South
Atlantic Tower Corporation, a Delaware corporation, Specialty Constructors,
Inc., a New Mexico corporation, Specialty Constructors Coatings, Inc., a Nevada
corporation, Specialty Management, Inc., a Nevada corporation, OmniTower, Ltd.,
a Florida limited partnership, Microwave Tower Service, Inc., an Oregon
corporation, Novak & Lackey Construction Co., Inc., an Oklahoma corporation, and
Specialty Combined Resources, Inc., a Texas corporation. The Company's
headquarters for its wireless infrastructure building and implementation
services are located in Cedar Crest, New Mexico, approximately seven miles from
Albuquerque, New Mexico. The Company's headquarters for its tower ownership and
leasing services are located in Independence, Ohio (a suburb of Cleveland,
Ohio). The Company also maintains 26 strategically-placed regional offices
located throughout the United States. See "ITEM 2. DESCRIPTION OF PROPERTIES"
HISTORY
The Company was incorporated in April 1994 under the name "Specialty
Teleconstructors, Inc." for the purpose of acquiring all of the issued and
outstanding shares of capital stock of Michael R. Budagher Specialty
Constructors, Inc. (now named Specialty Constructors, Inc.), whose primary
business involved wireless infrastructure building and implementation services
related to the build-out and expansion of cellular telephone and paging networks
in the U.S. On September 14, 1998, the Company, pursuant to a merger (the
"Reincorporation Merger") with and into a wholly-owned subsidiary of the
Company, changed its name from "Specialty Teleconstructors, Inc." to
"OmniAmerica, Inc." and changed its state of incorporation from Nevada to
Delaware.
In the last three years, the Company has consummated the following material
acquisitions of assets or companies, the largest and most strategically
important of which was the April Merger.
On July 9, 1998, the Company, through a wholly-owned subsidiary, acquired
substantially all the assets of Teleforce, LLC ("Teleforce"), a California
limited liability company providing site acquisition services for the wireless
communications industry, in exchange for $640,000 and 81,270 shares of the
Company's common stock, par value $.01 per share (the "Company Common Stock").
On April 10, 1998, OmniAmerica Towers, Inc. entered into an Asset Purchase
and Sale Agreement with certain wholly-owned subsidiaries of Arch pursuant to
which the Company will acquire substantially all of the telecommunications sites
owned by Arch. The Company is purchasing a portion of such sites at each of
three separate closings. Pursuant to the first closing on June 26, 1998 (the
"Arch First Closing"), the Company acquired a total of 52 towers on 46 sites,
and the exclusive right to manage an additional 3 sites. The Company paid Arch
approximately $13,139,000 for the sites acquired pursuant to the Arch First
Closing. Pursuant to the second closing, which is scheduled to take place on
September 29, 1998 (the "Arch Second Closing"), the Company will acquire
approximately 62 towers on 59 sites, and the exclusive right to manage an
additional 7 sites. The purchase price for the sites acquired pursuant to the
Arch Second Closing is estimated to be
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approximately $20,000,000. A third and final closing is expected to take place
during the last calendar quarter of 1998. The Company, if it so elects, could
acquire approximately 18 additional towers pursuant to the third closing.
On April 23, 1998, the Company consummated the April Merger pursuant to an
Amended and Restated Agreement and Plan of Merger among the Company, OAI
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the
Company ("Acquisition"), OmniAmerica Holdings, OmniAmerica, Inc. (subsequently
renamed OmniAmerica Towers, Inc.), a Delaware corporation and wholly-owned
subsidiary of OmniAmerica Holdings, Omni/HSW Acquisition, Inc., a Delaware
corporation ("Omni/HSW"), and HMTF/Omni Partners, L.P., a Delaware limited
partnership ("OmniPartners"). At the time of the April Merger, Omni/HSW was
merged into OmniAmerica Holdings, with OmniAmerica Holdings surviving, and
immediately thereafter, Acquisition was merged into OmniAmerica Holdings, with
OmniAmerica Holdings surviving as a wholly-owned subsidiary of the Company.
OmniAmerica Holdings and its subsidiaries' operations primarily involve tower
ownership and leasing services. In addition, as a result of the April Merger,
the Company acquired a 33 1/3% equity ownership position in Kline. At the
consummation of the April Merger, the Company issued 6,750,000 shares of Company
Common Stock to OmniPartners, the former stockholder of OmniAmerica Holdings.
OmniPartners is an affiliate of the Dallas-based investment firm of Hicks, Muse,
Tate & Furst Incorporated.
On October 7, 1997, a wholly-owned subsidiary of the Company purchased
substantially all of the assets of Ellis Tower Co., Inc. ("Ellis Tower") in
exchange for $449,405 in cash and 120,848 shares of Company Common Stock. Ellis
Tower, located in Ft. Lauderdale, Florida, provides wireless infrastructure
building services.
On June 30, 1997, the Company acquired Microwave Tower Service, Inc., an
Oregon corporation ("MTS"), pursuant to the merger of a wholly-owned subsidiary
of the Company with and into MTS (the "MTS Merger"). MTS is based in Salem,
Oregon, and designs, engineers, constructs and installs wireless communications
facilities primarily for providers of wireless communications services in the
western half of the U.S. In addition, MTS manufactures and distributes a line of
tower installation products used in the implementation, installation and
maintenance of wireless communications facilities. In connection with the MTS
Merger, the Company issued 2,380,000 shares of Company Common Stock for all of
the outstanding shares of MTS common stock.
On June 1, 1997, a subsidiary of the Company acquired substantially all the
assets of Specialty Constructors Coatings, Inc. ("SCC"), a Cedar Crest, New
Mexico-based provider of lead abatement and other remediation and refinishing
services for elevated metal structures such as water towers, in exchange for
55,814 shares of Company Common Stock.
On May 28, 1997, a wholly-owned subsidiary of the Company acquired
substantially all the assets of Paramount Communication Systems, Inc., a builder
of wireless transmitting and receiving facilities located in Somerdale, New
Jersey, in exchange for 186,047 shares of Company Common Stock.
On May 14, 1997, the Company acquired Novak & Lackey Construction Co.,
Inc., an Oklahoma corporation ("N&L"), pursuant to the merger of a wholly-owned
subsidiary of the Company with and into N&L (the "N&L Merger"). N&L is based in
Oklahoma City, Oklahoma and builds wireless communications facilities and
switching facilities primarily for providers of wireless communications services
in the western half of the U.S. In connection with the N&L Merger, the Company
issued 400,000 shares of Company Common Stock for all of the outstanding shares
of N&L common stock.
On October 31, 1996, a wholly-owned subsidiary of the Company acquired
substantially all the assets of Data Cell Systems, Inc. ("Data Cell"), a builder
of wireless transmitting and receiving facilities located near Phoenix, Arizona,
in exchange for $160,000 in cash and 93,400 shares of Company Common Stock. The
purchase price of the assets acquired from Data Cell is subject to increase by
an amount not to exceed $200,000 in the aggregate if certain pre-tax earnings
targets are achieved during the three fiscal years immediately following the
date of the acquisition and if certain other conditions are met. Such targets
were not attained in the fiscal years ended June 30, 1997 and 1998.
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On July 1, 1995, the Company exchanged 92,308 shares of Company Common
Stock for all of the issued and outstanding capital stock of ST Combined
Resources, Inc., a provider of wireless infrastructure electrical design and
engineering services located in Laguna Hills, California. Following this
acquisition, ST Combined Resources, Inc. changed its corporate name to Specialty
Combined Resources, Inc.
Management will continue to aggressively pursue acquisition opportunities
for existing wireless and broadcast communications sites and towers that meet
its geographical and economic requirements. Certain of such acquisitions, if
consummated, could be significant in size and may be funded with cash, stock of
the Company, increased indebtedness or a combination thereof. The Company is in
various stages of negotiation with owners of sites and towers that meet its
criteria. However, the tower industry is consolidating rapidly, and it is likely
that other tower operators will compete for existing assets in prime areas.
Therefore, there can be no assurances that the Company will be successful in its
acquisition strategy.
INDUSTRY BACKGROUND
The Wireless Communications Industry
Wireless communications towers are primary transmitting and receiving
facilities for wireless communications services such as cellular, paging, PCS,
specialized mobile radio ("SMR") services, enhanced specialized mobile radio
("ESMR") services, and wireless local loop ("WLL") services. Wireless
communications companies require specialized wireless transmission networks in
order to provide service to their customers. Each of these networks is
configured specifically to meet the coverage requirements of the particular
carrier and includes transmission equipment such as antennae, transmitters and
receivers placed at various locations throughout the covered area. These
locations, or communications sites, are critical to the operation of wireless
communications networks and consist of towers, rooftops and other structures
upon which such equipment may be placed. Wireless communications providers
design their networks and select their communications sites in order to optimize
available frequencies relative to their projected usage patterns, topography and
service requirements. Once tower locations and networks are established,
wireless communications providers rarely change tower locations due to the
specifically designed configuration of their networks, high switching costs,
business disruption and regulatory requirements.
The wireless communications industry is growing rapidly as: (i) consumers
become increasingly aware of the uses and benefits of wireless communications
services; (ii) the costs of wireless communications services decrease; and (iii)
new wireless communications technologies continue to be developed. Changes in
U.S. federal regulatory policy have led to a significant increase in the number
of competitors in the wireless communications industry, most recently through
the auction of radio spectrum for PCS. This competition, combined with an
increasing reliance on wireless communications services by consumers and
businesses, has increased demand for higher quality networks characterized by
uninterrupted service and improved coverage. As new carriers build out their
networks and existing carriers upgrade and expand their networks to maintain
their competitiveness, the demand for communications sites is expected to
continue to increase dramatically.
Cellular and Paging. Although SMR and other radio-based communications
technologies have been utilized commercially by taxi cabs, ambulance fleets and
other fleet dispatch services and by government entities such as police and fire
departments for many years, the widespread use of wireless communications
technologies for the general public began with the advent of the cellular
telephone industry. The cellular telephone industry began in 1983 when the FCC
began granting licenses to two licensees in each metropolitan statistical area
("MSA") and many rural areas ("rural service areas") throughout the United
States. Cellular licenses were eventually awarded in 306 MSAs and 428 rural
service areas. In 1986, the FCC granted additional portions of the radio
spectrum to each holder of a cellular license. Cellular networks operate within
a 50 MHz band located in the 800-900 MHz frequency range. Paging services also
began to expand rapidly in the 1980's. Paging services utilize a different
portion of the radio spectrum and, while not offering two-way voice transmission
capability, historically have offered a lower-cost alternative for mobile
communications than cellular telephony.
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PCS. During the late 1980s and early 1990s, advances in technology of
wireless communications gave rise to a new technology known as PCS. In 1993,
Congress enacted legislation directing the FCC to allocate a portion of the
radio spectrum for PCS via competitive bidding. In response, the FCC established
PCS service areas in the United States and began to hold auctions for portions
or "Blocks" of the radio spectrum designated for PCS services. Compared with
cellular, PCS will operate at higher frequencies within a 140 MHz band in the
1850-1990 MHz frequency range and in slightly different geographic coverage
areas. The geographic areas for PCS licenses are divided into 51 major trading
areas ("MTAs") for A- and B-Block licenses, and 493 basic trading areas ("BTAs")
for other PCS licenses, including the C-, D-, E- and F-Block licenses. MTAs and
BTAs are different than the metropolitan statistical areas and rural service
areas.
In March 1995, the FCC completed the A- and B-Block PCS auction, resulting
in the award of two 30 MHz licenses in each MTA. In May 1996, the FCC completed
the C-Block auction, resulting in the award of one 30 MHz license in each BTA.
After completion of the C-Block auction, the FCC reauctioned 18 C-Block licenses
for which the high bidders failed to make initial post-auction down payments. In
January, 1997, the FCC completed the auction for the D-, E- and F-Block
licenses, each block resulting in the award of one 10 MHz license in each BTA.
SMR and ESMR. As a result of advances in digital technology, some providers
of wireless communications services have begun to design and deploy or modify
networks that utilize SMR and ESMR technologies. ESMR technology increases the
capacity of SMR networks enabling more efficient use of the allocated frequency.
This increase coupled with additional advances in switching technologies are
intended to enable ESMR networks to compete effectively with cellular and PCS
networks. ESMR technology may offer certain cost advantages over cellular and
PCS technologies due in large part to the fact that, historically, licenses to
use part of the radio spectrum allocated for ESMR services have been available
at substantially lower costs than licenses to operate cellular or PCS systems in
the same geographic areas. Currently, ESMR technology is being used by companies
such as Nextel Communications and Southern Communications to provide wireless
telephone services in many large metropolitan areas in the U.S. In addition, the
Company believes that several other smaller wireless communications service
providers plan to use ESMR technology to offer wireless telephone service in the
U.S.
WLL. WLL systems provide non-mobile telecommunications services to users by
transmitting voice messages over radio waves from the public switched network to
the location of the fixed telephone. WLL systems are seen as an alternative to
traditional copper and fiber optic based fixed services with the potential to be
implemented more quickly and at lower cost than wireline services. The
installation of WLL systems minimizes the need to obtain rights-of-way and
excavate existing roads and infrastructure to lay copper or fiber cables in
order to install or upgrade a local telephone system serving non-mobile
telephones. At the present time, it is not possible to forecast the number of
WLL systems that might be implemented in the U.S. or to forecast the effect, if
any, such implementation will have on the demand for the Company's wireless
infrastructure building and implementation services and wireless infrastructure
components.
Other Wireless Communications Technologies. The FCC has proposed or adopted
final rules authorizing additional wireless communications services. For
example, the FCC has proposed to authorize the use of the 37 and 39 GHz bands
for the provision of fixed and mobile communications services. In May 1996, the
FCC adopted final rules to permit Interactive Video and Data Service licensees
to provide mobile two-way data services. Also in May 1996, the FCC authorized
local multipoint distribution service licensees to provide certain fixed and
mobile communications services. The FCC has proposed to reallocate former
federal government spectrum located at 4 GHz for a broad range of wireless fixed
and mobile services, and is expected to reallocate additional former federal
government spectrum for wireless mobile services in the future.
Several national and global mobile satellite or "MSS" based systems are
currently being implemented or have been proposed that are intended to compete
directly with land-based wireless communications networks. In theory, this
technology could create an alternative to land-based wireless networks that
might reduce or slow the growth in demand for new and enhanced land-based
wireless communications transmitting and receiving facilities, which in turn
could have a material adverse effect on the Company's business, results of
operations and financial condition. However, the Company believes that the cost
of wireless communications
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services planned to be offered by providers using MSS technologies will be
significantly higher than the cost of most services offered by land-based
wireless networks. At the present time, while it is not possible to forecast the
effect, if any, that MSS or any other alternative technology will have on the
demand for the Company's wireless infrastructure building and implementation
services and wireless infrastructure components, the Company does not believe
that MSS technologies will adversely affect demand for the Company's services
and products in the foreseeable future.
The Radio and Television Broadcasting Industry
Broadcast towers are primary transmitting and receiving facilities for
radio and television broadcast signals. Broadcasters transmit AM/FM radio
signals and VHF and UHF television signals in order to obtain the broadest,
clearest coverage available. A broadcast station's coverage is one of the
primary factors that influences the station's ability to attract advertising
revenue. Once a tower location is chosen, broadcasters rarely change sites due
to complex regulatory requirements, high switching costs and business
disruption. The U.S. broadcasting industry is generally mature with respect to
demand for transmission tower capacity. However, a significant increase in
demand for tower capacity may occur when digital spectrum is used to deliver
HDTV or digital multi-casting, i.e., multiple "normal" definition television
channels. Digital equipment generally is larger and heavier, requiring more
tower space and, in some instances, stronger and taller towers. As a result,
broadcasters owning their own towers may require their tower tenants to
relocate. Alternatively, broadcasters may seek to build new towers, upgrade
existing towers or locate their equipment on leased tower space. In addition,
wireless cable television is being developed and positioned as a potentially
more accessible alternative to traditional cable television. Wireless cable
operates by receiving programming from a satellite which is retransmitted from
an antenna on a tower to a receiving antenna on a subscriber's residence.
THE COMPANY'S TOWER SERVICES
Management's strategic focus is to take advantage of increasing demand for
tower space and industry trends toward outsourcing and co-location by expanding
its network of tower sites, either owned, leased or managed, and leasing space
to wireless communications providers and broadcasters. The Company intends to
implement this strategy by (i) aggressively marketing available rental space on
the Company's towers, (ii) acquiring additional towers and (iii) utilizing its
tower construction capabilities to pursue build-to-suit opportunities and to
build new towers and upgrade existing towers for its own account to accommodate
additional tenants. The Company's leasing operations primarily depend on the
location of towers and the amount of equipment installations that each tower can
support. Through "vertical separation" -- locating equipment at different levels
on one tower -- the Company is able to support multiple tenants on one tower.
The Company's portfolio of existing towers and towers under construction or
subject to acquisition contracts, together with the Company's construction
resources, are expected to provide the Company with tower locations and
equipment bearing capabilities suitable for attracting additional leasing
clients. Given their dependence on location and their reluctance to re-locate,
the Company's tenants generally are willing to enter into long-term leases
providing a churn-resistant recurring revenue stream for the Company. The
Company's standard lease for wireless communications tenants generally provides
for a five-year term, with options to renew the lease for additional five-year
terms. The Company's standard lease for broadcast tenants generally provides for
a 10-20 year term.
The Company designs, builds, installs, modifies and maintains
(collectively, "wireless infrastructure building and implementation services")
land-based wireless communications transmitting and receiving facilities located
in the U.S. ("wireless communications facilities") primarily for providers of
wireless communications services. As part of the Company's wireless
infrastructure building and implementation services business, the Company also
provides certain electrical engineering services, wireless equipment testing
services and site acquisition and evaluation services in connection with the
location and installation of wireless communications facilities.
The Company also manufactures and sells a line of fasteners and other
mounting components, waveguide bridge products, square support rail, tower
lighting systems, tower safety products and other hardware products
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(collectively, "wireless infrastructure components") primarily used in
connection with the installation and maintenance of wireless communications
facilities. The Company markets certain of its wireless infrastructure
components directly to end users in conjunction with the Company's wireless
infrastructure building and implementation services. In addition, the Company
markets certain of its wireless infrastructure components through independent
third party distributors located principally in the U.S. who then resell these
products to end users. Finally, the Company manufactures certain wireless
components on a private label basis for sale to several large wireless
communications equipment vendors who market these products under their own brand
names to end users. The Company believes that, to date, the vast majority of the
Company's wireless infrastructure components have been sold to end users located
in the U.S.
CUSTOMERS
The Company provides leased tower space and renders wireless infrastructure
building and implementation services to radio and television broadcasters and to
providers of a broad range of wireless communications services including paging
services, analog and digital cellular telephone services, PCS services, SMR
services, ESMR services and microwave communications services. Examples of the
Company's customers include Western Wireless Corporation, AT&T Wireless Services
Inc., Sprint, PCS PrimeCo L.P., BellSouth Mobility, Inc., Nextel Communications,
and Arch, among others. In fiscal 1998, Sprint accounted for approximately 15%
of the Company's revenues and was the only customer accounting for 10% or more
of the Company's revenues.
The Company's wireless infrastructure components customers include the end
users of the Company's building and infrastructure services, third party
distributors and large wireless communications vendors who market the Company's
products under their own brand names.
SALES AND MARKETING
The Company markets rental space on its towers by offering strategically
located towers and groups of towers to wireless communications providers and
radio and television broadcasters as well as by stressing the Company's ability
to provide "build to suit" locations to enhance or complete its clients'
networks. Additionally, the shift of the capital expenditures and overhead
relating to tower ownership to the Company as a result of build-to-suit
arrangements, outsourcing and co-location is a key marketing factor utilized by
the Company. The Company also provides highly-trained employees to assist
customers with site location and installation logistics. Finally, the Company
also provides well-maintained and secure facilities to protect the sophisticated
equipment located on its towers and in its tower buildings.
Although its customers include companies with international operations,
historically, the Company has marketed its wireless infrastructure building and
implementation services and wireless infrastructure components primarily to
providers of wireless communications services in the U.S. The Company's wireless
infrastructure building and implementation services are sold on a contract basis
and are marketed through either direct customer contact or via response to
competitive bids by a national marketing team led by four of the Company's top
regional managers. This national marketing team was formed in July 1997 to
exploit the increased capabilities and geographic presence which has resulted
from the Company's internal growth and acquisitions. The Company generates
prospective new customers through referrals from existing customers, wireless
communications equipment manufacturers and vendors, through participation in
conferences and trade shows and from other sources. The Company is currently
seeking to expand its relationships with wireless communications equipment
manufacturers and vendors as a method for increasing its exposure to prospective
new customers. The Company does not use independent distributors or agents in
connection with the marketing of its wireless infrastructure building and
implementation services.
The Company markets its wireless infrastructure components (i) directly to
end users in conjunction with the Company's wireless infrastructure building and
implementation services and (ii) through independent third party distributors
located principally in the U.S. who then resell these products to end users. The
Company also manufactures certain wireless components on a private label basis
for sale to several large wireless communications equipment vendors who market
these products under their own brand names to end
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users. The Company believes that, to date, the vast majority of the Company's
wireless infrastructure components have been sold to end users located in the
U.S.
The Company continues to evaluate opportunities to perform wireless
infrastructure building and implementation services and sell wireless
infrastructure components outside the U.S. Although the Company has been
approached regarding the possibility of becoming involved in certain wireless
infrastructure development activities outside the U.S., the Company has reached
no agreements with respect to any such involvement and the Company has very
little experience in doing business outside the U.S. There can be no assurance
that the Company will identify or enter into business opportunities outside the
U.S. or that, if entered into, such opportunities will be successful. See "ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Cautionary Statements -- Risks Associated with Potential
Operations Outside the U.S."
MANUFACTURING AND COMPONENT ASSEMBLY
The Company manufactures wireless infrastructure components by obtaining
sheet metal and other raw materials, standard parts and components from a
variety of vendors and specially fabricating and configuring these materials to
produce the Company's wireless infrastructure components. The Company also
engages third-party contract manufacturers and assemblers to produce certain of
these wireless infrastructure components based on the Company's specifications.
With the exception of wireless infrastructure components manufactured by
third-party contract manufacturers and assemblers, substantially all the
Company's wireless infrastructure components are manufactured or assembled at
the Company's manufacturing facilities in Salem, Oregon. Although the Company
has historically obtained the raw materials, standard parts and components used
in the manufacture and assembly of the Company's wireless infrastructure
components from a limited number of suppliers, to date, the Company generally
has been able to obtain the needed quantities of the items in a timely manner
from these suppliers. In addition, substantially all of these items are
available from numerous other suppliers.
RESEARCH AND DEVELOPMENT
Although the Company has designed many of its wireless infrastructure
components and has the capability to custom design wireless infrastructure
components to meet specific customer requirements, historically, the Company has
not incurred significant research and development expenses and the Company does
not currently anticipate making significant expenditures for research and
development activities in the foreseeable future.
TRADEMARKS
The Company markets certain of its wireless infrastructure components under
the ICECo(TM) brand name. The Company has filed for trademark protection for the
ICECo(TM) trademark. There can be no assurance that the Company will be
successful in obtaining this trademark or that this trademark will afford the
Company with any competitive advantages.
COMPETITION
The market for tower space leasing is highly competitive. The Company
competes with wireless communications providers and broadcasters who own and
operate their own tower networks, site management companies which acquire space
on existing towers, rooftops and other sites, other independent tower companies
and traditional local independent tower operators. Wireless communications
providers who own and operate their own tower networks generally are, and some
broadcasters and independent tower companies are, larger and have greater
financial resources than the Company. The Company believes that tower location
and capacity, price, quality of service and density within a geographic market
historically have been and will continue to be the most significant competitive
factors affecting tower rental companies. The Company believes that competition
for tower acquisitions will increase and that additional competitors will enter
the tower leasing market, some of which may have greater financial resources
than the Company.
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<PAGE> 11
Historically, the market for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this market have been relatively small firms of
between three and fifty employees. While the Company believes that the industry
continues to be comprised predominately of these smaller firms, in recent years,
as the market for wireless infrastructure building and implementation services
has grown, several of the Company's historical competitors have grown
substantially. In addition, the Company has faced increasing competition from
(i) wireless communications equipment manufacturers which provide wireless
infrastructure building and implementation services in conjunction with the sale
of wireless communications equipment, (ii) wireless and non-wireless engineering
companies, construction companies and construction management companies, and
(iii) non-wireless subcontractors. The Company believes that, historically,
competition in the market for wireless infrastructure building and
implementation services has been based primarily on price and the competitor's
reputation for quality and timely completion of work. In recent years, certain
competitors, predominately wireless communications equipment manufacturers, have
increasingly offered turnkey package solutions for the implementation of new
wireless communications networks such as PCS networks. These turnkey package
solutions typically include wireless communications equipment, radio frequency
or "RF" engineering services, wireless infrastructure building and
implementation services and, in many cases, financing for all or a significant
portion of the build-out of the network. Initially, many providers of wireless
communications services found these turnkey package solutions attractive because
of perceived administrative efficiencies of contracting with one party versus
contracting separately for the different products and services necessary to
implement their networks. Increasingly, however, current and prospective
providers of wireless communications services have become dependent on these
turnkey package solutions to implement their networks due largely to the
availability of the financing component.
The Company believes that many of the wireless communications equipment
manufacturers that offer these turnkey package solutions do not themselves have
the personnel necessary to perform the wireless infrastructure building and
implementation services included as a part of these turnkey package solutions.
Consequently, many wireless communications equipment manufacturers contract with
other companies to provide some or all of these wireless infrastructure building
and implementation services. From time to time, the Company has performed
wireless infrastructure building and implementation services in connection with
turnkey package solutions offered by certain of these wireless communications
equipment manufacturers. However, the Company believes that, in recent years,
several wireless communications equipment manufacturers have begun to acquire or
enhance their ability to perform wireless infrastructure building and
implementation services with their own personnel, thus competing directly with
the Company. In addition, the Company believes that many of the Company's other
competitors have either developed or are currently seeking to develop a customer
finance capability as a method for obtaining future business. As a consequence
of this trend, the Company believes that the ability to offer some element of
financing in conjunction with the sale of wireless infrastructure building and
implementation services is becoming an important competitive factor.
Historically, the Company has not provided significant financing to its third
party tower construction customers. While the Company may consider the
implementation of a customer financing program in the future, there can be no
assurances that the Company will in fact implement such a program. However, the
Company believes that its build-to-suit programs, pursuant to which the Company
bears the capital expenditures and overhead resulting from the construction and
ownership of a carrier's network, provide a competitive alternative to the
customer finance programs of other manufacturers.
EMPLOYEES
As of September 16, 1998, the Company employed 548 full-time employees.
None of the Company's employees are represented by a labor union and the Company
considers its employee relations to be good. The Company's future success is
also dependent on its ability to attract and retain experienced, highly
qualified sales personnel, technical employees, project managers and other key
employees who perform and manage the tower space leasing and the wireless
infrastructure building and implementation services provided by the Company. See
"ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- Cautionary Statements -- Dependence on Labor Force."
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<PAGE> 12
GOVERNMENT REGULATION
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, the FAA, Congress, the courts and other
governmental bodies. There can be no assurance that any of these governmental
bodies will not adopt or change regulations or take other actions that would
adversely affect the wireless communications industry and the Company's
business, results of operations and financial condition.
In addition, the Telecommunications Act of 1996 is expected to cause
significant changes in existing regulation of the telecommunications industry
that are intended to promote the competitive development of new services, to
expand public availability of telecommunications services and to streamline
regulation of the industry. These changes include requirements that local
exchange carriers must: (i) permit other competitive carriers, which may include
many wireless communications service providers, to interconnect to their
networks, (ii) establish reciprocal compensation agreements with competitive
carriers to terminate traffic on each other's networks, and (iii) offer resale
of their local loop facilities. The implementation of these requirements by the
FCC and state authorities potentially involves numerous changes in established
rules and policies that could adversely affect the wireless communications
industry and the Company's business, results of operations and financial
condition.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often subject to state or local zoning, land use and
other regulation. Such regulation may include zoning, environmental and building
permit approvals or other state or local certification. The Telecommunications
Act of 1996 provides that state and local authority over the placement,
construction and modification of personal wireless services (including cellular
and other cellular mobile radio services and unlicensed wireless services) shall
not prohibit or have the effect of prohibiting personal wireless services or
unreasonably discriminate among providers of functionally equivalent services.
Although state and local zoning authorities retain their rights over land use,
their actions cannot have the effect of banning wireless services or picking and
choosing among similar wireless providers.
ITEM 2. DESCRIPTION OF PROPERTY
The Company presently leases approximately 6,400 square feet of office
space in Cedar Crest, New Mexico from Michael R. Budagher, its Chief Operating
Officer and a Director of the Company, for $16,800 annually. See "ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." The New Mexico office serves as
the headquarters for the Company's wireless infrastructure building and
implementation services. The Company's headquarters for its tower ownership and
leasing services are located in Independence, Ohio. The Company is seeking
additional and/or new space to meet its current needs.
The Company maintains four regional offices in California, three regional
offices in Florida, two regional offices in Illinois, two regional offices in
Ohio, two regional offices in Texas, and one regional office in each of Alabama,
Colorado, Louisiana, Oklahoma, Arizona, North Carolina, Oregon, Utah, and New
Jersey, from which the Company conducts primarily wireless infrastructure
building and implementation operations. The Company manufactures infrastructure
components in an approximately 55,000 square foot manufacturing facility located
adjacent to its regional office in Salem, Oregon. The Company's electrical
design and engineering operations are conducted primarily from an office in
Laguna Hills, California; build-to-suit operations are conducted primarily from
offices in Dallas, Texas, Oklahoma City, Oklahoma, and Albuquerque, New Mexico;
and tower ownership and leasing services are conducted from the office in
Independence, Ohio. With exception of the regional offices in Salem and Oklahoma
City, all of the Company's regional offices are leased pursuant to operating
leases that do not exceed five years in duration.
The Company both owns and leases the real property upon which its owned
towers are located. As of September 16, 1998, the Company owned 90 towers on
parcels of real estate that are leased to the Company and 11 towers on parcels
of real estate that are owned by the Company. In rural areas, a tower site
typically consists of a one to five acre tract that supports the tower, an
equipment shelter and guy wires that stabilize the tower. Less than 2,500 square
feet are needed for a self-supporting tower that is typically used in
metropolitan areas. Ground leases generally have 5 to 25 year terms, with many
having options for the Company to renew. Pursuant to the Company's Credit
Agreement (as hereinafter defined), the senior lenders have (or have the
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<PAGE> 13
right to obtain) liens on, among other things, tenant leases, equipment,
inventory and interests in all real property of the Company on which towers are
located or which constitute a tower. Approximately 17 of the sites acquired by
the Company from Arch pursuant to the Arch First Closing are owned in fee. Of
the remaining 32 sites acquired in the Arch First Closing, 29 are located on
real estate that is leased, and 3 are managed sites. The sites which are
scheduled to be acquired by the Company pursuant to the Arch Second Closing,
consist of sites owned in fee, sites that are leased and managed sites.
ITEM 3. LEGAL PROCEEDINGS
The Company is, and from time to time may be, a party to routine legal
proceedings incidental to its business. The outcome of these legal proceedings
is not expected to have a material adverse effect on the Company's business,
results of operations or financial condition, based on the Company's current
understanding of the relevant facts and law. The Company maintains general
liability insurance against risks arising out of the normal course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of fiscal 1998.
On July 24, 1998, the holders of a majority (approximately 59.3%) of the
Common Stock of the Company executed a written consent (i) authorizing the
Reincorporation Merger and (ii) approving the Company's 1998 Stock Option Plan.
An Information Statement was distributed to all of the Company's stockholders
informing them of such matters. The Reincorporation Merger and 1998 Stock Option
Plan became effective on September 14, 1998.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under
the symbol "XMIT" (prior to the Reincorporation Merger the Company's symbol was
"SCTR"). On September 16, 1998, there were approximately 93 holders of record of
the Company Common Stock. The following table sets forth the quarterly high and
low bid prices for the Company Common Stock for the periods indicated. These
prices reflect inter-dealer prices and do not include adjustments for retail
mark-ups, mark-downs or commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1997: HIGH LOW
----------------- ------- -------
<S> <C> <C>
Fiscal Quarter Ended 09/30.................................. $ 9.625 $ 3.938
Fiscal Quarter Ended 12/31.................................. $10.063 $ 6.75
Fiscal Quarter Ended 03/31.................................. $16.25 $ 8.125
Fiscal Quarter Ended 06/30.................................. $15.563 $ 8.75
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1998: HIGH LOW
----------------- ------- -------
<S> <C> <C>
Fiscal Quarter Ended 09/30.................................. $19.875 $13.375
Fiscal Quarter Ended 12/31.................................. $17.375 $11.25
Fiscal Quarter Ended 03/31.................................. $36.50 $12.75
Fiscal Quarter Ended 06/30.................................. $48.50 $33.375
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
For the Period July 1, 1998 to September 25, 1998........... $43.00 $20.625
</TABLE>
To date, the Company has not declared or paid any cash dividends on the
Company Common Stock and the present policy of the Board of Directors is to
retain any earnings to provide for the Company's growth. The Credit Agreement
dated as of June 30, 1998 among the Company, the lenders party thereto, The
Chase Manhattan Bank, as administrative agent, issuing lender and swingline
lender, Bankers Trust Company, as documentation agent, and BankBoston, N.A., as
syndication agent (the "Credit Agreement"), contains covenants that restrict the
Company's ability to pay dividends. Further, future determination to pay
dividends will be at the discretion of the Board of Directors and in light of
the Company's financial condition, results of operations, capital requirements
and such other factors as the Board of Directors deems relevant.
In connection with the acquisition of substantially all of the assets of
Teleforce, on July 9, 1998, the Company issued 81,270 shares of Company Common
Stock to Teleforce. See "ITEM 1. DESCRIPTION OF BUSINESS -- History."
In connection with the April Merger, on April 23, 1998 the Company issued
6,750,000 shares of Company Common Stock to OmniPartners. See "ITEM 1.
DESCRIPTION OF BUSINESS -- History."
In connection with the acquisition of substantially all of the assets of
Ellis Tower, on October 7, 1997, the Company issued 120,848 shares of Company
Common Stock to Ellis Tower. See "ITEM 1. DESCRIPTION OF BUSINESS -- History."
With respect to the above-described transactions, the Company relied upon
the exemption from registration provided by Section 4(2) of the Securities Act
relating to transactions by an issuer not involving a public offering.
ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements appearing in the following discussion that are not historical
facts are forward-looking statements ("forward-looking statements") within the
meaning of Section 27A of the Securities Act and
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<PAGE> 15
Section 21E of the Exchange Act, which are intended to be covered by the safe
harbors created by those sections. In addition, such forward-looking statements
may be contained in filings made by the Company with the Securities Exchange
Commission, or press releases or oral statements made from time to time by or
with the approval of an authorized executive officer of the Company. Such
forward-looking statements are necessarily estimates reflecting the best
judgement of the Company's management based upon current information and involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include, but are not limited to, the following
possibilities: increasing competition for tower sites and leasing customers,
increasing difficulty in obtaining zoning and construction permits, difficulties
in integrating acquisitions, changes in regulatory requirements, changes in
telecommunications transmission technology, changes in outsourcing plans of
telecommunications transmission companies and factors inherent in tower
ownership and construction, such as the availability of experienced construction
crews and damage and delays caused by inclement weather. In addition, other
factors which may affect forward-looking statements include those set forth
below under the caption "Cautionary Statements" and appearing elsewhere in this
Annual Report and appearing from time to time in filings made by the Company
with the Securities and Exchange Commission. These risks, uncertainties and
other factors should not be construed as exhaustive and the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements. SEE "ITEM 1. DESCRIPTION OF
BUSINESS -- Forward-Looking Statements."
In addition, the following discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements and the notes
thereto and the other financial data appearing elsewhere in this Annual Report.
ACQUISITIONS
During the fiscal year ended June 30, 1998, the Company completed the
following acquisitions.
On October 7, 1997, a wholly-owned subsidiary of the Company purchased
substantially all the assets of Ellis Tower Co., Inc., a builder of wireless
transmitting and receiving facilities located in Ft. Lauderdale, Florida, in
exchange for $449,405 in cash and the delivery of 120,848 shares of Company
Common Stock. The transaction was accounted for by the Company as a purchase.
See "ITEM 1. DESCRIPTION OF BUSINESS -- History."
On April 23, 1998, the Company consummated the April Merger. The April
Merger was accounted for by the Company as a purchase. See "ITEM 1. DESCRIPTION
OF BUSINESS -- History."
On June 26, 1998, the consummated the Arch First Closing. This transaction
was accounted for by the Company as a purchase. See "ITEM 1. DESCRIPTION OF
BUSINESS -- History."
PLAN OF OPERATIONS
Historically, the Company principally has been engaged in building sites
for wireless carriers, who have traditionally owned and operated their own
transmission tower assets. While the Company continues to provide infrastructure
building and implementation services to wireless carriers, since the April
Merger the Company's focus has been directed increasingly toward developing
sources of recurring revenue, specifically, building towers for its own account,
acquiring towers from carriers and other owners, maximizing lease revenues from
existing towers, and entering into long-term maintenance contracts with other
tower owners. The Company's focus on sources of recurring revenues is intended,
in part, to capitalize on recent trends by several carriers who have begun to
evaluate opportunities to outsource the ownership and operation of their
wireless infrastructure either by selling their existing tower sites to
independent third party tower owners and operators, who would then lease tower
space back to the carriers and/or entering into build-to-suit arrangements,
whereby an independent third party builds, owns and leases tower sites to the
wireless carriers, often with multiple tenants on any given site. The Company
believes that its historical competency of tower
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<PAGE> 16
construction coupled with the ownership and leasing operations of OmniAmerica
Holdings and its subsidiaries makes the Company one of the leading candidates
for carrier outsourcing.
The Company believes owning towers and leasing tower space to the wireless
carriers will provide more stable long-term recurring revenues. In addition to
the Company's plans to pursue opportunities to acquire existing sites and towers
from carriers seeking to outsource their wireless infrastructure, the Company
believes that, at the present time, utilizing its infrastructure building and
implementation resources to construct towers for its own account is a more cost
effective method of expanding its portfolio of owned towers. As part of its
effort to develop sources of recurring revenue, late in the second fiscal
quarter of 1998, the Company began focusing on opportunities to provide
build-to-suit services to wireless carriers. The Company's build-to-suit program
offers an end-to-end solution to wireless carriers and is designed to reduce
carriers' capital expenditures and overhead associated with the traditional
methods of acquiring and owning their wireless networks. As of June 30, 1998,
approximately 183 sites were under written or oral commitments from 5 wireless
carriers. As of September 18, 1998, an additional 265 sites were under written
or oral commitments. In addition to the sites subject to build-to-suit
commitments, as of September 18, 1998, the Company was conducting site
acquisition or construction related activities with respect to approximately 175
towers and/or rooftop transmission facilities for its own account. There can be
no assurance that the Company will successfully enter into additional
significant build-to-suit agreements with any wireless carrier or group of
carriers or that it will be able to reach definitive agreements with the owners
of sites not currently under written contract or develop the sites in a
cost-effective manner, that implementation of its existing build-to-suit
agreements will result in the Company's ownership of all of the towers
originally contemplated by those agreements or that the Company will complete
the development of any of the towers or rooftop transmission facilities
currently being developed for its own account. As the Company focuses its
resources increasingly on tower ownership, revenues from its infrastructure
building and implementation services operations are likely to decline.
Management believes that the decline in revenues from its infrastructure
building and implementation services operations will be offset over time by the
recurring revenue stream expected from tower ownership, including revenues from
the towers owned by OmniAmerica Holdings and its subsidiaries prior to the April
Merger, revenues from future tower acquisitions by the Company, revenues from
towers the Company is currently developing and building for its own account and
revenues from towers the Company will develop and build for its own account in
the future.
RESULTS OF OPERATIONS
Comparison of the Fiscal Years Ended June 30, 1998 and 1997
Revenues. Revenues for the fiscal year ended June 30, 1998 decreased
$2,827,729, or approximately 4%, from $65,626,800 in the fiscal year ended June
30, 1997 to $62,799,071 for fiscal 1998. Management believes the decrease in
revenues was attributable to (i) the utilization of staff during the last
quarter of the fiscal year for build-to-suit sites to be owned by the Company
instead of building for third parties (resulting in the Company incurring
approximately $2.1 million in capitalized costs through June 30, 1998 with
respect to which no revenues were generated in fiscal 1998) and (ii) the slower
rollout of wireless infrastructure building and implementation activity in the
U.S. compared to fiscal year 1997 as carriers evaluated outsourcing and
build-to-suit options. The decrease in revenues was offset in part by $1,258,936
in revenues from the Company's leasing operations for the 67 day period
subsequent to the April Merger.
Gross Profit. Gross profit for fiscal year ended June 30, 1998 decreased
$1,349,943, or approximately 11%, from $12,215,250 in fiscal 1997 to $10,865,307
in fiscal 1998. In addition to the decrease in revenues, this decrease was
attributable to management's decision in the third fiscal quarter of 1998 to
retain its existing workforce, despite the slowdown in building and
implementation activity, to implement the rollout of the Company's build-to-suit
programs in the fourth quarter of fiscal year 1998. Build-to-suit costs incurred
in the fourth quarter (approximately $2.1 million through June 30, 1998) have
not yet resulted in the generation of revenue, resulting in a negative impact on
gross profit. In preparation for the build-to-suit program, field personnel were
mobilized throughout the nation to meet regional workloads, despite the
additional costs to be incurred. In addition, management directed certain senior
management personnel to focus on the development
15
<PAGE> 17
of sites for the Company's own account, incurring substantial costs and change
in focus, thus impacting current operations. These actions resulted in less
efficient labor utilization and costs.
Selling, General and Administrative ("SG&A") Expenses. SG&A for fiscal year
ended June 30, 1998 increased $2,317,682, or approximately 39%, from $5,915,808
in fiscal year 1997 to $8,233,490 in fiscal 1998. The increase was primarily the
result of the following: approximately $582,000 in goodwill charges in
connection with fiscal 1998 acquisitions; approximately $230,000 in legal
expenses related to acquisitions and other issues not encountered in fiscal year
1997; a $225,000 increase in the Company's allowance for doubtful accounts;
transitional costs incurred in connection with the integration of the operations
and administration of OmniAmerica Holdings' tower ownership business; and a
general increase in personnel as a result of fiscal 1998 acquisitions and to
meet the needs of the Company's build-to-suit programs. The Company does not
expect to incur significant additional expenses in the future as a result of the
continuing integration of the operations of OmniAmerica Holdings and its
subsidiaries with the Company.
Income Taxes. Income taxes were provided at a 46% effective rate in fiscal
1998 as compared to a 39% effective rate in fiscal 1997. The increased rate was
primarily the result of non-deductible goodwill and other non-deductible
expenses.
Net Earnings. Net earnings decreased $4,710,630 ($2,570,130 on a pro forma
basis after adjustment for tax differences resulting from MTS's prior status as
an S-Corporation), or approximately 83% (73% on a pro forma basis), to $977,112
in the fiscal year ended June 30, 1998 from $5,687,742 ($3,547,242 on a pro
forma basis) in the fiscal year ended June 30, 1997. The decrease was primarily
the result of lower revenues and associated gross profit that were a consequence
of the slowdown in wireless infrastructure building and implementation activity
compared to fiscal year 1997 and the implementation of the Company's
build-to-suit program described above. Net earnings were also directly affected
by build-to-suit costs incurred in the fourth quarter (approximately $2.1
million through June 30, 1998) which have not yet resulted in the generation of
revenues. The remainder was due to the increased SG&A costs noted above and to a
one-time, non-cash compensation expense of approximately $719,000 for the
cashless exercise of stock options granted primarily to a former director of the
Company.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and temporary investments totaling
$4,349,324, an increase of $3,359,604 from June 30, 1997. In addition, at June
30, 1998, the Company had no "available for sale securities", a decrease of
$769,850 from June 30, 1997. During the fiscal year ended June 30, 1998, cash
provided from operating activities was $4,531,664. Net cash flow from operating
activities was impacted primarily due to increases in trade accounts payable
associated with build-to-suit costs principally incurred during the fourth
quarter of fiscal 1998. During fiscal 1998, the Company expended $23,628,680
primarily for the purchases of existing wireless tower facilities and
build-to-suit projects throughout the country.
Net cash generated by financing activities during fiscal year 1998 was
$22,456,620, primarily consisting of long-term borrowings under an existing
long-term credit facility for the acquisition of existing tower facilities and
build-to-suit sites.
On June 30, 1998, the Company entered into a $75,000,000 senior secured
credit facility with a group of lenders, consisting of Bankers Trust Company
(documentation agent), BankBoston, N.A. (syndication agent) and Chase Manhattan
Bank (administrative agent) ("Chase"). The credit facility consists of a $30
million term loan and a $45 million revolving loan, collateralized by
substantially all the assets of the Company's subsidiaries and the stock of the
Company's subsidiary companies. Interest accrues at a rate of interest that
approximates the Chase prime rate plus 1% or the Interbank Eurodollar Rate plus
2%. At June 30, 1998, the entire term loan of $30 million was borrowed at a
blended rate of 7.675%. The term loan matures on June 30, 2001. At June 30,
1998, there were no borrowings under the Company's revolving credit facility.
The Company's future cash requirements for fiscal 1999 and beyond will
depend primarily upon the level of wireless infrastructure building and
implementation services, leasing revenue from existing, acquired and constructed
tower facilities, the level of working capital needed to generate the revenues
associated with such
16
<PAGE> 18
business (including capital expenditures to construct towers and transmission
equipment pursuant to build-to-suit arrangements and for the Company's own
account), and acquisition opportunities. The Company believes that cash flow
from operations, amounts available from the credit facility noted above and
other capital resources available to the Company will be adequate to satisfy its
working capital requirements for at least the next twelve months.
To date, the Company has derived substantially all its revenues from sales
in the U.S. and inflation has not had a significant effect on the Company's
business. The Company does not currently expect inflation to adversely affect
the Company in the future unless it increases significantly in the U.S. or
unless the Company begins doing business outside the U.S. in countries in which
inflation is significantly higher than in the U.S. See ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Cautionary Statements -- Risks Associated with Potential
Operations Outside the U.S."
YEAR 2000
As a result of certain computer programs being written using two digits
rather than four digits to define the applicable year, any of the Company's
computer programs that have date sensitive software may recognize a date using
"00" as the Year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities. The Company has implemented a Year 2000
program to review the functionality of the Company's information technology and
non-information technology systems and applications beyond 1999 as well as year
2000 issues related to the Company's third-party vendors. The Company currently
has four major internal information technology systems. The Company believes
these systems will be fully Year 2000 compliant by January 1999.
The Company is currently reviewing Year 2000 issues with its major
third-party vendors, including the Company's lockbox system, mailing service,
electronic funds transfer system and its long distance carrier and believes that
applications used by the Company are either Year 2000 compliant or are in the
process of being upgraded or replaced by the third-party vendors. Should these
third-party vendors fail to become Year 2000 compliant, the Company intends to
contract with alternative Year 2000 compliant vendors. Although the failure to
complete the Year 2000 conversion process by the Company or its vendors could
cause disruption to the Company's operations, the Company believes that this
process will be completed in accordance with the current schedule, the costs of
implementation will not be material, and the Year 2000 issue will not have a
material adverse effect on the Company.
CAUTIONARY STATEMENTS
Outstanding Options; Risk of Further Dilution
As of June 30, 1998, the Company had outstanding options to purchase a
total of 667,776 shares of Company Common Stock at a weighted average price of
$12.13 including 156,576 options granted under the Company's Amended and
Restated 1994 Stock Option Plan (the "1994 Plan"); 22,000 options granted under
the Company's Outside Directors' Stock Option Plan (the "Director Plan"); and
489,200 shares granted under the Company's 1997 Stock Incentive Plan (the "1997
Plan"). Of these options, 363,258 are currently exercisable. Although the 1994
Plan, the Director Plan and the 1997 Plan have been amended to provide that no
further options may be granted thereunder, the Company has adopted its 1998
Stock Option Plan (the "1998 Plan"), effective September 14, 1998, which makes
available options to purchase 675,000 shares of Company Common Stock. There
currently are no options outstanding under the 1998 Plan.
In the future, the price which the Company would receive for Company Common
Stock upon exercise of options to purchase Company Common Stock could be
significantly less than the value of, or market price for, the Company Common
Stock at the time such options are exercised. While such options are
outstanding, the holders thereof are given, at little or no cost, the
opportunity to profit from a rise, if any, in the value of or market price (if
any) for the Company Common Stock without assuming the risk of ownership. To the
extent that any such options are exercised, the interests of the Company's
stockholders will be diluted proportionately.
17
<PAGE> 19
Dependence on the Wireless Communications Industry
The Company is dependent on the continued growth, viability and financial
stability of its customers, which are in turn substantially dependent on the
continued growth, viability and financial stability of the wireless
communications industry. The wireless communications industry is highly
competitive and has been characterized by rapid technological and regulatory
change. Examples of recent technological changes include the advent or continued
rapid development of new or enhanced wireless communications technologies such
as PCS, ESMR and MSS-based wireless communications technologies. Technological
changes could reduce, delay or make unnecessary the expansion or construction of
new wireless communications networks, which in turn could render the Company's
products and services obsolete or noncompetitive or otherwise reduce the demand
for such products and services. A recent example of regulatory changes affecting
the industry is the enactment of the Telecommunications Act of 1996. See
"-- Government Regulation." In addition, many of the Company's customers are
affected by general economic conditions. Any downturn or other disruption of the
wireless communications industry caused by adverse competitive developments,
technological changes, government regulation, lack of available financing or
other factors would have a material adverse effect on the Company's business,
results of operations and financial condition.
Uncertainty and Fluctuations of Operating Results.
The Company has experienced and may continue to experience fluctuations in
quarterly and annual operating results due to variations in the amount and
timing of revenues generated by its wireless infrastructure building and
implementation services business and wireless infrastructure components
business. While the Company anticipates that its tower leasing services will
provide a recurring revenue stream, there can be no assurance that the Company
will sustain profitability on a quarterly or annual basis in the future.
Although the Company's strategy will focus on expanding its network of owned
towers and leasing space to wireless providers and broadcasters, the Company's
future results will continue to depend in part on the continued deployment of
new wireless communications networks in the U.S. and the continued success of
the Company's wireless infrastructure building and implementation services
business and the Company's ability to successfully manufacture and sell
commercial scale quantities of its wireless infrastructure components on a
timely and profitable basis.
Implementation of Business Strategy
The Company's strategy of expanding its network of sites and towers to
provide leased space to multiple wireless providers and broadcasters is subject,
among other things, to the Company's ability to enter into additional
build-to-suit arrangements, to secure additional opportunities to acquire
outsourced towers and to attract other tenants to co-locate on the Company's
towers. Competition for the construction of build-to-suit networks is great and
there can be no assurance that the Company will be able to enter into
significant build-to-suit arrangements, obtain attractive sites or develop sites
in a cost-effective manner. The rapid consolidation of the tower industry has
led to increased competition for existing assets in prime locations and there
can be no assurance that the Company will be able to acquire additional
outsourced towers that may become available or that the Company will be able to
complete acquisitions on terms satisfactory to the Company. Finally, the Company
will face competition from other tower owners for additional tenants and such
competitors may have more attractive sites or more favorable lease terms.
Because wireless providers and broadcasters are generally reluctant to relocate,
the number of potential tenants for the Company's leasing operations may be
limited.
Dependence on Key Personnel
The Company relies on the business and technical expertise of its senior
management personnel and certain other key employees. The Company's future
performance depends in substantial part upon the continued contributions of
these individuals. The loss of the services of any one of these individuals
could have a material adverse effect on the Company's business, results of
operations and financial condition. In particular, the Company's future
performance is highly dependent on the continued contributions of Mr. Carl E.
Hirsch, the Company's President and Chief Executive Officer, and Mr. Michael R.
Budagher, the Company's Chief Operating Officer. The loss of the services of
Messrs. Hirsch or Budagher may have a
18
<PAGE> 20
material adverse effect on the Company's business, results of operations and
financial condition. Each of Messrs. Hirsch and Budagher, as well as certain
other executives of the Company, have entered into employment agreements with
the Company. See "Item 10. EXECUTIVE COMPENSATION -- Employment Agreements."
Dependence on Labor Force
The Company's future success is also dependent on its ability to attract
and retain experienced, highly qualified marketing and technical employees,
project managers and other key employees who perform and manage the wireless
infrastructure building and implementation services provided by the Company. The
Company believes there is, and there will continue to be, intense competition
for the services of these individuals from competitors in the wireless
infrastructure development and implementation industry and from providers of
wireless communications services. The loss of significant numbers of the
Company's current marketing, technical and project management personnel or the
inability to attract and retain sufficient numbers of additional marketing,
technical and project management personnel to support the expansion of the
Company's business would have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to retain its key employees or that it
will be able to attract or retain other experienced, highly qualified marketing,
technical and project management personnel in the future.
Risks Related to Acquisitions
The acquisition of towers and tower companies is a key component of the
Company's business strategy. Execution of this component of its business
strategy requires the Company's management to, among other things, (i) identify
geographic markets (local, regional or national) in which the Company can
successfully compete, (ii) identify acquisition candidates who are willing to be
acquired at prices and on terms acceptable to the Company and (iii) consummate
identified acquisitions. In addition, it is possible that future acquisitions
will require the Company to obtain additional financing either to consummate the
acquisition or to provide additional working capital to facilitate the increased
level of business activity caused by the acquisition. Certain risks are inherent
in an acquisition strategy, such as dilution of outstanding equity securities,
increased leverage and debt service requirements, the difficulty in combining
different company cultures and facilities and the possibility of significant
turnover among key employees of the acquired company following the acquisition,
any of which could materially adversely affect the Company's operating results
or the market price of the Company Common Stock prevailing from time to time.
The success of any completed acquisition will depend in part on the Company's
ability to effectively integrate the acquired business, which integration may
involve unforeseen difficulties and may require a disproportionate amount of
management's attention and the Company's financial and other resources.
Possible Need for Additional Financing
During the past three fiscal years, the Company has made significant
expenditures for the acquisition of new equipment used primarily in the
Company's wireless infrastructure building and implementation services business
and to make certain of the Company's recent acquisitions of towers and tower
companies. In addition, the Company's strategy of building towers for its own
account to be leased to wireless carriers and broadcasters requires the Company
to incur significant capital expenditures for the acquisition of tower sites and
the construction of towers prior to the Company receiving revenues from leasing
services with respect to such sites and towers. To the extent that the Company's
cash resources are insufficient to fund the Company's activities, the Company
will be required to raise additional funds. The Company may, from time to time,
seek additional funding through the amendment of the Credit Agreement, or public
or private financing, including debt or equity financing. There can be no
assurance that adequate funding will be available as needed on terms acceptable
to the Company, or at all. If additional funds are raised by issuing equity or
convertible debt securities, existing stockholders may experience dilution.
Insufficient funds may inhibit future growth or require the Company to scale
back or eliminate some or a significant part of its business.
19
<PAGE> 21
Competition
Competition in the wireless infrastructure building and implementation
services, the wireless infrastructure components businesses and the tower
leasing business is intense and many of the Company's competitors have
financial, technical, marketing, sales, manufacturing, distribution and other
resources substantially greater than those of the Company. There can be no
assurance that the Company will be able to compete effectively or that future
increases or changes in competition will not have a material adverse effect on
the Company's business, results of operations and financial condition. See "ITEM
1. DESCRIPTION OF BUSINESS -- Competition."
Product Liability
The manufacturing, marketing and use of the Company's wireless
infrastructure components entail the risk of product liability. While the
Company currently has product liability insurance that it believes is adequate
to protect against product liability claims, no assurance can be given that the
Company will be able to continue to maintain such insurance at a reasonable cost
or in sufficient amounts to protect the Company against losses due to product
liability. An inability to maintain insurance at an acceptable cost or to
otherwise protect against potential product liability could prevent or inhibit
the Company's ability to market its wireless infrastructure components. In
addition, a product liability claim or recall could have a material adverse
effect on the business, results of operations and financial condition of the
Company.
Risks Associated with Potential Operations Outside the U.S.
To date, the Company has derived substantially all its revenues from sales
in the U.S. Consequently, the Company has very little experience doing business
outside the U.S. While the Company continues to evaluate potential opportunities
to perform wireless infrastructure building and implementation services and sell
wireless infrastructure components outside the U.S., the Company has reached no
agreements with respect to any such involvement. There can be no assurance that
the Company will in fact begin to do business outside the U.S. or, if such
operations are commenced, that they will be successful. If the Company does
begin to do business outside the U.S., the Company will be subject to the risks
of doing business internationally, including unexpected changes in regulatory
requirements; fluctuations in foreign currency exchange rates; imposition of
tariffs and other barriers and restrictions; the burdens of complying with a
variety of foreign laws; and general economic and geopolitical conditions,
including inflation and trade relationships. There can be no assurance that
currency fluctuations, changes in the rate of inflation or any of the
aforementioned factors will not have a material adverse effect on the Company's
business, results of operations and financial condition.
Government Regulation
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, Congress, the courts and other governmental
bodies. There can be no assurance that any of these governmental bodies will not
adopt or change regulations or take other actions that would adversely affect
the wireless communications industry and the Company's business, results of
operations and financial condition.
The Telecommunications Act of 1996 is expected to cause significant changes
in existing regulation of the telecommunications industry that are intended to
promote the competitive development of new services, to expand public
availability of telecommunications services and to streamline regulation of the
industry. These changes include requirements that local exchange carriers must:
(i) permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks, (ii)
establish reciprocal compensation agreements with competitive carriers to
terminate traffic on each other's networks, and (iii) offer resale of their
local loop facilities. The implementation of these requirements by the FCC and
state authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, results of operations and financial condition.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often subject to state or local zoning, land use and
other regulation. Such regulation may include zoning,
20
<PAGE> 22
environmental and building permit approvals or other state or local
certification. The Telecommunications Act of 1996 provides that state and local
authority over the placement, construction and modification of personal wireless
services (including CMRS and unlicensed wireless services) shall not prohibit or
have the effect of prohibiting personal wireless services or unreasonably
discriminate among providers of functionally equivalent services. Although state
and local zoning authorities retain their rights over land use, their actions
cannot have the effect of banning wireless services or picking and choosing
among similar wireless providers.
Alleged Health Risks Related to RF Emissions
Allegations have been raised that the use of cellular telephones and other
wireless communications devices may pose health risks to humans due to RF
emissions from the handsets. Concerns over RF emissions may have the effect of
discouraging the use of wireless communications. Studies performed by wireless
telephone equipment manufacturers dispute these allegations, and a major
industry trade association and certain governmental agencies have stated
publicly that the use of such phones poses no undue health risk. Regardless of
the truth of these allegations, they could have an adverse effect on the
wireless communications industry which in turn could have an adverse effect on
the Company. In addition, digital wireless telephones have been shown to cause
interference with some electronic devices, such as hearing aids and pacemakers.
The FCC has recently adopted new standards for safe RF output and radiation from
communications sites. All legacy sites must comply with such standards by
September 1, 2000 and all new sites must be in compliance immediately.
Compliance with such standards, or the adoption of more stringent standards, may
have an adverse effect on the wireless communications industry which in turn
could adversely effect the Company.
Seasonality of Installation Activities
Historically, the rate at which contracts for the installation and retrofit
of wireless communications facilities are awarded has been lower during the
period from January 1 to March 31 of each year due to contracting practices of
many providers of wireless communications. In addition, cold weather and the
limited daylight hours in the winter months in certain markets have lowered the
revenues received from wireless infrastructure building and implementation
services during these months. Therefore, the Company may experience lower than
average revenues during the winter season.
Volatility of Stock Price
Historically, the Company's stock price has been volatile. The sales prices
for the Company's Common Stock have ranged from $11.25 to $48.50 during the
fiscal year ended June 30, 1998. See "ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS." Future announcements concerning the Company or
its competitors or the wireless communications industry, changes in
recommendations of securities analysts, government regulations or other events
may have a significant impact on the market price of the Company's Common Stock.
The Company's future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Any shortfalls in revenues or
earnings from the levels expected by securities analysts could have an immediate
and significant adverse effect on the trading price of the Company's Common
Stock in any given period.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included in the Company's
Consolidated Financial Statements and the notes thereto beginning on page F-1 of
this Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
By unanimous written consent dated as of July 21, 1998, the Board of
Directors of the Company engaged the accounting firm of Ernst & Young LLP as the
independent auditors for the Company for its fiscal year ended June 30, 1998.
The engagement of KPMG Peat Marwick LLP, which had theretofore served as the
Company's independent auditors, was terminated effective July 21, 1998. The
additional disclosures with respect to this matter called for by this item were
previously reported (as that term is defined in Rule 12b-2 under the Exchange
Act) in the Company's Form 8-K dated July 21, 1998 filed with the Securities and
Exchange Commission on July 24, 1998.
21
<PAGE> 23
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth information regarding the directors,
nominees for director and executive officers of the Company.
The Board of Directors of the Company is classified into three classes.
Each Class I Director will hold office until the 1998 annual meeting of
stockholders of the Company, each Class II Director will hold office until the
1999 annual meeting of stockholders of the Company and each Class III director
will hold office until the 2000 annual meeting of stockholders of the Company
and, in each case, until his successor is duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation of the
Company or the Bylaws of the Company, or as otherwise provided by applicable
law.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---- --------
<S> <C> <C>
Michael R. Budagher............... 40 Chief Operating Officer and Vice Chairman,
Director
Ernie L. Carpenter................ 58 Director
John D. Emery..................... 51 Director
Jack D. Furst..................... 39 Chairman of the Board, Director
Carl E. Hirsch.................... 52 President and Chief Executive Officer, Director
Jeffrey A. Howard................. 38 Vice President -- Corporate Development, Director
F. Howard Mandel.................. 37 Vice President and General Counsel
Anthony S. Ocepek................. 60 Executive Vice President and Chief Financial
Officer
Steven M. Smith................... 33 Vice President -- Finance
Lawrence D. Stuart, Jr. .......... 54 Director
J. Otis Winters................... 65 Director
</TABLE>
Mr. Budagher has served as Chief Operating Officer and Vice Chairman of the
Company since the effective date of the April Merger and Treasurer of the
Company since June 1996. Prior to the effective date of the April Merger, and
from the inception of the Company, Mr. Budagher served as Chairman of the Board,
President and Chief Executive Officer of the Company. Mr. Budagher has served as
a Director of the Company since its inception and is currently serving as a
Class III Director. Mr. Budagher is also a founder, stockholder and President of
Specialty Antenna Site Resources, Inc. ("SASR") and a founder and President of
Specialty Constructors Coatings, Inc.
Mr. Carpenter was elected to the Board of Directors in September 1997 and
currently serves as a Class II Director. Since March 1997, Mr. Carpenter has
been President and Chief Executive Officer of Microwave Tower Service, Inc., a
wholly-owned subsidiary of the Company. For more than five years prior to March
1997, Mr. Carpenter was Controller of Microwave Tower Service, Inc.
Mr. Emery has been a Director of the Company since 1994 and currently
serves as a Class I Director. For more than five years prior to the date hereof,
Mr. Emery has been President of Corporate Development Center, Inc., a consulting
firm specializing in assisting fast-growth companies, arranging mergers and
acquisitions, rendering expert valuations and providing crisis management
services to businesses. In August 1997, Mr. Emery founded Growth Dynamics, LLC,
which provides consulting and other services primarily to new or recently formed
high technology companies. Mr. Emery has taught Entrepreneurship, Business
Ethics and Organizational Environment, and Business Policy and Strategy at the
University of New Mexico.
Mr. Furst has been Chairman of the Board and a Director of the Company
since April 1998 and currently serves as a Class III Director. Mr. Furst is a
Managing Director and Principal of Hicks, Muse, Tate & Furst Incorporated and
has held such position since 1989. Mr. Furst currently serves as a Director of
Cooperative Computing, Inc., Hedstrom Corp., International Wire Holding Company
and Viasystems, Inc.
22
<PAGE> 24
Mr. Hirsch has served as President, Chief Executive Officer and Director of
the Company since April 1998. Mr. Hirsch currently serves as a Class I Director.
From October 1997 until April 1998, Mr. Hirsch served as President and Chief
Executive Officer of OmniAmerica Towers, Inc. Prior to that time and for more
than five years prior to the date hereof, Mr. Hirsch served as the Chairman of
the Board, President and Chief Executive Officer of OmniAmerica Communications,
Inc., the managing general partner of OmniAmerica Group.
Mr. Howard has served as Vice President -- Corporate Development and
Director of the Company since April 1998. Mr. Howard currently serves as a Class
I Director. From December 1997 until April 1998, Mr. Howard served as Vice
President -- Business Development of the Company. From March 1994 to December
1997, Mr. Howard was a named partner of the law firm, Jordaan, Howard &
Pennington, PLLC. Prior to that time and for more than five years prior to the
date hereof, Mr. Howard served as Vice President and General Counsel of Carlyle
Capital Markets, Inc.
Mr. Mandel has served as Vice President and General Counsel of the Company
since April 1998. Since November 1997, Mr. Mandel has served as Vice President
of OmniAmerica Towers, Inc. For more than five years prior to the date hereof,
Mr. Mandel served as an associate and a partner of the law firm of Thompson,
Hine & Flory LLP. Mr. Mandel continues to be a non-equity partner of the same
firm.
Mr. Ocepek has served as Executive Vice President and Chief Financial
Officer of the Company since April 1998. From October 1997 until April 1998, Mr.
Ocepek served as Senior Vice President, Chief Financial Officer and Director of
OmniAmerica Towers, Inc. For more than five years prior to the date hereof, Mr.
Ocepek served as the Senior Vice President of OmniAmerica Communications, Inc.,
the managing general partner of OmniAmerica Group.
Mr. Smith has served as Vice President -- Finance since April 1998. From
November 1997 until April 1998, Mr. Smith served as Vice President of
OmniAmerica Towers, Inc. For more than five years prior to the date hereof, Mr.
Smith served as Vice President -- Finance of OmniAmerica Communications, Inc.,
the managing general partner of OmniAmerica Group.
Mr. Stuart has served as a Director of the Company since April 1998 and
currently serves as a Class II Director. Mr. Stuart is a Managing Director and
Principal of Hicks, Muse, Tate & Furst Incorporated and has held such position
since October 1995. Prior to joining Hicks, Muse, Tate & Furst Incorporated,
from 1990 to 1995, Mr. Stuart served as the managing partner of the Dallas
office of the law firm Weil, Gotshal & Manges LLP. Mr. Stuart currently serves
as a Director of Capstar Broadcasting Corp., Chancellor Media Corp. and Arena
Brands Holding Corporation.
Mr. Winters has served as a Director of the Company since April 1998 and
currently serves as a Class II Director. Mr. Winters has served in several
positions, including Chief Executive Officer and Chairman of the Board, with PWS
Group Inc. during the last five years. Mr. Winters currently serves as a
Director of Dynegy, Inc., AMX Corporation, Walden Residential Properties, Inc.
and Chancellor Media Corporation.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than ten percent of the Company's Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than ten-percent owners
are required by the Securities and Exchange Commission regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it, the Company believes that, during the fiscal year ended June 30, 1997,
all filing requirements applicable to its officers, directors and greater than
ten-percent owners were complied with, except the Forms 4 for Mr. Stuart and Mr.
Furst, relating to the transfer of Company Common Stock to each of them by
OmniPartners, were late. Forms 5 were filed for Mr. Stuart and Mr. Furst with
respect to such transfers.
23
<PAGE> 25
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during each of the
three years in the period ended June 30, 1998 to the following individuals (the
"Named Executive Officers"): (i) the Chief Executive Officer and each other
individual who was serving as an executive officer of the Company at June 30,
1998 whose total annual salary and bonus for the fiscal year ended June 30, 1998
was in excess of $100,000 and (ii) Michael R. Budagher, who served as Chief
Executive Officer of the Company prior to the April Merger and who was serving
as the Vice Chairman and Chief Operating Officer of the Company at June 30,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL
----------------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION
- --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Carl E. Hirsch......................... 1998(1) 273,500 -- -- --
President and Chief Executive 1997 -- -- -- --
Officer (since April 23, 1998) 1996 -- -- -- --
Anthony S. Ocepek...................... 1998(1) 232,944 -- -- --
Executive Vice President and 1997 -- -- -- --
Chief Financial Officer 1996 -- -- -- --
(since April 23, 1998)
Ernie L. Carpenter..................... 1998 150,000 -- 60,000 --
President and Chief Executive Officer 1997 116,667 110,000 -- --
of Microwave Tower Service, Inc. 1996 50,000 35,000 -- --
F. Howard Mandel....................... 1998(1) 116,667 -- -- --
Vice President and General Counsel 1997 -- -- -- --
(since April 23, 1998) 1996 -- -- -- --
Michael R. Budagher.................... 1998 70,833 -- -- --
Vice Chairman and Chief Operating 1997 85,000 -- -- 850(2)
Officer (since April 23, 1998) and 1996 85,000 -- -- --
Chief Executive Officer (until April
23, 1998)
</TABLE>
- ---------------
(1) Amounts for the fiscal year ended June 30, 1998 for Messrs. Hirsch, Ocepek
and Mandel include compensation paid to such individuals as executive
officers of OmniAmerica Holdings Corporation and its subsidiaries prior to
the April Merger.
(2) Reflects employer contributions under the Specialty Constructors, Inc.
Profit Sharing Plan.
24
<PAGE> 26
The following table summarizes option grants made during the fiscal year
ended June 30, 1998 to the Named Executive Officers. Other than as set forth
below, no stock options, SARs or awards under any long-term incentive plan were
granted to any Named Executive Officer in the fiscal year ended June 30, 1998.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
(#)(1) FISCAL YEAR ($/SH) DATE
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Ernie L. Carpenter............................... 60,000 18.7% $12.50 12/3/07
</TABLE>
- ---------------
(1) The options to purchase Company Common Stock were granted under the
Company's 1997 Stock Incentive Plan and become exercisable in three equal
annual installments commencing on January 1, 1999.
The following table summarizes the value of options to acquire Company
Common Stock held by the Named Executive Officers as of June 30, 1998. Other
than as set forth below, at June 30, 1998, no Named Executive Officer held any
unexercised stock options or SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
END(#) FISCAL YEAR END($)(2)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
Ernie L. Carpenter................................ 0/60,000 0/1,470,000
</TABLE>
- ---------------
(1) No options were exercised by a Named Executive Officer in fiscal 1998.
(2) Reflects a market value of the underlying securities of $37.00 per share,
the closing price on The Nasdaq Stock Market on June 30, 1998, less the
exercise price.
EMPLOYMENT AGREEMENTS
Executive Employment Agreements with Messrs. Hirsch, Budagher and
Ocepek. Each of Messrs. Hirsch, Budagher and Ocepek entered into Executive
Employment Agreements with the Company effective April 23, 1998 with terms
ending on April 23, 2000; provided that the term of each such employment
agreement shall be extended for successive one year terms unless either party
shall give notice that the term shall not be so extended at least 120 days prior
to the end of the initial term or annual extension, as the case may be. The
employment agreements provide that Messrs. Hirsch, Budagher and Ocepek shall
serve as the President and Chief Executive Officer, Vice Chairman and Chief
Operating Officer, and Executive Vice President and Chief Financial Officer,
respectively, of the Company. The employment agreements further provide that
Messrs. Hirsch, Budagher and Ocepek shall receive an annual base salary of
$295,000, $245,000 and $245,000, respectively, subject to increase as determined
in the sole discretion of the Board of Directors of the Company, and that each
such executive officer shall be eligible for annual bonuses based on budgeted
earnings before income tax, depreciation and amortization and other criteria
established by the Board of Directors at the beginning of each fiscal year. The
employment agreements also provide that Messrs. Hirsch, Budagher and Ocepek will
be entitled to other customary benefits generally made available to other
executives of the Company. The employment agreements provide for a severance
payment equal to twelve months base salary in the event of termination of
employment by the executive for Good Reason (as defined) or by the Company other
than for Cause (as defined), Financial Cause (as defined) or the executive's
death, permanent disability or retirement and for severance payments equal to
six months base salary in the event of
25
<PAGE> 27
termination by the Company for Financial Cause. Pursuant to the employment
agreements, Messrs. Hirsch, Budagher and Ocepek have agreed that, subject to
certain exceptions, during the term of their respective agreements and for one
year thereafter, they will not (i) solicit, entice, persuade or induce any
employee of the Company or its subsidiaries to terminate his employment with the
Company or its subsidiaries or become employed by any other person and (ii)
compete with the Company through any person or other business enterprise having
or operating transmission towers within any of the same markets as the Company
or any of its subsidiaries.
Executive Employment Agreement with Mr. Carpenter. Mr. Carpenter entered
into an Employment Agreement with Microwave Tower Service, Inc., a wholly owned
subsidiary of the Company ("MTS"), on June 30, 1997 for a term of three years
pursuant to which Mr. Carpenter serves as President and Chief Executive Officer
of MTS. The employment agreement provides that Mr. Carpenter shall receive an
annual salary of $150,000 and shall be eligible for a bonus for each fiscal year
during which Mr. Carpenter is continuously employed by MTS. The employment
agreement also provides that Mr. Carpenter will be entitled to such benefits as
are customarily provided to other employees of MTS. Pursuant to his employment
agreement, Mr. Carpenter has agreed that he will not, during the term of his
employment and for two years thereafter, (i) directly or indirectly, engage or
participate in any business or other activities in competition with MTS in the
United States, (ii) directly or indirectly, call upon any customer of MTS, the
Company or their respective subsidiaries for the purpose of selling to or
supplying such customer with products or services similar to the products and
services provided by MTS, the Company or their respective subsidiaries and (iii)
directly or indirectly, solicit or employ any person employed by MTS, the
Company or their respective subsidiaries.
COMPENSATION OF DIRECTORS
Prior to the April Merger, Directors received $500 for each Board of
Directors meeting attended and reimbursement for expenses incurred in attending
such meetings. In addition, Directors who served on committees received $100 per
hour for time spent attending meetings of such committees. The Company has not
adopted a formal policy regarding the compensation of Directors following the
April Merger. The Company anticipates that Directors will be compensated in
accordance with the policy in effect prior to the April Merger until such time
as a new policy has been adopted.
26
<PAGE> 28
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 16, 1998, there were 15,096,360 shares of Company Common
Stock issued and outstanding. The following table sets forth certain
information, as of September 16, 1998, with respect to the beneficial ownership
of shares of Company Common Stock by (i) all persons known by the Company to be
the beneficial owners of more than 5% of the outstanding shares of Company
Common Stock (as derived solely from the Company's review of Schedules 13D and
13G on file with the Commission and from correspondence received from or
telephone conversations with certain stockholders of the Company), (ii) each
director of the Company, (iii) each Named Executive Officer, and (iv) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OWNER COMPANY COMMON STOCK(1) PERCENT OF CLASS
- ------------------------------------ ----------------------- ----------------
<S> <C> <C>
Thomas O. Hicks........................................ 6,676,099(2) 44.2%
200 Crescent Court, Suite 1600
Dallas, Texas 75201-6950
HMTF/Omni Partners, L.P................................ 6,648,811 44.0%
200 Crescent Court, Suite 1600
Dallas, Texas 75201-6950
Tommie R. Carpenter.................................... 2,280,000(3) 15.1%
888 Coburn St. South
Salem, Oregon 97302
Michael R. Budagher.................................... 2,155,000(4) 14.3%
12001 Hwy 14 North
Cedar Crest, New Mexico 87001
John D. Emery.......................................... 12,000(5) *
Jack D. Furst.......................................... 17,604 *
Carl E. Hirsch......................................... 17,000(6) *
Jeffrey A. Howard...................................... 137,500(7) *
Lawrence D. Stuart, Jr................................. 5,065 *
Ernie L. Carpenter..................................... -- --
J. Otis Winters........................................ -- --
Anthony S. Ocepek...................................... --(6) --
F. Howard Mandel....................................... --(6) --
All executive officers and directors as a group (11 2,344,169 15.5%
persons).............................................
</TABLE>
- ---------------
* Less than 1%.
(1) Based upon information supplied or confirmed by officers, directors and the
principal stockholders. The percentage of class assumes the exercise of all
options and warrants held by the named individual that are exercisable on
September 16, 1998, or within sixty days thereafter, but not the exercise of
any other options or warrants that are outstanding.
(2) Includes (i) 24,412 shares owned of record by Mr. Hicks, (ii) 2,876 shares
owned of record by six trusts of which Mr. Hicks serves as trustee and (iii)
6,648,811 shares owned of record by HMTF/Omni Partners, L.P., a limited
partnership of which the sole general partner is HM3/OmniAmerica Partners,
LLC, a limited liability company of which the sole member is HM3
Coinvestors, L.P., a limited partnership of which the sole general partner
is Hicks, Muse GP Partners III, L.P., a limited partnership of which the
sole general partner is Hicks, Muse Fund III Incorporated, a corporation of
which Mr. Hicks is the sole director, Chairman of the Board, Chief Executive
Officer, Secretary and sole
27
<PAGE> 29
stockholder. Mr. Hicks expressly disclaims (i) the existence of any group and
(ii) beneficial ownership with respect to any shares of Company Common Stock not
owned of record by him.
(3) Includes (i) 174,300 shares owned of record by Mr. Carpenter, (ii) 174,300
shares owned of record by Virginia Carpenter, Mr. Carpenter's wife, and
(iii) 1,931,400 shares owned by Carpenter Family Investments LLC, of which
Mr. Carpenter and his wife are the sole members.
(4) Consists entirely of shares owned by the Budagher Family LLC, of which Mr.
Budagher is the general manager.
(5) Consists entirely of shares that are deemed beneficially owned by Mr. Emery
by virtue of options held by him that are exercisable within 60 days of
September 16, 1998.
(6) In addition to shares of Company Common Stock, if any, owned of record by
Messrs. Hirsch, Ocepek and Mandel, each of Messrs. Hirsch, Ocepek and Mandel
is also a limited partner of HMTF/Omni Partners, L.P. The percentage
ownership represented by Messrs. Hirsch's, Ocepek's and Mandel's limited
partnership interests are equivalent to 487,847, 487,847 and 71,118 shares,
respectively, of the shares of Company Common Stock owned by HMTF/Omni
Partners, L.P. Each of Messrs. Hirsch, Ocepek and Mandel expressly disclaims
(i) the existence of any group and (ii) beneficial ownership with respect to
any shares of Company Common Stock not owned of record by him.
(7) Includes (i) 50,000 shares owned of record by Mr. Howard and (ii) 87,500
shares that are deemed beneficially owned by Mr. Howard by virtue of options
held by him that are exercisable within 60 days of September 16, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description concerning transactions that may not
otherwise be described herein by and between the Company and/or its affiliates
and other persons or entities affiliated with the Company or its affiliates. The
Company is of the view that each of such transactions was on terms no less
favorable to the Company than would otherwise have been available to the Company
in arms-length transactions with unaffiliated third parties.
Until March 1, 1997, Michael R. Budagher owned 50% of Specialty
Constructors Coatings, Inc. ("SCC"). SCC provides lead abatement services and
finishes or refinishes metal structures, principally elevated water towers.
During the year ended June 30, 1997, the Company paid $606,304 for services
provided by SCC to the Company. On March 1, 1997, Mr. Budagher sold his interest
in SCC to two employees of SCC pursuant to a warrant to purchase said interests
that was sold to these employees in 1996. On June, 1, 1997, the Company acquired
substantially all the assets of SCC in exchange for 55,814 shares of Company
Common Stock.
Bruce P. Budagher, Vice President of Specialty Constructors and the brother
of Michael R. Budagher, and Sheril E. Budagher, the spouse of Michael R.
Budagher, own all of the outstanding stock of Specialty Manufacturing, Inc.
("SMI"). Until August 1997, SMI manufactured devices ("SMI ground kits") that
ground electric transmission lines used in connection with wireless transmitting
and receiving facilities. Historically, the Company has bought SMI ground kits
for use in connection with certain of the Company's wireless infrastructure
building operations. During fiscal 1997 and 1998, the Company purchased $29,852
and $3,768, respectively, of SMI ground kits. In August, 1997, Microwave Tower
Service, Inc., a wholly-owned subsidiary of the Company, acquired substantially
all the inventory and manufacturing equipment of SMI and the right to
manufacture and sell SMI ground kits in exchange for approximately $134,832 in
cash and the right to receive a royalty of $2.00 per SMI ground kit sold by
Microwave Tower Service, Inc. during the period beginning August 1, 1997 and
ending July 31, 2000. During fiscal year 1998, the Company paid $42,348 to SMI
pursuant to the royalty arrangement.
The Company has utilized contract labor from Budagher Tower Co., a company
wholly owned by William J. Budagher, a brother of Michael R. Budagher and Bruce
P. Budagher. The Company paid $452,338 and $252,933 for contract labor services
provided by Budagher Tower Co. for the fiscal years ended June 30, 1997 and
1998, respectively.
28
<PAGE> 30
The Company presently leases approximately 5,400 square feet of office
space from Michael R. Budagher for $16,800 annually. The office space is located
in a 6,400 square foot building in Cedar Crest, New Mexico. This office serves
as the Company's headquarters and as a regional office for the Company's
wireless infrastructure building and implementation and wireless infrastructure
electrical design and engineering operations. Management of the Company believes
that the rent for the space is at least as favorable as could have been
negotiated in an arms-length transaction.
In connection with the MTS Merger, on June 30, 1997, the Company borrowed
$2,000,000 (the "Carpenter Loan") from Tommie R. Carpenter. The Carpenter Loan
has an interest rate of 8.25% and is secured by finished goods inventory of the
Company. The principal balance of the Carpenter Loan at June 30, 1998 was
$80,000.
On December 29, 1997, the Company loaned $600,000 to Jeffrey A. Howard (the
"Howard Loan"), due and payable on December 29, 2002, for the purchase of 50,000
shares of Company Common Stock. The Howard Loan has an annual interest rate of
the lesser of (i) seven percent and (ii) the maximum rate of nonusurious
interest allowed from time to time by law.
On April 23, 1998, the Company and its subsidiaries entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with Hicks, Muse & Co.
Partners, L.P. ("Hicks Muse Partners"), an affiliate of OmniPartners, pursuant
to which they pay Hicks Muse Partners an annual fee of $180,000 for oversight
and monitoring services to the Company and its subsidiaries. The annual fee is
adjustable at the end of each fiscal year to an amount equal to 0.2% of the
budgeted consolidated annual net sales of the Company and its subsidiaries for
the then current fiscal year, but in no event less than $180,000. Messrs. Thomas
O. Hicks, Jack D. Furst and Lawrence D. Stuart, Jr. are each principals of Hicks
Muse Partners. In addition, the Company and its subsidiaries have agreed to
indemnify Hicks Muse Partners, its affiliates and their respective directors,
officers and controlling persons, if any, and, agents and employees of Hicks
Muse Partners or any of its affiliates from and against all claims, liabilities,
losses, damages, and expenses, including legal fees, arising out of or in
connection with the services rendered by Hicks Muse Partners in connection with
the Monitoring and Oversight Agreement.
On April 23, 1998, the Company and its subsidiaries entered into a ten-year
agreement (the "Financial Advisory Agreement") with Hicks Muse Partners. Hicks
Muse Partners also will be entitled to receive a fee equal to 1.5% of the
transaction value (as defined) for each add-on transaction (as defined) in which
the Company and its subsidiaries is involved. The term "transaction value" means
the total value of any add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement in connection with such add-on transaction)
including the amount of any indebtedness, preferred stock or similar items
assumed (or remaining outstanding). The term "add-on transaction" means any
future proposal for a tender offer, acquisition, sale, merger, exchange offer,
recapitalization, restructuring, or other similar transaction directly or
indirectly involving the Company and its subsidiaries, and any other person or
entity. Messrs. Thomas O. Hicks, Jack D. Furst and Lawrence D. Stuart, Jr. are
each principals of Hicks Muse Partners. In addition, the Company and its
subsidiaries have agreed to indemnify Hicks Muse Partners, its affiliates and
their respective directors, officers and controlling persons, if any, and agents
and employees of Hicks Muse Partners from and against all claims, liabilities,
losses, damages, and expenses, including legal fees, arising out of or in
connection with the services rendered by Hicks Muse Partners in connection with
the Financial Advisory Agreement.
The Monitoring and Oversight Agreement and the Financial Advisory Agreement
make available the resources of Hicks Muse Partners concerning a variety of
financial and operational matters. The services that have been and will continue
to be provided by Hicks Muse Partners could not otherwise be obtained by the
Company and its subsidiaries without the addition of personnel or the engagement
of outside professional advisors. In management's opinion, the fees provided for
under these agreements reasonably reflect the benefits received and to be
received by the Company and its subsidiaries.
OmniPartners, Mr. Budagher, the Budagher Family LLC, of which Mr. Budagher
is the general manager, Mr. Tommie Carpenter (together with Mr. Budagher and the
Budagher Family, LLC, the "Stockholder Group") and certain other stockholders of
the Company have entered into a stockholders agreement (the "Stockholders
Agreement") dated as of April 23, 1998. Pursuant to the Stockholders
29
<PAGE> 31
Agreement, each of Hicks, Muse, Tate & Furst Incorporated, an affiliate of
OmniPartners ("HMTF"), and the Stockholder Group is entitled to designate up to
four directors of the Board of Directors of the Company, dependent upon the
percentage of the Company Common Stock owned by OmniPartners and its affiliates
(the "Omni Group") or the Stockholder Group, as applicable. Without the
affirmative vote of a majority of the directors elected by HMTF and a majority
of the directors elected by the Stockholder Group, the Company cannot enter into
certain transactions, including, without limitation, acquisitions involving an
aggregate purchase price in excess of $5,000,000, the disposition of
substantially all of the assets of the Company and its subsidiaries, debt
financing involving more than $10,000,000 or any merger, consolidation or
business combination between the Company or a subsidiary of the Company and any
other entity. Also, pursuant to the terms of the Stockholders Agreement, the
Company has the right of first offer upon the proposed transfer of certain
shares of Company Common Stock that are subject to the Stockholders Agreement.
If the Company chooses not to or fails to purchase such shares, the member of
the Omni Group or Stockholder Group desiring to effect the transfer may offer to
include in the transfer a certain percentage of shares held by other non-
selling shareholders. In addition, OmniPartners and certain of its affiliates
have agreed that prior to the termination of the Stockholders Agreement, none of
them will purchase or otherwise acquire, directly or indirectly, more than 49.9%
of the outstanding shares of Company Common Stock. Furthermore, none of such
parties will take certain actions, including, without limitation, soliciting
proxies, encouraging the formation of voting trusts or commencing other actions
in order to seek control of the Board of Directors of the Company. At any time,
(i) members of the Omni Group owning at least 35% or more of the aggregate
number of Registrable Shares (as defined in the Stockholders Agreement) then
owned by the Omni Group or (ii) members of the Stockholder Group owning 35% or
more of the aggregate number of Registrable Shares then owned by the Stockholder
Group, may request the registration of all or part of its or their Registrable
Shares. Furthermore, all holders of Registrable Shares may include its or their
Registrable Shares in each registration of equity securities by the Company.
On August 13, 1998, the Company announced that it had entered into a
build-to-suit agreement with Alamosa PCS, L.L.C. ("Alamosa"), an affiliate of
Sprint PCS, for the construction of approximately 250 towers for which Alamosa
will be the anchor tenant. It is anticipated that construction of the towers
will be completed by the year 2000. Michael R. Budagher currently owns
approximately 12% of the outstanding equity of Alamosa.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
April 22, 1998, among Specialty Teleconstructors, Inc.,
OAI Acquisition Corp., OmniAmerica Holdings Corporation,
OmniAmerica, Inc., Omni/HSW Acquisition, Inc. and
HMTF/OmniPartners, L.P.(1)
2.2 -- Agreement and Plan of Merger, dated July 24, 1998, by and
between Specialty Teleconstructors, Inc. and OmniAmerica,
Inc.(2)
3.1 -- Certificate of Incorporation of the Registrant(2)
3.2 -- By-laws of the Registrant(2)
4.1 -- Post-Merger Stockholders Agreement, dated April 23, 1998,
among Specialty Teleconstructors, Inc. and the
stockholders of Speciality Teleconstructors, Inc. party
thereto(1)
10.1 -- 1998 Stock Option Plan of Specialty Teleconstructors,
Inc.(2)
10.2 -- Executive Employment Agreement, dated December 6, 1997,
by and between Specialty Teleconstructors, Inc. and
Jeffrey A. Howard(3)
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.3 -- Employment Agreement, dated February 16, 1998, effective
as of the effective time of the April Merger, between
Specialty Teleconstructors, Inc. and Michael R.
Budagher(1)
10.4 -- Executive Employment Agreement, dated February 16, 1998,
effective as of the effective time of the April Merger,
between Specialty Teleconstructors, Inc. and Carl E.
Hirsch(1)
10.5 -- First Amendment to Employment Agreement, dated April 22,
1998, effective as of the effective time of the April
Merger, between Specialty Teleconstructors, Inc. and
Jeffrey A. Howard(1)
10.6 -- Executive Employment Agreement, dated February 16, 1998,
effective as of the effective time of the April Merger,
between Specialty Teleconstructors, Inc. and Anthony S.
Ocepek(1)
10.7 -- Credit Agreement, dated as of June 30, 1998, among
Specialty Teleconstructors, Inc., the lenders party
thereto, Bankers Trust Company, Bank Boston, N.A. and The
Chase Manhattan Bank*
10.8 -- Guarantee and Collateral Agreement, dated as of June 30,
1998, made by Specialty Teleconstructors, Inc. and
certain of its subsidiaries, in favor of The Chase
Manhattan Bank*
10.9 -- Monitoring and Oversight Agreement, dated April 23, 1998,
among Specialty Teleconstructors, Inc., a Nevada
corporation, OmniAmerica Holdings Corporation, a Delaware
corporation, OmniAmerica, Inc., a Delaware corporation,
Novak & Lackey Construction Co., Inc., an Oklahoma
corporation, Specialty Management, Inc., a Nevada
corporation, Microwave Tower Services, Inc., an Oregon
corporation, Specialty Constructors, Inc., a New Mexico
corporation, Specialty Constructors Coatings, Inc., a
Nevada corporation, Specialty Capital Services, Inc., a
Nevada corporation, Specialty Combined Resources, Inc., a
Texas corporation, Specialty Fortress, Inc., a Nevada
corporation, Specialty Training Centers, Inc., a Nevada
corporation, South Atlantic Tower Corporation, a Delaware
corporation, OmniTower, Ltd., a Florida limited
partnership, and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership*
10.10 -- Financial Advisory Agreement, dated April 23, 1998, among
Specialty Teleconstructors, Inc., a Nevada corporation,
OmniAmerica Holdings Corporation, a Delaware corporation,
OmniAmerica, Inc., a Delaware corporation, Novak & Lackey
Construction Co., Inc., an Oklahoma corporation,
Specialty Management, Inc., a Nevada corporation,
Microwave Tower Services, Inc., an Oregon corporation,
Specialty Constructors, Inc., a New Mexico corporation,
Specialty Constructors Coatings, Inc., a Nevada
corporation, Specialty Capital Services, Inc., a Nevada
corporation, Specialty Combined Resources, Inc., a Texas
corporation, Specialty Fortress, Inc., a Nevada
corporation, Specialty Training Centers, Inc., a Nevada
corporation, South Atlantic Tower Corporation, a Delaware
corporation, OmniTower, Ltd., a Florida limited
partnership, and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership*
10.11 -- Asset Purchase Agreement, dated June 1, 1998, among
Specialty Capital Services, Inc. (n/k/a OmniAmerica
Development Corp.), Specialty Teleconstructors, Inc.,
Teleforce, LLC, and Richard H. Statler and Terry A.
Klein*
10.12 -- Asset Purchase and Sale Agreement, dated April 10, 1998,
between certain subsidiaries of Arch Communications
Group, Inc. and OmniAmerica, Inc.*
10.13 -- Amendment to Asset Purchase and Sale Agreement, dated
June 26, 1998, between certain subsidiaries of Arch
Communications Group, Inc. and OmniAmerica, Inc.*
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.14 -- Second Amendment to Asset Purchase and Sale Agreement,
dated August 12, 1998, between certain subsidiaries of
Arch Communications Group, Inc. and OmniAmerica, Inc.*
10.15 -- Third Amendment to Asset Purchase and Sale Agreement,
dated as of September 29, 1998, between certain
subsidiaries of Arch Communications Group, Inc. and
OmniAmerica, Inc.*
10.16 -- Employment Agreement dated as of June 30, 1997, by and
between Microwave Tower Services, Inc. and Ernie L.
Carpenter(4)
21.1 -- Subsidiaries of the Registrant*
23.1 -- Consent of Ernst & Young LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on May 7, 1998.
(2) Incorporated by reference to the Registrant's Schedule 14C filed on August
24, 1998.
(3) Incorporated by reference to the Registrant's Form 10-QSB filed on February
20, 1998.
(4) Incorporated by reference to the Registrant's Form 10-KSB for the fiscal
year ended June 30, 1997.
(b) Reports on Form 8-K
On May 7, 1998, the Company filed a Form 8-K and reported the consummation
of the merger of OAI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company, with and into OmniAmerica Holdings
Corporation, a Delaware corporation ("Holdings"), with Holdings being the
surviving corporation of the merger and, as a result of the merger, a
wholly-owned subsidiary of the Company.
32
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OMNIAMERICA, INC.
By: /s/ CARL E. HIRSCH
----------------------------------
Carl E. Hirsch,
President and
Chief Executive Officer
By: /s/ ANTHONY S. OCEPEK
----------------------------------
Anthony S. Ocepek,
Chief Financial Officer
By: /s/ DENNIS K. HARTNETT
----------------------------------
Dennis K. Hartnett,
Chief Accounting Officer
Date: September 28, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL R. BUDAGHER Director September 28, 1998
- -----------------------------------------------------
Michael R. Budagher
/s/ ERNIE L. CARPENTER Director September 28, 1998
- -----------------------------------------------------
Ernie L. Carpenter
/s/ JOHN D. EMERY Director September 28, 1998
- -----------------------------------------------------
John D. Emery
/s/ JACK D. FURST Director September 28, 1998
- -----------------------------------------------------
Jack D. Furst
/s/ CARL E. HIRSCH Director September 28, 1998
- -----------------------------------------------------
Carl E. Hirsch
/s/ JEFFREY A. HOWARD Director September 28, 1998
- -----------------------------------------------------
Jeffrey A. Howard
/s/ LAWRENCE D. STUART, JR. Director September 28, 1998
- -----------------------------------------------------
Lawrence D. Stuart, Jr.
/s/ J. OTIS WINTERS Director September 28, 1998
- -----------------------------------------------------
J. Otis Winters
</TABLE>
33
<PAGE> 35
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(WITH REPORTS OF INDEPENDENT AUDITORS)
F-1
<PAGE> 36
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors
OmniAmerica, Inc. (formerly Specialty Teleconstructors, Inc.)
We have audited the accompanying consolidated balance sheet of OmniAmerica,
Inc. and subsidiaries (formerly Specialty Teleconstructors, Inc.) as of June 30,
1998, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
OmniAmerica, Inc. and subsidiaries (formerly Specialty Teleconstructors, Inc.)
at June 30, 1998, and the consolidated results of their operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG, LLP
Dallas, Texas
September 16, 1998
F-2
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
The Board of Directors
OmniAmerica, Inc. (formerly Specialty Teleconstructors, Inc.):
We have audited the accompanying consolidated balance sheet of OmniAmerica,
Inc. and subsidiaries (formerly Specialty Teleconstructors, Inc.) as of June 30,
1997, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also incudes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of OmniAmerica
Inc. and subsidiaries (formerly Specialty Teleconstructors, Inc.) as of June 30,
1997, and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
August 29, 1997
F-3
<PAGE> 38
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
ASSETS (Substantially Pledged)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,349,324 $ 989,720
Available for sale securities............................. -- 769,850
Contracts receivable, less allowance for doubtful accounts
of $390,230 in 1998 and $355,000 in 1997............... 17,349,853 14,740,479
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 3)......................... 3,747,671 2,233,289
Components inventory...................................... 3,430,868 2,664,239
Prepaid income taxes...................................... 287,849 407,477
Other current assets...................................... 891,148 283,760
------------ -----------
Total current assets.............................. 30,056,713 22,088,814
Property and equipment, net (note 4)........................ 50,847,107 8,429,906
Goodwill, net of amortization of $808,250 in 1998 and
$43,383 in 1997........................................... 87,993,151 1,512,555
Investment in unconsolidated subsidiary (note 5)............ 7,889,650 --
Other assets, net........................................... 2,536,804 331,989
------------ -----------
$179,323,425 $32,363,264
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $ 8,802,734 $ 4,021,694
Lines of credit (note 8).................................. -- 3,387,910
Notes payable to stockholder (note 14).................... 80,000 2,000,000
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 3)......................... 758,932 597,939
Accrued expenses.......................................... 2,171,429 790,975
Current installments of notes and capital leases payable
(note 8)............................................... 474,696 573,798
Deferred income taxes (note 11)........................... -- 384,600
------------ -----------
Total current liabilities......................... 12,287,791 11,756,916
Deferred income taxes (note 11)............................. 213,378 90,000
Notes and capital leases payable, excluding current
installments (note 8)..................................... 31,631,459 2,012,081
------------ -----------
Total liabilities................................. 44,132,628 13,858,997
------------ -----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 20,000,000
shares; issued 15,070,294 and 7,876,554 shares in 1998
and 1997, respectively (notes 9, 10 and 15)............ 150,703 78,765
Additional paid-in capital................................ 129,131,297 12,015,667
Treasury stock, at cost, 100,000 shares................... (1,387,500) --
Note receivable from officer and director (note 14)....... (600,000) --
Retained earnings......................................... 7,896,297 6,409,835
------------ -----------
Total stockholders' equity........................ 135,190,797 18,504,267
Commitments and contingencies (notes 6, 13, 15 and 17)
------------ -----------
$179,323,425 $32,363,264
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 39
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues earned:
Installation services..................................... $53,038,988 $57,250,485
Component sales........................................... 8,501,147 8,376,315
Tower leasing............................................. 1,258,936 --
----------- -----------
Total revenues earned............................. 62,799,071 65,626,800
----------- -----------
Cost of revenues earned:
Cost of installation services............................. 45,684,581 48,298,454
Cost of component sales................................... 5,589,902 5,113,096
Cost of tower leasing..................................... 659,281 --
----------- -----------
Total cost of revenues earned..................... 51,933,764 53,411,550
----------- -----------
Gross profit on revenues earned................... 10,865,307 12,215,250
Compensation expense for cashless option exercises (note
10)....................................................... 719,000 --
Selling, general and administrative expenses................ 8,233,490 5,915,808
----------- -----------
Earnings from operations.......................... 1,912,817 6,299,442
----------- -----------
Other income (expenses):
Interest income........................................... 157,015 181,516
Interest expense.......................................... (623,723) (429,615)
Equity in earnings of unconsolidated subsidiary........... 219,569 --
Other, net................................................ 143,434 (20,101)
----------- -----------
(103,705) (268,200)
----------- -----------
Earnings before income taxes...................... 1,809,112 6,031,242
Income taxes................................................ 832,000 343,500
----------- -----------
Net earnings...................................... $ 977,112 $ 5,687,742
=========== ===========
Shares of common stock used in computing earnings per share:
Basic..................................................... 9,274,676 7,110,282
Diluted................................................... 9,562,121 7,467,990
Net earnings per common share:
Basic..................................................... $ .11 $ .80
=========== ===========
Diluted................................................... $ .10 $ .76
=========== ===========
Pro forma information (note 12):
Net earnings.............................................. 5,687,742
Pro forma adjustment for 1997 income taxes of acquired
entity previously filing as an S Corporation........... 2,140,500
-----------
Pro forma net earnings after adjustment for income taxes of
acquired entity........................................... 3,547,242
===========
Pro forma net earnings per common share:
Basic..................................................... $ .50
===========
Diluted................................................... $ .47
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 40
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
NOTE
RECEIVABLE
FROM
COMMON STOCK ADDITIONAL OFFICER
--------------------- PAID-IN TREASURY AND RETAINED
SHARES AMOUNT CAPITAL STOCK DIRECTOR EARNINGS TOTAL
---------- -------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996.......... 6,872,308 $ 68,723 $ 5,344,298 $ -- $ -- $ 5,032,817 $ 10,445,838
Issuance of common stock and
warrants to acquire common
stock, net...................... 668,985 6,690 3,686,003 -- -- -- 3,692,693
Acquisitions (note 15):
Data Cell Systems, Inc. ........ 93,400 934 664,576 -- -- -- 665,510
Paramount Communication Systems,
Inc........................... 186,047 1,860 1,728,324 -- -- -- 1,730,184
Specialty Constructors Coatings,
Inc........................... 55,814 558 592,466 -- -- -- 593,024
Distributions of prior S
Corporation earnings............ -- -- -- -- -- (4,310,724) (4,310,724)
Net earnings...................... -- -- -- -- -- 5,687,742 5,687,742
---------- -------- ------------ ----------- --------- ----------- ------------
Balance at June 30, 1997.......... 7,876,554 78,765 12,015,667 -- -- 6,409,835 18,504,267
Issuance of common stock, net..... 322,892 3,229 2,886,720 -- -- -- 2,889,949
Acquisitions (note 15):
Ellis Tower..................... 120,848 1,209 1,796,410 -- -- -- 1,797,619
OmniAmerica..................... 6,750,000 67,500 112,432,500 -- -- -- 112,500,000
Purchase of treasury stock........ -- -- -- (1,387,500) -- -- (1,387,500)
Return of prior S Corporation
earnings distribution........... -- -- -- -- -- 509,350 509,350
Note receivable from officer and
director (note 14).............. -- -- -- -- (600,000) -- (600,000)
Net earnings...................... -- -- -- -- -- 977,112 977,112
---------- -------- ------------ ----------- --------- ----------- ------------
Balance at June 30, 1998.......... 15,070,294 $150,703 $129,131,297 $(1,387,500) $(600,000) $ 7,896,297 $135,190,797
========== ======== ============ =========== ========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 41
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 977,112 $5,687,742
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Provision for uncollectible receivables.............. 225,000 355,000
Depreciation of property and equipment............... 2,282,084 1,496,830
Amortization......................................... 799,867 134,185
Compensation expense for cashless option exercises... 719,000 --
Equity in earnings of unconsolidated subsidiary...... (219,569) --
Gain on sale of equipment............................ -- (10,489)
Changes in certain assets and liabilities, net of
acquisitions:
Contracts receivable............................. (1,869,714) (4,636,796)
Prepaid income taxes............................. 119,628 (344,726)
Costs and estimated earnings in excess of
billings on uncompleted contracts............. (1,514,382) (945,959)
Components inventory............................. (680,417) (1,769,594)
Other current assets............................. (292,647) (172,919)
Trade accounts payable........................... 4,109,132 808,416
Billings in excess of costs and estimated
earnings on uncompleted contracts............. (335,738) 355,359
Accrued expenses................................. 473,530 (444,544)
Current income taxes............................. -- (578,200)
Deferred income taxes............................ (261,222) (210,300)
------------ ----------
Net cash provided by (used in) operating
activities.................................. 4,531,664 (275,995)
------------ ----------
Cash flows from investing activities:
Purchases of property and equipment, net.................. (22,182,316) (3,609,094)
Acquisitions costs recorded as goodwill................... (3,499,319) --
Acquisitions, net of cash acquired........................ 1,665,555 (80,263)
Purchases of other assets................................. (382,450) --
Proceeds from sale of available for sale securities....... 769,850 --
Purchases of available for sale securities, net........... -- (473,815)
------------ ----------
Net cash used in investing activities........... (23,628,680) (4,163,172)
------------ ----------
Cash flows from financing activities:
Lines of credit, net...................................... (3,387,910) 1,255,910
Borrowings from notes payable............................. 29,162,211 661,500
Payment of deferred financing fees........................ (1,340,000) --
Principal payments on notes payable....................... (750,480) (783,110)
Borrowings from notes payable to stockholder.............. -- 2,000,000
Principal payments on notes payable to stockholder........ (1,410,650) (500,000)
Proceeds from sale of common stock and warrants to acquire
common stock, net...................................... 1,570,949 3,692,693
Acquisition of treasury stock............................. (1,387,500) --
Distributions of prior S Corporation earnings............. -- (4,310,724)
------------ ----------
Net cash provided by financing activities....... 22,456,620 2,016,269
------------ ----------
Net increase (decrease) in cash and cash
equivalents................................. 3,359,604 (2,422,898)
Cash and cash equivalents at beginning of year.............. 989,720 3,412,618
------------ ----------
Cash and cash equivalents at end of year.................... $ 4,349,324 $ 989,720
============ ==========
</TABLE>
F-7
<PAGE> 42
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 623,723 $ 478,177
============ ==========
Income taxes paid......................................... $ 1,220,587 $1,318,977
============ ==========
Noncash investing and financing activities:
Acquisition of vehicles in exchange for notes
payable............................................... $ 1,108,545 $1,208,056
============ ==========
Notes receivable from stockholder in exchange for
common stock.......................................... $ 600,000 $ --
============ ==========
Return of prior S Corporation earnings distribution.... $ 509,350 $ --
============ ==========
</TABLE>
Acquisitions of net assets of Ellis Tower and OmniAmerica Holdings in
exchange for cash and common stock of the Company in the year ended June 30,
1998 and Paramount, Data Cell, and Coatings in exchange for cash and common
stock of the Company in the year ended June 30, 1997. Fair value of assets
acquired and liabilities assumed at the date of the acquisition were as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Contracts receivable........................................ $ 1,175,989 $ 1,348,404
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... -- (169,674)
Components inventory........................................ 86,212 204,888
Other current assets........................................ 314,741 --
Property and equipment...................................... 21,408,424 934,550
Goodwill.................................................... 87,069,134 1,593,397
Investment in unconsolidated subsidiary..................... 7,670,081 --
Other assets................................................ 482,365 100,066
Trade accounts payable...................................... (671,908) (475,809)
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (496,731) --
Accrued expenses............................................ (906,924) (6,883)
Notes and capital leases payable............................ -- (459,957)
Common stock issued......................................... (114,297,619) (2,988,719)
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 43
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
On September 14, 1998, Specialty Teleconstructors, Inc.("STI"), through a
merger with a wholly-owned subsidiary of STI, changed its name from STI to
OmniAmerica, Inc. ("OmniAmerica" or the "Company") and changed its state of
incorporation from Nevada to Delaware.
The Company is headquartered in Cedar Crest, New Mexico and was formed as a
holding company to combine the operations of its principal operating
subsidiaries, OmniAmerica Towers, Inc., OmniAmerica Development Corporation,
OmniAmerica Holdings Corporation, South Atlantic Tower Corporation, Specialty
Constructors, Inc., Specialty Constructors Coatings, Inc., Specialty Management,
Inc., OmniTower, Ltd., Microwave Tower Service, Inc., Novak & Lackey
Construction Company, Inc., and Specialty Combined Resources, Inc. The Company
is a leading provider of wireless communications and broadcast tower services to
the United States communications industry. The Company's tower services include
owning, leasing, managing and developing multi-use telecommunications sites for
radio and television broadcasting, paging, cellular, personal communications
services and other wireless technologies; providing wireless infrastructure
building and implementation services primarily for providers of wireless
communication services in the United States; and manufacturing and selling
wireless infrastructure components used in the construction and maintenance of
wireless communication transmitting and receiving facilities. The Company's
customers are located throughout the country.
Effective March 31, 1997, a subsidiary of the Company merged with Novak &
Lackey Construction Co., Inc. ("N&L") and on June 30, 1997, a subsidiary of the
Company merged with Microwave Tower Service, Inc. ("MTS"). Both transactions
were accounted for as pooling of interests business combinations. Accordingly,
the Company's consolidated financial statements prior to these transactions have
been restated to reflect the combined operations (see note 15) for all periods
presented.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Investment in a 33 1/3% owned affiliated company is accounted for on the
equity basis of accounting and accordingly, the statement of earnings includes
the Company's proportionate share of the affiliate's income since its date of
acquisition during 1998.
(b) Revenue Recognition
Revenues from installation services are recognized on the
percentage-of-completion method. Contract costs include all direct material and
labor costs and those indirect costs related to contract performance. Selling,
general and administrative costs are charged to expense as incurred. Provisions
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined.
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenues recognized in excess of amounts billed. Billings in excess
of costs and estimated earnings on uncompleted contracts represents billings in
excess of revenues recognized.
Revenues from the sale of components are recognized upon shipment to the
customer.
Revenues from tower leasing are recognized ratably as earned over the
respective tower lease terms.
F-9
<PAGE> 44
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Statements of Cash Flows
For purposes of statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
(d) Available for Sale Securities
Investment securities consist of stocks, municipal bonds and mutual funds.
In accordance with Statement of Financial Accounting Standard (SFAS) No. 115,
the Company's investments are classified as available for sale. Available for
sale securities are recorded at fair value based on the market value as provided
by brokers/dealers. Unrealized holding gains and losses, net of the related tax
effect, are reported as a separate component of stockholders' equity. Realized
gains and losses from the sale of available for sale securities are determined
on a specific identification basis.
A decline in the market value of any available for sale security below cost
that is deemed to be other than temporary results in a reduction in carrying
amount to fair value. The impairment is charged to earnings and a new cost basis
for the security is established. Premiums and discounts are amortized or
accreted over the life of the related security as an adjustment to yield using
the effective interest method. Dividend and interest income are recognized when
earned.
As of June 30, 1997, the cost of the Company's available for sale
securities approximates market value. Such securities were liquidated during
1998.
(e) Components Inventory
Components inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is provided on a straight-line basis over the estimated useful lives
of the assets. Leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or estimated useful life of the asset.
(g) Business and Credit Concentrations
Customers comprising 10 percent or greater of the Company's revenues earned
are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sprint...................................................... 15% --
Western Wireless............................................ -- 20%
AT&T........................................................ -- 12%
</TABLE>
The Company generally does not require collateral from its customers and
has provided adequate provisions for possible credit losses for 1998 and 1997.
(h) Distributions
Distributions to the previous subchapter S Corporation stockholder in 1997
were made at the discretion of the Board of Directors for payment of income
taxes. In 1998, the excess amount of this distribution over actual income taxes
was returned to the Company.
F-10
<PAGE> 45
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(i) Goodwill
The excess of purchase price over the fair value of net assets acquired is
amortized on a straight-line basis over the estimated benefit period of
approximately 30 years.
(j) Deferred Financing Costs
Deferred financing costs incurred in connection with the Company's senior
secured revolving credit facility and variable term note will be amortized over
the term of the related debt on a straight-line basis.
(k) Impairment of Long-lived Assets and Long-lived Assets to be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
July 1, 1996. This statement requires that long-lived assets and certain
identifiable intangible assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(l) Income Taxes
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(m) Advertising Costs
Advertising costs, all of which are non-direct response advertising, are
expensed as incurred. Advertising expense was approximately $153,000 and
$133,000 during the years ended June 30, 1998 and 1997, respectively.
(n) Stock Option Plan
Prior to July 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
July 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in fiscal
1996 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions of
APB No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
F-11
<PAGE> 46
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(o) Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(p) Earnings Per Share
In 1998, the Company adopted SFAS No. 128, Earnings per Share. In
accordance with this SFAS, basic earnings per common share is computed by
dividing net income applicable to common stock by the weighted average number of
common shares outstanding. Dilutive earnings per share is computed by dividing
net income applicable to common stock by the total of the weighted average
number of common shares outstanding and the additional dilutive effect of stock
options and warrants during the period. The dilutive effect of outstanding stock
options and warrants is computed using the average market price of the Company's
common stock for the period. The earnings per share for 1997 has been restated
to conform to this change.
The following is the reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for net income and other
related disclosures required by SFAS No. 128 at June 30:
<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Year ended June 30, 1998:
Basic earnings per share:
Income available to common stockholders... $ 977,112 9,274,676 $.11
Effect of dilutive shares:
Options................................... -- 287,445
---------- ----------
Dilutive earnings per share:
Income available to common stockholders
plus assumed conversions................ $ 977,112 9,562,121 $.10
========== ========== ====
Year ended June 30, 1997:
Basic earnings per share:
Income available to common stockholders... $5,687,742 7,110,282 $.80
Effect of dilutive shares:
Options and warrants...................... -- 357,708
---------- ----------
Dilutive earnings per share:
Income available to common stockholders
plus assumed conversions................ $5,687,742 7,467,990 $.76
========== ========== ====
Proforma earnings per share after adjustment
for income taxes of acquired entity
previously filing as an S Corporation:
Basic..................................... $3,547,242 7,110,282 $.50
========== ========== ====
Diluted................................... $3,547,242 7,467,990 $.47
========== ========== ====
</TABLE>
(q) Financial Instruments
SFAS No. 107, Disclosures About Fair Values of Financial Instruments,
requires the fair value of financial instruments be disclosed. In addition to
available for sale securities carried at fair value, the
F-12
<PAGE> 47
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's financial instruments are contracts receivable, accounts payable, line
of credit and notes payable. The carrying amounts of these items, because of
their nature, approximate fair value.
(r) New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general purpose financial statements.
Specifically, SFAS No. 130 requires that all items that meet the definition of
components of comprehensive income be reported in a financial statement for the
period in which they are recognized. However, SFAS No. 130 does not specify when
to recognize or how to measure the items that make up comprehensive income. SFAS
No. 130 is effective for financial statements issued for periods beginning after
December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Financial Reporting for Segments of Business Enterprise. SFAS No. 131 supercedes
the "industry segment" concept of SFAS No. 14 with a "management approach'
concept as the basis for identifying reportable segments. SFAS No. 131 is
effective for financial statements issued for periods beginning after December
15, 1997.
(s) Reclassifications
Certain prior year amounts have been reclassified to conform to current
year presentation.
(3) COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Costs incurred on uncompleted contracts................... $23,877,446 $ 16,682,266
Estimated earnings........................................ 10,033,415 6,321,822
Less billings to date..................................... (30,922,122) (21,368,738)
----------- ------------
$ 2,988,739 $ 1,635,350
=========== ============
Included in the accompanying balance sheets:
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ $ 3,747,671 $ 2,233,289
Billings in excess of costs and estimated earnings on
uncompleted contracts................................ (758,932) (597,939)
----------- ------------
$ 2,988,739 $ 1,635,350
=========== ============
</TABLE>
F-13
<PAGE> 48
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES (YEARS) 1998 1997
------------- ----------- -----------
<S> <C> <C> <C>
Tower assets................................... 30 $34,918,139 $ --
Land........................................... 3,528,681 398,204
Buildings...................................... 15-40 4,932,786 1,812,275
Vehicles....................................... 3-7 6,406,562 5,103,442
Furniture and fixtures......................... 3-10 1,794,439 1,468,646
Equipment...................................... 3-10 4,556,502 2,774,246
Leasehold improvements......................... 5 156,053 58,827
----------- -----------
56,293,162 11,615,640
Less accumulated depreciation (5,446,055) (3,185,734)
----------- -----------
$50,847,107 $ 8,429,906
=========== ===========
</TABLE>
(5) INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (UNAUDITED)
As a result of the Company's merger with OmniAmerica Holdings described in
note 15 below, the Company holds a 33 1/3% interest in Kline Iron and Steel Co.,
Inc. ("Kline"), a company which fabricates structural and tower steel products,
domestically and internationally, and is accounted for under the equity method.
Summarized historical financial information of Kline as of and for the year
ended June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current Assets............................................. $29,595,156 $12,310,714
Total Assets............................................... 33,448,072 15,991,459
Stockholders' Equity....................................... 5,625,935 3,236,912
Revenues................................................... 65,345,299 47,371,599
Net Earnings............................................... 2,389,023 931,261
</TABLE>
(6) LEASES
The Company leases its main office building from an executive officer and
leases office space for several regional offices and various equipment and
vehicles from unrelated parties. These leases are operating leases that expire
over the next four years. The main office building lease contains a renewal
option for five years and requires the Company to pay all executory costs such
as maintenance and insurance. Rental expense for operating leases was
approximately $490,000 and $365,000 for the years ending June 30, 1998 and 1997,
respectively.
F-14
<PAGE> 49
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under non-cancelable operating leases at June
30, 1998 are:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
-------------------
<S> <C>
1999........................................................ $ 464,857
2000........................................................ 247,931
2001........................................................ 151,263
2002........................................................ 103,482
2003........................................................ 112,816
Thereafter.................................................. 2,554,075
----------
Total minimum lease payments...................... $3,634,424
==========
</TABLE>
(7) TOWER LEASING REVENUE
The Company receives rental revenue from its tenants for use of its towers.
Certain leases with tenants include renewal options and/or escalation clauses.
Future minimum tower leasing revenues under tower leases in effect at June 30,
1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
-------------------
<S> <C>
1999........................................................ $ 4,341,131
2000........................................................ 3,731,309
2001........................................................ 2,953,908
2002........................................................ 2,356,235
2003........................................................ 1,802,980
Thereafter.................................................. 4,409,387
-----------
$19,594,950
===========
</TABLE>
F-15
<PAGE> 50
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) NOTES AND CAPITAL LEASES PAYABLE
Notes and capital leases payable consist of the following at June 30:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Variable rate term note payable to Chase Manhattan Bank,
interest at LIBOR plus 2% (7.675% at June 30, 1998)
payable monthly, matures June 30, 2001; secured by
substantially all assets of the Company................... $30,000,000 $ --
Note payable in monthly installments of $2,267, including
interest at U.S. Treasury Index plus 3.5% (9.125% at June
30, 1998) with the balance due March 2005; secured by a
building and guaranteed by a principal stockholder of the
Company................................................... 776,410 784,436
7.3% capital lease payable in monthly installments of
$26,341 with the balance due July 2001, secured by
vehicles.................................................. 697,937 --
8.5% note payable in monthly installments of $12,068,
including interest, with the balance due July 1999;
secured by vehicles....................................... 350,177 492,893
11% note payable in monthly installments of approximately
$29,795, including interest, with the balance due at
various dates in 2000; secured by vehicles................ -- 835,968
Other....................................................... 281,631 472,582
----------- ----------
Total notes and capital leases payable............ 32,106,155 2,585,879
Less current installments................................... 474,696 573,798
----------- ----------
Notes and capital leases payable, excluding
current installments............................ $31,631,459 $2,012,081
=========== ==========
</TABLE>
The aggregate maturities of notes and capital leases payable are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
- -------------------
<S> <C>
1999........................................................ $ 474,696
2000........................................................ 467,374
2001........................................................ 30,343,948
2002........................................................ 77,377
2003........................................................ 9,100
Thereafter.................................................. 733,660
-----------
$32,106,155
===========
</TABLE>
The Company entered into a bank senior secured revolving credit facility of
$45,000,000 with Chase Manhattan Bank on June 30, 1998. There were no draws from
this credit facility as of June 30, 1998. The credit facility is to be secured
by substantially all the Company's assets, and borrowings are limited to certain
EBITDA ratios along with specific capitalization and interest ratios. Interest
is based on Company directed Eurodollar or ABR variable rate of interest. The
line of credit balance as of June 30, 1997 was repaid in 1998.
(9) WARRANTS
In connection with its initial public offering in November 1994, the
Company issued 1,000,000 shares of common stock and warrants to acquire 500,000
shares of common stock. Warrants issued with the Company's common stock were
exercisable for $6.00 per share. Additionally, in connection with the public
offering, the Company issued warrants to the underwriters to purchase 50,000
units, each consisting of two shares of
F-16
<PAGE> 51
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock and one warrant to acquire a share of common stock. The exercise
price was 120 percent of the initial public offering price of $10.125 per unit,
or $12.15 per unit. Pursuant to the warrant agreements, the Company was entitled
to redeem all outstanding warrants, or repurchase those not redeemed at $.05 per
share, upon the Company's common stock market closing price reaching specified
levels. These levels were attained and, on February 20, 1997, the Company filed
a registration statement which included a notice to the warrant holders of
record that the Company intended to redeem all unexercised warrants on March 26,
1997 (the "Redemption Date"). All but 330 of the outstanding warrants, including
all of the underwriter units, were exercised prior to the Redemption Date,
resulting in the issuance of 649,670 shares of the Company's common stock.
Proceeds to the Company, net of issuance costs of approximately $289,000, were
$3,607,000. Following the Redemption Date, the Company redeemed the 330 then
outstanding warrants at $.05 each.
(10) STOCK OPTION PLANS
In November 1997, the Company's Board of Directors resolved and the
shareholders approved an Incentive Stock Option Plan (the 1997 Plan) pursuant to
which the Company may grant stock options to officers and key employees. The
1997 Plan may be terminated at any time by the Board of Directors, subject to
shareholder approval. Stock options are granted with an exercise price equal to
the stock's fair market value at the date of grant. All stock options have
10-year terms and generally vest and become fully exercisable after 3 years from
the date of grant.
In May 1995, the Company's Board of Directors resolved and the shareholders
approved an Incentive Stock Option Plan (the 1995 Plan) pursuant to which the
Company may grant stock options to officers and key employees. The 1995 Plan may
be terminated at any time by the Board of Directors, subject to shareholder
approval. Stock options are granted with an exercise price equal to the stock's
fair market value at the date of grant. All stock options have 10-year terms and
generally vest and become fully exercisable after 3 years from the date of
grant.
In May 1995, the Company's Board of Directors resolved and the shareholders
approved an Outside Directors' Stock Option Plan (Directors Plan) pursuant to
which the Company may grant stock options to non-employee directors of the
Company. The Directors Plan will terminate in May 2004. The Directors Plan
authorizes grants of options to purchase up to 50,000 shares of authorized but
unissued common stock. Stock options are granted with an exercise price equal to
the stock's fair market value at the date of grant. All stock options have
10-year terms and vest and become fully exercisable after 3 years from the date
of grant.
On July 24, 1998, the Company's Board of Directors resolved and the
shareholders approved an Incentive Stock Option Plan (the 1998 Plan) pursuant to
which the Company may grant stock options to key employees. The effective date
of the 1998 Plan was September 14, 1998 and shall terminate ten years later. A
maximum of 675,000 shares were designated.
At June 30, 1998, there were 15,000 additional shares available for grant
under the 1997 Plan, 163 additional shares available for grant under the 1995
Plan and 2,000 additional shares available under the Directors Plan. The per
share weighted-average fair value of stock options granted during 1998 and 1997
was $12.58 and $6.98 on the date of grant using the Black Scholes option-pricing
model with the following weighted-average assumptions: 1998 -- expected
volatility of 63 percent, expected dividend yield 0 percent, risk-free interest
rate of 5.22 percent, and an expected life of 3 years; 1997 -- expected
volatility of 82 percent, expected dividend yield 0 percent, risk-free interest
rate of 6.82 percent, and an expected life of 3 years.
The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company
F-17
<PAGE> 52
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997
-------- ----------
<S> <C> <C> <C>
Net income..................................... As reported $977,112 $5,687,742
Pro forma $ 95,427 $4,212,742
Earnings per common share:
Basic........................................ As reported $ .11 $ .80
Pro forma $ .01 $ .59
Diluted...................................... As reported $ .10 $ .76
Pro forma $ .01 $ .56
</TABLE>
Pro forma net income reflects only options granted in 1998, 1997 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to July 1, 1995 is not
considered.
Stock option activity for all plans during the periods indicated is as
follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at June 30, 1996................................... 323,645 $ 4.14
Granted............................................... 337,500 12.96
Exercised............................................. (23,125) 3.71
Forfeited............................................. (4,175) 4.52
Expired............................................... -- --
--------
Balance at June 30, 1997................................... 633,845 8.85
Granted............................................... 321,700 12.58
Exercised............................................. (239,836) 5.10
Forfeited............................................. (47,933) 6.98
Expired............................................... -- --
--------
Balance at June 30, 1998................................... 667,776 $12.13
========
</TABLE>
The following tables summarize information about fixed stock options
outstanding at June 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
------------------------ ----------- ---------------- ----------------
<S> <C> <C> <C>
$3.0625 to $4.5625......................... 54,925 1.00 $ 4.13
$6 to $9................................... 48,000 1.38 7.13
$10 to $12.50.............................. 295,851 2.50 12.07
$13.00 to $15.50........................... 269,000 1.77 14.72
-------
667,776 $12.13
=======
</TABLE>
F-18
<PAGE> 53
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
-------------------------------
NUMBER WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING EXERCISE PRICE
------------------------ ----------- ----------------
<S> <C> <C>
$3.0625 to $4.5625...................................... 54,925 $ 4.13
$6 to $9................................................ 39,000 6.69
$10 to $12.50........................................... 101,001 11.88
$13.00 to $15.50........................................ 168,332 14.74
-------
363,258 $11.47
=======
</TABLE>
In 1998, approximately 23,500 options were exercised by employees and an
outside director on the cashless method, which resulted in the Company
recognizing a one-time non-cash compensation expense of $719,000.
(11) INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- --------- --------
<S> <C> <C> <C>
Year ended June 30, 1998:
U.S. federal................................... $ 973,000 $(249,000) $724,000
State and local................................ 143,000 (35,000) 108,000
---------- --------- --------
Total.................................. $1,116,000 $(284,000) $832,000
========== ========= ========
Year ended June 30, 1997:
U.S. federal................................... $ 411,500 $(201,800) $209,700
State and local................................ 98,700 35,100 133,800
---------- --------- --------
Total.................................. $ 510,200 $(166,700) $343,500
========== ========= ========
</TABLE>
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to earnings before income taxes as a
result of the following factors:
<TABLE>
<CAPTION>
1998 1997
-------- -----------
<S> <C> <C>
Computed "expected" tax..................................... $615,000 $ 2,050,600
Reduction for income taxable to Subchapter S shareholder
(MTS)..................................................... -- (1,895,900)
Deferred taxes established in connection with acquisition of
prior Subchapter S Corporation (MTS)...................... -- 90,000
Non-deductible goodwill expense............................. 58,100 --
Non-deductible compensation expense for cashless option
exercises................................................. 38,900 --
Non-deductible meals and entertainment...................... 32,300 --
State income taxes, net of federal tax benefit.............. 90,400 63,100
Other....................................................... (2,700) 35,700
-------- -----------
Total............................................. $832,000 $ 343,500
======== ===========
</TABLE>
F-19
<PAGE> 54
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1998 and 1997 are presented below:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred Tax Liabilities:
Adjustment for conversion from cash basis to accrual basis
tax reporting.......................................... $(213,200) $(385,700)
Investment in unconsolidated subsidiary................... (167,600) --
Amortization of goodwill and depreciation for financial
reporting purposes in excess of tax amounts............ (270,300) 21,400
Deferred taxes established in connection with acquisition
of prior Subchapter S Corporation (MTS)................ (90,000) (90,000)
Other..................................................... -- (20,300)
--------- ---------
Total deferred tax liability...................... (741,100) (474,600)
--------- ---------
Deferred Tax Assets:
Allowance for doubtful accounts........................... 152,200 --
Start up costs............................................ 244,000 --
Accrued expenses.......................................... 65,300 --
Net operating loss........................................ 336,800 --
Other..................................................... 29,522 --
Less valuation allowance.................................. (300,100) --
--------- ---------
Total deferred tax asset.......................... 527,722 --
--------- ---------
Net deferred tax liability................................ $(213,378) $(474,600)
========= =========
</TABLE>
A subsidiary of the Company has a net operating loss of $893,000 as of its
acquisition date. This net operating loss is subject to limitation by Internal
Revenue Code Section 382 and the separate return limitation year rules. The net
operating loss will begin to expire in the year 2012. A valuation allowance has
been established against the net deferred tax asset resulting from the net
operating loss due to the limitations imposed on the utilization of the loss.
All of the valuation allowance for deferred tax assets will reduce goodwill when
the tax benefit is recognized in the future.
(12) PRO FORMA INCOME TAXES
For financial reporting purposes, a pro forma provision for income taxes
has been reflected in the consolidated statements of earnings to present taxes
on the results of operations of MTS for the year ended June 30, 1997 on the
basis that is required upon their change in tax status from an S Corporation to
a C Corporation. This amount, $2,140,500, is equal to the required Federal and
state income tax provisions that would have been recorded if MTS had not elected
S Corporation status and was subject to and liable for Federal and state income
taxes as a C Corporation prior to its termination of S Corporation status. MTS
terminated its S Corporation status upon merging with a wholly-owned subsidiary
of the Company on June 30, 1997.
(13) PROFIT-SHARING PLANS
In November 1996, the Company established a profit sharing plan pursuant to
Section 401(k) of the Internal Revenue Code, whereby participants may contribute
a percentage of compensation, but not in excess of the maximum allowed under the
code. The plan provides for a matching contribution by the Company, which
amounted to approximately $50,800 and $9,000 for the years ended June 30, 1998
and 1997, respectively.
F-20
<PAGE> 55
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1989, MTS, a wholly owned subsidiary, established a discretionary profit
sharing and money purchase pension plan. The plans cover all non-union employees
who have met certain service requirements. Contributions to the profit sharing
plan are discretionary and determined based on operating results of MTS. For the
money purchase pension plan, MTS was required to contribute 8% of eligible
compensation annually. Effective, October 31, 1997, the plans were terminated in
accordance with the provisions of Employee Retirement Income Security Act of
1974, and all participants became immediately vested in their accounts.
Contributions were approximately $-0- and $173,000 in 1998 and 1997,
respectively.
(14) RELATED PARTY TRANSACTIONS
(a) Leases
The Company leases its main office building from Michael R. Budagher (a
principal stockholder, an officer and director of the Company).
(b) Budagher's Tower Co. ("BTC")
The Company uses contract labor provided by BTC, a corporation which is
wholly-owned by Michael R. Budagher's brother. The Company incurred $252,933 and
$452,338 for contract labor services provided by BTC during the years ended June
30, 1998 and 1997, respectively.
(c) Specialty Constructors Coatings, Inc.("SCC")
The Company uses contract labor services provided by SCC. SCC is a
corporation which was 50 percent owned by Michael R. Budagher until March 31,
1997, when Mr. Budagher sold his interest in SCC. On June 1, 1997, the Company
acquired SCC (note 15). The Company incurred $606,304 for contract labor
services provided by SCC during the year ended June 30, 1997.
(d) Specialty Manufacturing, Inc.("SMI")
Prior to August 1997, the Company purchased ground kits from SMI used in
certain construction projects. SMI is owned 50 percent by Michael R. Budagher's
spouse (a stockholder) and 50 percent by Michael R. Budagher's brother (a
stockholder and employee of the Company). The Company purchases from SMI totaled
$3,768 and $29,852 during the years ended June 30, 1998 and 1997, respectively.
In August 1997, MTS acquired substantially all of the inventory and
manufacturing equipment of SMI for $134,882 in cash and the right to receive a
royalty of $2 for each ground kit sold by MTS through July 31, 2000. The Company
paid royalties to SMI in the amount of $42,348 in 1998.
(e) Change Corporation ("Change")
The Company occasionally purchases computer equipment and software from
Change, which is used for office purposes. Change is owned by Michael R.
Budagher's sister. The Company incurred $36,575 in 1998 and $ -0- in 1997 for
such purchases.
(f) Note Receivable from Officer and Director
A 7% recourse note receivable of $600,000 due December 29, 2002 is due from
an officer and director of the Company. Such note was originated for the
purchase of 50,000 shares of the Company's common stock, the source being from
unissued shares of the Company. Such balance is classified in the stockholders'
equity section of the balance sheet.
F-21
<PAGE> 56
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) Notes Payable to Stockholder
The Company had notes payable to stockholder for $80,000 and $2,000,000 as
of June 30, 1998 and 1997, respectively. Such notes payable originated as a
distribution to the previous subchapter S Corporation stockholder in 1997 for
estimated payment of income taxes. $1,410,650 was paid to this stockholder
during 1998, $509,350 of this balance was returned to the Company for the
difference between the actual income tax liability and the original $2,000,000
distribution, and $80,000 remains for anticipated remaining liability for such
income taxes. The remaining payable is secured by components inventory.
(h) Principal Stockholder Advisory and Financial Services Commitment
The Company has retained Hicks, Muse & Co. Partners ("HMCo") (owner of
approximately 45% of the Company's outstanding common stock) in 1998 to perform
certain advisory, oversight, monitoring, and financial services as requested by
the Board of Directors for a period to be the lesser of April 23, 2008 or upon
HMCo owning less than 33 1/3% of the outstanding common stock of the Company.
Such annual fees shall be the greater of $180,000 or .2% of annual consolidated
net sales of the Company for oversight and monitoring services and a 1 1/2% fee
for all future acquisitions, sales, mergers, recapitalization, restructurings or
other similar transactions for which HMCo provides services. During 1998,
approximately $269,000 was paid to HMCo. Such services did not exist in 1997.
(i) Kline Tower and Steel ("Kline")
The Company purchases certain structural and tower steel products from
Kline. The Company owns 33 1/3% of the outstanding equity of Kline (note 5).
During the year ended June 30, 1998, approximately $2,569,000 of such products
were purchased from Kline and approximately $100,000 in consulting fees were
paid to Kline. The Company is obligated to pay Kline this $100,000 consulting
fee each year for the next four fiscal years. Approximately $294,000 included in
trade accounts payable was owed to Kline as of June 30, 1998. The Company did
not hold an ownership interest in Kline during 1997.
(15) ACQUISITIONS
On April 23, 1998, the Company issued 6,750,000 shares of restricted common
stock of the Company at a price of $16.67 per share, determined by the average
closing price on or about February 16, 1998, in connection with the merger of
OmniAmerica Holdings ("OmniAmerica Holdings"). OmniAmerica Holdings owns assets
consisting of real estate, equipment and other physical property used in the
operation of the wireless communications and broadcast transmission tower
leasing business. The source of the shares for the transaction were unissued
shares of the Company. The transaction was accounted for as a purchase.
Accordingly, the results of OmniAmerica Holdings have been included in those of
the Company since the date of the merger. Goodwill of approximately $85,000,000
recorded in connection with the acquisition is being amortized over a period of
thirty years. The Company is currently completing the allocation of its purchase
price, including the valuation of identifiable intangible assets. The refinement
of the purchase price allocation within the next year is not expected to have a
material impact on the Company's financial position or results of operations.
On October 7, 1997, a wholly-owned subsidiary of the Company purchased
substantially all the assets of Ellis Tower Co., Inc. ("Ellis Tower"), in
exchange for $449,405 in cash and 120,848 shares of the Company's common stock
at a price of $14.87 determined by the closing price on or about October 7,
1997. Ellis Tower, located in Ft. Lauderdale, FL, provides wireless
infrastructure building services. The source of the shares for the transaction
were unissued shares of the Company. The transaction was accounted for as a
purchase. Accordingly the results of Ellis Tower have been combined with those
of the Company since the date of the
F-22
<PAGE> 57
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase. Goodwill of approximately $1,700,000 recorded in connection with the
purchase is being amortized over a period of 15 years.
On June 30, 1997, the Company issued 2,380,000 shares of restricted common
stock of the Company at a price of $11.625 per share, determined by the closing
price on or about June 8, 1997, pursuant to the merger of MTS with a
wholly-owned subsidiary of the Company. The source of the shares for the
transaction were unissued shares of the company. MTS, located in Salem, Oregon;
Salt Lake City, Utah; Phoenix, Arizona; Denver, Colorado; and Sacramento,
California, provides wireless infrastructure building services and
manufacturing, distribution and sales of components for wireless infrastructure.
The transaction was accounted for as a pooling of interests. Accordingly, the
Company's consolidated financial statements have been restated to include the
operations of MTS prior to the acquisition for all periods presented.
On June 1, 1997, the Company issued 55,814 shares of restricted common
stock of the Company at a price of $10.625 per share, determined by the closing
price on or about June 1, 1997, in exchange for substantially all the assets and
liabilities of Specialty Constructors Coatings, Inc. ("Coatings"). Coatings was
originally 50 percent owned by Michael R. Budagher, but Mr. Budagher's interest
was sold to the other shareholders on March 1, 1997. The source of the shares
for the transaction were unissued shares of the Company. Coatings, located in
Cedar Crest, New Mexico, provides wireless infrastructure building services,
primarily on water tank facilities. The transaction was accounted for as a
purchase. Accordingly, the results of Coatings operations have been combined
with those of the Company since the date of acquisition. No goodwill was
recorded in connection with the purchase.
On May 28, 1997, the Company issued 186,047 shares of restricted common
stock of the Company at a price of $9.30 per share, determined by the closing
price on or about March 31, 1997, in exchange for substantially all the assets
and liabilities of Paramount Communication Systems, Inc. ("Paramount"). The
source of the shares for the transaction were unissued shares of the Company.
Paramount, located in Somerdale, New Jersey, provides wireless infrastructure
building services. The transaction was accounted for as a purchase. Accordingly,
the results of Paramount's operations have been combined with those of the
Company since the date of acquisition. Goodwill of approximately $1,300,000
recorded in connection with the purchase is being amortized over a period of
fifteen years. In connection with the purchase, the Company entered into a note
receivable with the principal stockholder of Paramount. The note, in the amount
of $250,000, is due in three semi-annual installments beginning May 2000 and one
final installment in November 2001. Interest, at 9 percent, is payable
quarterly. Under the terms of the acquisition agreement, the Company is
obligated to loan an additional $250,000 to the stockholder of Paramount. Such
additional loan was not requested by the stockholder in 1998. The note is
secured by 93,024 shares of the Company's common stock.
On May 14, 1997, the Company issued 400,000 shares of restricted common
stock of the Company at a price of $9.25 per share, determined by the closing
price on or about March 31, 1997, pursuant to the merger of N&L with a
wholly-owned subsidiary of the Company. The source of the shares for the
transaction were unissued shares of the Company. N&L, located in Oklahoma City,
OK and southern California, provides general contract services for wireless
telecommunications companies, health care and other commercial customers. The
transaction was accounted for as a pooling of interests. Accordingly, the
Company's consolidated financial statements have been restated to include the
operations of N&L prior to the acquisition for all periods presented.
On October 31, 1996, the Company paid $160,000 and issued 93,400 shares of
restricted common stock of the Company at a price of $7.125 per share,
determined by the closing price on or about October 31, 1996, in exchange for
substantially all the assets and liabilities of Data Cell Systems, Inc. ("Data
Cell"). Data Cell provides wireless infrastructure building services. The source
of the shares for the transaction were unissued shares of the Company. The
transaction was accounted for as a purchase. Accordingly, the results of Data
F-23
<PAGE> 58
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cell's operations have been combined with those of the Company since the date of
acquisition. Goodwill of approximately $380,000 recorded in connection with the
purchase is being amortized over a period of five years. Additionally, pursuant
to the purchase agreement, the Company may be required to pay additional
consideration, not to exceed $200,000, based upon the Data Cell subsidiary
achieving specified levels of pre-tax earnings during the three years
immediately following the date of acquisition. Such levels were not attained in
the years ended June 30, 1998 and 1997.
Fiscal years 1998 and 1997 also include other acquisitions which are
immaterial to the consolidated financial statements of the Company.
Separate results of the combining entities, giving effect to the N&L and
MTS poolings of interests for periods prior to such transactions are as follows
for the years ending June 30:
<TABLE>
<CAPTION>
1997(1)
AS RESTATED
-----------
(UNAUDITED)
<S> <C>
Revenues earned:
OmniAmerica............................................... $32,303,360
Novak & Lackey............................................ 10,303,550
Microwave Tower Service................................... 23,019,890
-----------
$65,626,800
===========
Net earnings (loss):
OmniAmerica............................................... $ (279,257)
Novak & Lackey............................................ 390,885
Microwave Tower Service................................... 5,576,114
-----------
$ 5,687,742
===========
Pro forma net earnings (loss) (see note 12)
OmniAmerica............................................... $ (279,257)
Novak & Lackey............................................ 390,885
Microwave Tower Service................................... 3,435,614
-----------
$ 3,547,242
===========
</TABLE>
- ---------------
(1) The Company's results for the twelve months ended June 30, 1997 include the
results of N&L for the period following the consummation of the merger.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and OmniAmerica Holdings as if the
acquisitions had occurred as of the beginning of 1998 and 1997, after giving
effect to certain adjustments, including amortization of goodwill, additional
depreciation expense and related income tax effects. The pro forma financial
information does not necessarily reflect the
F-24
<PAGE> 59
OMNIAMERICA, INC. AND SUBSIDIARIES
(FORMERLY SPECIALTY TELECONSTRUCTORS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operations that would have occurred had the Company and the acquired entities
constituted a single entity during such periods nor is it an indication of
future performance:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues earned............................................. $67,437,136 $71,332,114
=========== ===========
Net earnings................................................ $ 1,163,107 $ 6,424,651
=========== ===========
Earnings per common share:
Basic..................................................... $ .08 $ .46
=========== ===========
Diluted................................................... $ .08 $ .45
=========== ===========
Pro forma net earnings(2)................................... $ 4,284,151
===========
Pro forma earnings per common and common equivalent share(2)
Basic..................................................... $ .31
===========
Diluted................................................... $ .30
===========
</TABLE>
- ---------------
(2) Pro forma net earnings and earnings per common and common equivalent share
are based on pooled results of the Company, giving effect to pro forma
income taxes for pooling with Subchapter S Corporation for the years ended
June 30, 1998 and 1997.
The effects of the Company's acquisition of Ellis Tower is not material to
the combined results of operations of the Company for the year ended June 30,
1998 and 1997, respectively.
(16) SUBSEQUENT EVENTS
On July 9, 1998, the Company paid $640,000 and issued 81,270 shares of
restricted common stock of the Company at a price of $30.60 per share,
determined by the closing price on or about July 9, 1998, in exchange for
substantially all the assets and liabilities of Teleforce Communications. LLC
("Teleforce"). Teleforce provides site acquisition services for the wireless
communications industry. The transaction is to be accounted for as a purchase.
On April 10, 1998, the Company entered into an Asset Purchase and Sale
Agreement with certain wholly-owned subsidiaries of Arch Communications Group,
Inc. ("Arch") with respect to the acquisition by the Company of substantially
all of the telecommunications sites owned by Arch. The Company is purchasing a
portion of such sites at each of three separate closings. Pursuant to the first
closing on June 26, 1998 (the "Arch First Closing"), the Company acquired a
total of 52 towers on 46 sites, and the exclusive right to manage an additional
3 sites. The Company paid Arch approximately $13,139,000 for the sites acquired
pursuant to the Arch First Closing. Pursuant to the second closing, which is
scheduled to take place on September 29, 1998 (the "Arch Second Closing"), the
Company will acquire approximately 62 towers on 59 sites, and the exclusive
right to manage an additional 7 sites. The purchase price for the sites acquired
pursuant to the Arch Second Closing is estimated to be approximately
$20,000,000. A third and final closing is expected to take place during the last
calendar quarter of 1998.
(17) CONTINGENCIES
The Company is, and from time to time may be, a party to routine legal
proceedings incidental to its business. The outcome of these legal proceedings
is not expected to have a material adverse effect on the Company's business,
results of operations or financial condition, based on the Company's current
understanding of the relevant facts and law. The Company maintains general
liability insurance against risks arising out of the normal course of business.
F-25
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
April 22, 1998, among Specialty Teleconstructors, Inc.,
OAI Acquisition Corp., OmniAmerica Holdings Corporation,
OmniAmerica, Inc., Omni/HSW Acquisition, Inc. and
HMTF/OmniPartners, L.P.(1)
2.2 -- Agreement and Plan of Merger, dated July 24, 1998, by and
between Specialty Teleconstructors, Inc. and OmniAmerica,
Inc.(2)
3.1 -- Certificate of Incorporation of the Registrant(2)
3.2 -- By-laws of the Registrant(2)
4.1 -- Post-Merger Stockholders Agreement, dated April 23, 1998,
among Specialty Teleconstructors, Inc. and the
stockholders of Speciality Teleconstructors, Inc. party
thereto(1)
10.1 -- 1998 Stock Option Plan of Specialty Teleconstructors,
Inc.(2)
10.2 -- Executive Employment Agreement, dated December 6, 1997,
by and between Specialty Teleconstructors, Inc. and
Jeffrey A. Howard(3)
10.3 -- Employment Agreement, dated February 16, 1998, effective
as of the effective time of the April Merger, between
Specialty Teleconstructors, Inc. and Michael R.
Budagher(1)
10.4 -- Executive Employment Agreement, dated February 16, 1998,
effective as of the effective time of the April Merger,
between Specialty Teleconstructors, Inc. and Carl E.
Hirsch(1)
10.5 -- First Amendment to Employment Agreement, dated April 22,
1998, effective as of the effective time of the April
Merger, between Specialty Teleconstructors, Inc. and
Jeffrey A. Howard(1)
10.6 -- Executive Employment Agreement, dated February 16, 1998,
effective as of the effective time of the April Merger,
between Specialty Teleconstructors, Inc. and Anthony S.
Ocepek(1)
10.7 -- Credit Agreement, dated as of June 30, 1998, among
Specialty Teleconstructors, Inc., the lenders party
thereto, Bankers Trust Company, Bank Boston, N.A. and The
Chase Manhattan Bank*
10.8 -- Guarantee and Collateral Agreement, dated as of June 30,
1998, made by Specialty Teleconstructors, Inc. and
certain of its subsidiaries, in favor of The Chase
Manhattan Bank*
10.9 -- Monitoring and Oversight Agreement, dated April 23, 1998,
among Specialty Teleconstructors, Inc., a Nevada
corporation, OmniAmerica Holdings Corporation, a Delaware
corporation, OmniAmerica, Inc., a Delaware corporation,
Novak & Lackey Construction Co., Inc., an Oklahoma
corporation, Specialty Management, Inc., a Nevada
corporation, Microwave Tower Services, Inc., an Oregon
corporation, Specialty Constructors, Inc., a New Mexico
corporation, Specialty Constructors Coatings, Inc., a
Nevada corporation, Specialty Capital Services, Inc., a
Nevada corporation, Specialty Combined Resources, Inc., a
Texas corporation, Specialty Fortress, Inc., a Nevada
corporation, Specialty Training Centers, Inc., a Nevada
corporation, South Atlantic Tower Corporation, a Delaware
corporation, OmniTower, Ltd., a Florida limited
partnership, and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership*
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.10 -- Financial Advisory Agreement, dated April 23, 1998, among
Specialty Teleconstructors, Inc., a Nevada corporation,
OmniAmerica Holdings Corporation, a Delaware corporation,
OmniAmerica, Inc., a Delaware corporation, Novak & Lackey
Construction Co., Inc., an Oklahoma corporation,
Specialty Management, Inc., a Nevada corporation,
Microwave Tower Services, Inc., an Oregon corporation,
Specialty Constructors, Inc., a New Mexico corporation,
Specialty Constructors Coatings, Inc., a Nevada
corporation, Specialty Capital Services, Inc., a Nevada
corporation, Specialty Combined Resources, Inc., a Texas
corporation, Specialty Fortress, Inc., a Nevada
corporation, Specialty Training Centers, Inc., a Nevada
corporation, South Atlantic Tower Corporation, a Delaware
corporation, OmniTower, Ltd., a Florida limited
partnership, and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership*
10.11 -- Asset Purchase Agreement, dated June 1, 1998, among
Specialty Capital Services, Inc. (n/k/a OmniAmerica
Development Corp.), Specialty Teleconstructors, Inc.,
Teleforce, LLC, and Richard H. Statler and Terry A.
Klein*
10.12 -- Asset Purchase and Sale Agreement, dated April 10, 1998,
between certain subsidiaries of Arch Communications
Group, Inc. and OmniAmerica, Inc.*
10.13 -- Amendment to Asset Purchase and Sale Agreement, dated
June 26, 1998, between certain subsidiaries of Arch
Communications Group, Inc. and OmniAmerica, Inc.*
10.14 -- Second Amendment to Asset Purchase and Sale Agreement,
dated August 12, 1998, between certain subsidiaries of
Arch Communications Group, Inc. and OmniAmerica, Inc.*
10.15 -- Third Amendment to Asset Purchase and Sale Agreement,
dated as of September 29, 1998, between certain
subsidiaries of Arch Communications Group, Inc. and
OmniAmerica, Inc.*
10.16 -- Employment Agreement dated as of June 30, 1997, by and
between Microwave Tower Services, Inc. and Ernie L.
Carpenter(4)
21.1 -- Subsidiaries of the Registrant*
23.1 -- Consent of Ernst & Young LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
27.1 -- Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed on May 7, 1998.
(2) Incorporated by reference to the Registrant's Schedule 14C filed on August
24, 1998.
(3) Incorporated by reference to the Registrant's Form 10-QSB filed on February
20, 1998.
(4) Incorporated by reference to the Registrant's Form 10-KSB for the fiscal
year ended June 30, 1997.
<PAGE> 1
EXHIBIT 10.7
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
DATED AS OF
JUNE 30, 1998
AMONG
SPECIALTY TELECONSTRUCTORS, INC.,
AS BORROWER,
THE LENDERS PARTY HERETO,
BANKERS TRUST COMPANY,
AS DOCUMENTATION AGENT,
BANKBOSTON, N.A.,
AS SYNDICATION AGENT,
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
AS ISSUING LENDER
AND AS SWINGLINE LENDER
------------------------------
CHASE SECURITIES INC.,
AS ARRANGER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS
1.1 Defined Terms.......................................................................................2
1.2 Other Definitional Provisions......................................................................26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Commitments...................................................................................27
2.2 Procedure for Term Loan Borrowing..................................................................27
2.3 Repayment of Term Loans............................................................................27
2.4 Revolving Credit Commitments.......................................................................27
2.5 Procedure for Revolving Credit Borrowing...........................................................29
2.6 Commitment Fees, etc...............................................................................30
2.7 Termination or Reduction of Commitments............................................................30
2.8 Optional Prepayments...............................................................................31
2.9 Mandatory Prepayments and Commitment Reductions....................................................31
2.10 Conversion and Continuation Options...............................................................32
2.11 Minimum Amounts and Maximum Number of Eurodollar Tranches.........................................33
2.12 Interest Rates and Payment Dates..................................................................33
2.13 Computation of Interest and Fees..................................................................34
2.14 Inability to Determine Interest Rate..............................................................34
2.15 Pro Rata Treatment and Payments...................................................................35
2.16 Requirements of Law...............................................................................37
2.17 Taxes.............................................................................................38
2.18 Indemnity.........................................................................................40
2.19 Change of Lending Office..........................................................................40
2.20 Replacement of Lenders under Certain Circumstances................................................40
2.21 Notice of Certain Costs...........................................................................41
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment.....................................................................................41
3.2 Procedure for Issuance of Letter of Credit.........................................................42
3.3 Commissions, Fees and Other Charges................................................................42
3.4 L/C Participations.................................................................................43
3.5 Reimbursement Obligation of the Borrower...........................................................43
3.6 Obligations Absolute...............................................................................44
3.7 Letter of Credit Payments..........................................................................44
3.8 Applications.......................................................................................44
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Financial Condition................................................................................44
4.2 No Change..........................................................................................45
4.3 Corporate Existence; Compliance with Law...........................................................45
4.4 Corporate Power; Authorization; Enforceable Obligations............................................46
4.5 No Legal Bar.......................................................................................46
</TABLE>
<PAGE> 3
Contents, p.2
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.6 No Material Litigation.............................................................................46
4.7 No Default.........................................................................................46
4.8 Ownership of Property; Liens.......................................................................47
4.9 Intellectual Property..............................................................................47
4.10 Taxes.............................................................................................47
4.11 Federal Regulations...............................................................................47
4.12 Labor Matters.....................................................................................48
4.13 ERISA.............................................................................................48
4.14 Investment Company Act; Other Regulations.........................................................48
4.15 Subsidiaries......................................................................................48
4.16 Use of Proceeds...................................................................................49
4.17 Environmental Matters.............................................................................49
4.18 Accuracy of Information, etc......................................................................50
4.19 Security Documents................................................................................50
4.20 Solvency..........................................................................................51
4.21 Year 2000 Compliance...............................................................................51
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit..........................................................51
5.2 Conditions to Each Extension of Credit.............................................................54
SECTION 6. AFFIRMATIVE COVENANTS
6.1 Financial Statements...............................................................................55
6.2 Certificates; Deliveries; Other Information........................................................56
6.3 Payment of Obligations.............................................................................57
6.4 Conduct of Business and Maintenance of Existence, etc..............................................57
6.5 Maintenance of Property; Insurance.................................................................58
6.6 Inspection of Property; Books and Records; Discussions.............................................58
6.7 Notices............................................................................................58
6.8 Environmental Laws.................................................................................59
6.9 Additional Collateral, etc.........................................................................59
6.10 Changes in Locations, Name, etc...................................................................61
6.11 Share Certificates................................................................................61
SECTION 7. NEGATIVE COVENANTS
7.1 Financial Condition Covenants......................................................................62
7.2 Limitation on Indebtedness.........................................................................63
7.3 Limitation on Liens................................................................................64
7.4 Limitation on Fundamental Changes..................................................................66
7.5 Limitation on Sale of Assets.......................................................................67
7.6 Limitation on Dividends............................................................................67
7.7 Limitation on Capital Expenditures.................................................................68
7.8 Limitation on Investments, Loans and Advances......................................................69
</TABLE>
<PAGE> 4
Contents, p. 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc.........................70
7.10 Limitation on Transactions with Affiliates........................................................71
7.11 Limitation on Sales and Leasebacks................................................................71
7.12 Limitation on Changes in Fiscal Periods...........................................................72
7.13 Limitation on Negative Pledge Clauses.............................................................72
7.14 Limitation on Lines of Business...................................................................72
7.15 Limitation on Amendments to Constituent Documents.................................................72
7.16 Limitations on Changes in Holding Company Status..................................................72
7.17 Limitation on Changes to Tower Group...............................................................72
SECTION 8. EVENTS OF DEFAULT
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment........................................................................................76
9.2 Delegation of Duties...............................................................................76
9.3 Exculpatory Provisions.............................................................................76
9.4 Reliance by Administrative Agent...................................................................77
9.5 Notice of Default..................................................................................77
9.6 Non-Reliance on the Administrative Agent and Other Lenders.........................................77
9.7 Indemnification....................................................................................78
9.8 Agent in Its Individual Capacity...................................................................78
9.9 Successor Administrative Agent.....................................................................79
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers............................................................................79
10.2 Notices...........................................................................................80
10.3 No Waiver; Cumulative Remedies....................................................................80
10.4 Survival of Representations and Warranties........................................................81
10.5 Payment of Expenses and Taxes.....................................................................81
10.6 Successors and Assigns; Participations and Assignments............................................82
10.7 Adjustments; Set-off..............................................................................84
10.8 Counterparts......................................................................................85
10.9 Severability......................................................................................85
10.10 Integration......................................................................................85
10.11 GOVERNING LAW....................................................................................85
10.12 Submission To Jurisdiction; Waivers..............................................................85
10.13 Acknowledgments..................................................................................86
10.14 WAIVERS OF JURY TRIAL............................................................................86
10.15 Confidentiality..................................................................................86
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
SCHEDULES:
<S> <C>
1.1A Commitments
4.4 Consents, Authorizations, Filings and Notices
4.6 Litigation
4.12 Labor Matters
4.15 Subsidiaries
4.17 Environmental Matters
4.19 UCC Filing Jurisdictions
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
7.8(f) Existing Investments
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Assignment and Acceptance
E Form of Swingline Loan Participation Certificate
F-1 Form of Revolving Credit Note
F-2 Form of Term Loan Note
F-3 Form of Swingline Note
G Form of Borrowing Notice
</TABLE>
<PAGE> 6
CREDIT AGREEMENT, dated as of June 30, 1998,
among SPECIALTY TELECONSTRUCTORS, INC., a Nevada
corporation (the "Borrower"), the several banks and
other financial institutions or entities from time to
time parties to this Agreement (the "Lenders"),
BANKERS TRUST COMPANY, as documentation agent (in
such capacity, the "Documentation Agent"),
BANKBOSTON, N.A., as syndication agent (in such
capacity, the "Syndication Agent"), and THE CHASE
MANHATTAN BANK, as administrative agent (in such
capacity, the "Administrative Agent"), as issuing
lender (in such capacity, the "Issuing Lender"), and
as swingline lender (in such capacity, the "Swingline
Lender").
Pursuant to or in connection with the transactions
contemplated by the Transaction Documents (such term and each other capitalized
term used but not defined herein having the meaning given to it in subsection
1.1), on or prior to the Closing Date, the Borrower, of which 40% of the
outstanding common stock is owned, directly or indirectly, by the Investors,
intends to acquire through its wholly owned Subsidiary, OmniAmerica, Inc., a
Delaware corporation, approximately 150 communications towers (the towers
acquired, directly or indirectly, by the Borrower being referred to herein as
the "Arch Towers") from Arch Communications Group, Inc., a Delaware corporation
("Arch Communications"), pursuant to one or more closings under the Asset
Purchase and Sale Agreement dated as of April 10, 1998, among certain wholly
owned subsidiaries of Arch Communications and OmniAmerica, Inc. (the "Purchase
Agreement"), for cash consideration not to exceed $13,400,000 with respect to
the initial closing under the Purchase Agreement (the "Initial Arch
Acquisition") and $38,000,000 in the aggregate (the subsequent closings under
the Purchase Agreement being referred to herein as the "Subsequent Arch
Acquisitions" and, together with the Initial Arch Acquisition, the "Arch
Acquisition").
In connection with the Arch Acquisition, (a) the Borrower has
requested (i) the Term Loan Lenders to extend credit in the form of Term Loans
on the Closing Date in an aggregate principal amount not in excess of
$30,000,000, (ii) the Revolving Credit Lenders to extend credit in the form of
Revolving Credit Loans from time to time during the Revolving Credit Commitment
Period, in an aggregate principal amount at any time outstanding not in excess
of the difference between (A) $45,000,000 and (B) the sum of the L/C Obligations
at such time and the Swingline Exposure at such time, (iii) the Issuing Lender
to issue Letters of Credit from time to time during the Revolving Credit
Commitment Period in an aggregate stated amount at any time outstanding not in
excess of $5,000,000 and (iv) the Swingline Lender to extend credit in the form
of Swingline Loans from time to time during the Revolving Credit Commitment
Period in an aggregate principal amount at any time outstanding not in excess of
$5,000,000 and (b) the Borrower will refinance certain existing Indebtedness for
borrowed money of the Borrower and its Subsidiaries (the "Existing
Indebtedness") in an aggregate principal amount equal to approximately
$15,000,000.
The proceeds of the Term Loans, together with the proceeds of
up to $15,000,000 of Revolving Credit Loans, will be used on the Closing Date,
in part, to (i) finance the Initial Arch Acquisition, (ii) repay in full the
Existing Indebtedness and (iii) pay related fees, expenses and other transaction
costs. The proceeds of Revolving Credit Loans will be used following the Closing
Date for general corporate purposes, including the Subsequent Arch Acquisitions
and Permitted Acquisitions. The Letters of Credit and Swingline Loans will be
used for general corporate purposes.
<PAGE> 7
2
The Arch Acquisition and each of the transactions described
above are collectively referred to herein as the "Transactions".
The Lenders and the Swingline Lender are willing to extend
such credit to the Borrower and the Issuing Lender is willing to issue Letters
of Credit for the account of the Borrower, in each case on the terms and subject
to the conditions set forth herein.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime
Rate" shall mean the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its principal
office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by Chase in connection with extensions
of credit to debtors); and "Federal Funds Effective Rate" shall mean,
for any day, the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.
"Adjusted Consolidated Leverage Ratio": as defined in
subsection 7.1(b)(i).
"Adjustment Date": as defined in the definition of the term
"Pricing Grid".
"Administrative Agent": Chase, together with its Affiliates,
as the administrative agent for the Lenders under this Agreement and
the other Loan Documents, together with any of its successors.
"Affected Eurodollar Loans": as defined in subsection 2.9(e).
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of
<PAGE> 8
3
this definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 51% or more of the securities having
ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether
by contract or otherwise.
"Agreement": this Credit Agreement, as amended, amended and
restated, supplemented or otherwise modified from time to time.
"Anchor Tenant": a Person (other than any individual) (a)
providing cellular, PCS or EMSR services, (b) engaged in television or
radio broadcasting or (c) otherwise reasonably acceptable to the
Administrative Agent.
"Applicable Margin": for all Loans, the Applicable Margin as
determined pursuant to the Pricing Grid.
"Application": an application, in such form (reasonably
acceptable to the Borrower) as the Issuing Lender may specify from time
to time, requesting the Issuing Lender to open a Letter of Credit.
"Approved Fund": with respect to any Lender that is a fund
that invests in bank loans, any other fund that invests in bank loans
and is advised or managed by the same investment advisor as such Lender
or by an Affiliate of such investment advisor.
"Arch Acquisition": as defined in the preamble of this
Agreement.
"Arch Communications": as defined in the preamble of this
Agreement.
"Arch Towers": as defined in the preamble of this Agreement.
"Asset Sale": any sale, transfer or other disposition
(including any sale and leaseback of assets and any sale of accounts
receivable in connection with a receivable financing transaction) by
the Borrower or any of its Subsidiaries of any property of the Borrower
or any such Subsidiary (including property subject to any Lien under
any Security Document), other than as permitted pursuant to subsection
7.5(a), (b) (provided that, except with respect to the loss or
condemnation of all or substantially all of the assets of the Borrower
and its Subsidiaries, the proceeds from such casualty or condemnation
(including insurance) are used to replace or rebuild the lost or
condemned assets within the time period specified in subsection 2.9(b))
and (c) through (g).
"Assignee": as defined in subsection 10.6(c).
"Assignment and Acceptance": an Assignment and Acceptance
entered into by a Lender and an assignee, and accepted by the
Administrative Agent and, if applicable, the Borrower in the form of
Exhibit D or such other form that shall be approved by the
Administrative Agent.
"Assignor": as defined in subsection 10.6(c).
<PAGE> 9
4
"Available Revolving Credit Commitment": as to any Lender at
any time, an amount equal to (a) such Lender's Revolving Credit
Commitment minus (b) such Lender's Revolving Extensions of Credit.
"Benefitted Lender": as defined in subsection 10.7(a).
"Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Borrower": as defined in the introductory paragraph of this
Agreement.
"Borrowing Date": any Business Day specified by the Borrower
as a date on which the Borrower requests the Lenders or Swingline
Lender to make Loans or Swingline Loans hereunder.
"Business": as defined in subsection 4.17(b).
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close, provided that when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on
which commercial banks are not open for dealing in Dollar deposits in
the London interbank market.
"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures (whether paid in cash or
accrued as a liability) by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period). For purposes
of this definition, the following items will be excluded from the
definition of "Capital Expenditures": (a) Capital Expenditures to the
extent funded by insurance proceeds, condemnation awards or payments
pursuant to a deed in lieu thereof, (b) assets acquired pursuant to (i)
Permitted Acquisitions and (ii) a reinvestment of proceeds received
under subsection 7.5(c) and (c) monies reimbursed to the Borrower or
any Subsidiary by tenants in connection with the construction of
towers.
"Capital Lease Obligations": as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of
such Person under GAAP and, for the purposes of this Agreement, the
amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
<PAGE> 10
5
"Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of
the United States, in each case maturing on or within one year from the
date of acquisition; (b) certificates of deposit, time deposits,
Eurodollar time deposits, bankers' acceptances and repurchase
agreements, or overnight bank deposits having maturities of one year or
less from the date of acquisition issued by any Lender or by any
commercial bank organized under the laws of the United States of
America or any state thereof having combined capital and surplus (or
whose obligations are guaranteed by an affiliated commercial bank which
has capital and surplus) of not less than $500,000,000; (c) commercial
paper of an issuer rated at least A-2 by Standard & Poor's Ratings
Services or P-2 by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of
the two named rating agencies cease publishing ratings of commercial
paper issuers generally; (d) money market accounts or funds with or
issued by Qualified Issuers; (e) repurchase obligations with a term of
not more than 90 days for underlying securities of the types described
in clause (a) above entered into with any bank meeting the
qualifications specified in clause (b) above and (f) demand deposit
accounts maintained in the ordinary course of business with any Lender
or with any bank that is not a Lender not in excess of $100,000 in the
aggregate on deposit with such Lender or any such bank.
"Change of Control": means (a) any "Person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), excluding the Investors, shall
become the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5
under such Act), directly or indirectly, of shares representing more
than the greater of (i) 20% of the shares outstanding of the Borrower
and (ii) the percentage of the aggregate then outstanding voting stock
of the Borrower owned beneficially, directly or indirectly, by the
Investors; (b) the Board of Directors of the Borrower shall not consist
of at least a majority of Continuing Directors; or (c) a Change of
Control as defined in any document pertaining to any Senior
Subordinated Indebtedness.
"Chase": The Chase Manhattan Bank.
"Closing Date": June 30, 1998.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Lender, the sum of the Term Loan
Commitment, the Revolving Credit Commitment and the Swingline Loan
Commitment of such Lender and with respect to the Issuing Lender and
L/C Participants, as applicable, their L/C Obligations.
"Commitment Fee Rate": 3/8 of 1% per annum, provided that from
and after the first Adjustment Date, the Commitment Fee Rate will be
determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or
<PAGE> 11
6
is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Consolidated Cash Interest Expense": for any period,
Consolidated Interest Expense (including, without limitation, that
attributable to Capital Lease Obligations but excluding capitalized
financing fees), net of cash interest income of the Borrower and its
Subsidiaries, for such period (a) minus, in each case to the extent
included in determining such Consolidated Interest Expense for such
period, the sum of the following: (i) non-cash expenses for interest
payable in kind and (ii) amortization of debt discount and fees and (b)
plus the sum of cash payments made by the Borrower or any of its
Subsidiaries during such period in respect of the items referred to in
clause (a)(i) of this definition to the extent previously subtracted
pursuant to clause (a) of this definition (including, without
limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and
net costs under Interest Rate Protection Agreements to the extent such
net costs are allocable to such period in accordance with GAAP).
"Consolidated Current Assets": at a particular date, all
amounts (other than cash and Cash Equivalents) which would, in
conformity with GAAP, be set forth opposite the caption "total current
assets" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date.
"Consolidated Current Liabilities": at a particular date, all
amounts which would, in conformity with GAAP, be set forth opposite the
caption "total current liabilities" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such
date.
"Consolidated Debt Service": for any period, the sum of
Consolidated Cash Interest Expense plus any scheduled amortization
payments on any Indebtedness made or payable during such period, but
excluding mandatory prepayments on any such Indebtedness.
"Consolidated EBITDA": for any period:
(a) Net Income for such period; plus
(b) without duplication, the sum of the following items (to
the extent deducted in the computation of such Net Income for such
period):
(i) depreciation expense;
(ii) amortization expense and amortization of
intangibles (including, but not limited to, goodwill and
organizational costs (including costs associated with the
Transactions));
(iii) Consolidated Interest Expense;
<PAGE> 12
7
(iv) income and franchise tax expense;
(v) any extraordinary and unusual losses (net of
income taxes);
(vi) the amount of dividends and distributions (other
than loans, advances or tax sharing payments) actually
received in cash by the Borrower or any of its Subsidiaries
from any Unrestricted Subsidiary during such period; and
(vii) other non-cash charges;
less (c) without duplication, the sum of the following items:
(i) any extraordinary and unusual gains (net of
income taxes); and
(ii) non-cash gains included in Net Income.
For purposes of the definition of the term "Adjusted Consolidated Leverage
Ratio", Consolidated EBITDA for any period will be adjusted to (A) exclude the
Consolidated EBITDA attributable to any asset or business that was disposed of
(either directly or as part of an exchange) by the Borrower or any of its
Subsidiaries prior to the date of determination (as if such asset or business
had not been owned by the Borrower or any of its Subsidiaries prior to the date
of determination) and (B) include the Consolidated EBITDA attributable to any
asset or business that was acquired (either directly or as part of an exchange)
by the Borrower or any of its Subsidiaries (including, to the extent identified
and reasonably satisfactory to the Administrative Agent, pro forma cost savings
in connection therewith) prior to the date of determination (as if such asset or
business had been owned by the Borrower or any of its Subsidiaries prior to the
date of determination).
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Cash Interest Expense for such period.
"Consolidated Interest Expense": for any period, the amount of
interest expense, both expensed and capitalized, of the Borrower and
its Subsidiaries, determined on a consolidated basis in accordance with
GAAP, for such period on the aggregate principal amount of their
Indebtedness.
"Consolidated Leverage Ratio" : at any date, the ratio of (a)
Consolidated Total Debt as of such date to (b) Consolidated EBITDA for
the period of four consecutive fiscal quarters of the Borrower most
recently ended as of such date, all determined on a consolidated basis
in accordance with GAAP.
"Consolidated Senior Secured Debt": at any date and without
duplication, Consolidated Total Debt at such date minus, to the extent
included in computing such Consolidated Total Debt, the aggregate
amount of the sum of (a) any Senior Subordinated Indebtedness, (b) any
secured Indebtedness of the Borrower and its Subsidiaries that is
subordinated to the Obligations at such date and (c) any other
unsecured Indebtedness of the
<PAGE> 13
8
Borrower and its Subsidiaries at such date, in each case determined on
a consolidated basis (excluding Unrestricted Subsidiaries) in
accordance with GAAP.
"Consolidated Senior Secured Debt to Total Capitalization
Ratio": at any date, the ratio of (a) Consolidated Senior Secured Debt
to (b) Total Capitalization at such date.
"Consolidated Total Debt": at any date and without
duplication, the aggregate amount of Indebtedness of the Borrower and
its Subsidiaries outstanding as of such date, determined on a
consolidated basis in accordance with GAAP (other than Indebtedness of
the type referred to in clause (g) of the definition of the term
"Indebtedness").
"Consolidated Total Debt to Total Capitalization Ratio": at
any date, the ratio of (a) Consolidated Total Debt to (b) Total
Capitalization at such date.
"Consolidated Working Capital": the excess of Consolidated
Current Assets over Consolidated Current Liabilities.
"Continuing Directors": the directors of the Borrower on the
Closing Date, and each other director, if, in each case, such other
director's nomination for election to the board of directors of the
Borrower is recommended by a majority of the then Continuing Directors
or such other director receives the vote of the Investors in his or her
election by the stockholders of the Borrower.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Default": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, unless cured or waived, has been satisfied.
"Delivery Date": as defined in the definition of the term
"Pricing Grid".
"Documentation Agent": as defined in the introductory
paragraph of this Agreement.
"Dollars" and "$": lawful currency of the United States of
America.
"ECF Percentage": 75%, provided that the ECF Percentage shall
be deemed to be 50% if, on the applicable Excess Cash Flow Application
Date, the Adjusted Consolidated Leverage Ratio as of the last day of
the fiscal year preceding such Excess Cash Flow Application Date was
less than 4.50 to 1.00.
"Environmental Laws": any and all applicable foreign, Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, legally binding requirements of any
Governmental Authority or other Requirements of Law (including common
law) regulating, relating to or imposing liability or standards of
conduct concerning protection of the environment, as now or may at any
time hereafter be in effect.
<PAGE> 14
9
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chase is offered Dollar deposits at or about
10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery
on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loans to be outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
Loans under the same Facility the then current Interest Periods with
respect to all of which begin on the same date and end on the same
later date (whether or not such Loans shall originally have been made
on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower,
Consolidated EBITDA (plus or minus the cash portion of any
extraordinary gains or losses incurred during such fiscal year without
duplication of mandatory prepayments resulting from any transaction
giving rise thereto) for such period (before any adjustments thereto
(a) to exclude the Consolidated EBITDA attributable to any asset or
business that was disposed of (either directly or as part of an
exchange) by the Borrower or any of its Subsidiaries during the period
of calculation or (b) to include the Consolidated EBITDA attributable
to any asset or business that was acquired (either directly or as part
of an exchange) by the Borrower or any of its Subsidiaries (excluding,
to the extent identified and reasonably satisfactory to the
<PAGE> 15
10
Administrative Agent, pro forma cost savings in connection therewith to
the extent included in Consolidated EBITDA) during the period of
calculation), minus the sum of the following (without duplication):
(i) Consolidated Debt Service for such period;
(ii) Capital Expenditures made during such period by the
Borrower and its Subsidiaries;
(iii) taxes of the Borrower for such period paid in cash;
(iv) the amount of any increases during such period in
Consolidated Working Capital;
(v) voluntary prepayments made during such period of the Term
Loans;
(vi) voluntary repayments made during such period of the
Revolving Credit Loans, provided that substantially simultaneously
therewith the aggregate Revolving Credit Commitments are permanently
reduced by an amount equal to the amount of such repayment; and
(vii) any cash used during such period for any Restricted
Payment, Permitted Acquisition or Investment permitted pursuant to
subsections 7.8(e) or (i);
plus the sum of the following (without duplication):
(i) the amount of all proceeds received during such period of
Capital Lease Obligations, purchase money Indebtedness and any other
Indebtedness to the extent used to finance any Capital Expenditures, to
make any Restricted Payment or to make a Permitted Acquisition; and
(ii) the amount of any decreases during such period in
Consolidated Working Capital.
"Excess Cash Flow Application Date": as defined in subsection
2.9(c).
"Existing Indebtedness": as defined in the preamble of this
Agreement.
"Facility": each of (a) the Term Loan Commitments and the Term
Loans made thereunder (the "Term Loan Facility"), (b) the Swingline
Loan Commitments and the Swingline Loans made thereunder and (c) the
Total Revolving Credit Commitments and the Revolving Extensions of
Credit made thereunder (the "Revolving Credit Facility").
"FCC": the Federal Communications Commission or any
Governmental Authority substituted therefor.
"Federal Funds Effective Rate": as defined in the definition
of the term "ABR".
<PAGE> 16
11
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements
and pronouncements of the Financial Accounting Standards Board and the
rules and regulations of the Securities and Exchange Commission, or in
such other statements by such other entity as may be in general use by
significant segments of the accounting profession, which are applicable
to the circumstances of the Borrower as of the date of determination,
except that for purposes of subsection 7.1, GAAP shall be determined on
the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements referred to in subsection 4.1(a). In the event that any
"Accounting Change" (as defined below) shall occur and such change
results in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the Borrower and
the Administrative Agent agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for
evaluating the Borrower's financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been
made. Until such time as such an amendment shall have been executed and
delivered by the Borrower, the Administrative Agent and the Required
Lenders, all financial covenants, standards and terms in this Agreement
shall continue to be calculated or construed as if such Accounting
Changes had not occurred. The term "Accounting Changes" refers to
changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board or the American Institute of Certified Public
Accountants or, if applicable, the Securities and Exchange Commission
(or successors thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by the Borrower and
each Subsidiary Guarantor, substantially in the form of Exhibit A, as
the same may be amended, supplemented or otherwise modified from time
to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counter indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property,
<PAGE> 17
12
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss
in respect thereof; provided, however, that the term "Guarantee
Obligation" shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
"Guarantors": the Subsidiary Guarantors.
"Hicks Muse": Hicks, Muse, Tate & Furst Incorporated.
"Incur": as defined in subsection 7.2; and the term
"Incurrence" shall have a correlative meaning.
"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of
property or services (other than current trade payables and accrued
expenses incurred in the ordinary course of such Person's business),
(c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations of such Person, (f) all
obligations of such Person, contingent or otherwise, as an account
party under a bankers' acceptance, letter of credit or similar
facilities, (g) the obligations of such Person under any Interest Rate
Protection Agreement, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through
(g) above and (i) all obligations of the kind referred to in clauses
(a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such
obligation and on which obligations such Person has recourse only to
such property; provided, however, that the amount of such Indebtedness
of any Person described in this clause (i) shall, for the purposes of
this Agreement, be deemed to be equal to the lesser of (i) the
aggregate unpaid amount of such Indebtedness and (ii) the fair market
value of the property or asset encumbered, as determined by such
Person in good faith.
"Initial Arch Acquisition": as defined in the preamble of this
Agreement.
<PAGE> 18
13
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is Insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 4.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, (c) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan, the date of repayment thereof at final
stated maturity, provided that the first Interest Payment Date for ABR
Borrowings shall be September 30, 1998.
"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case
may be, with respect to such Eurodollar Loan and ending one, two,
three, six or (if available to all Lenders under the relevant Facility
as determined in good faith by such Lenders) nine or twelve months
thereafter, as selected by the Borrower in its notice of borrowing or
notice of conversion, as the case may be, given with respect thereto;
and (b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three, six or (if available to all Lenders under the relevant
Facility as determined in good faith by such Lenders) nine or twelve
months thereafter, as selected by the Borrower by irrevocable notice to
the Administrative Agent not less than three Business Days prior to the
last day of the then current Interest Period with respect thereto,
provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that would otherwise extend beyond
(A) the Revolving Credit Termination Date, in the case of Revolving
Credit Loans, or the date final payment is due, in the case of Term
Loans, shall end on the Revolving Credit Termination Date or such due
date, as applicable;
(iii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
<PAGE> 19
14
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract, interest rate
option, interest rate cap or other interest rate hedge arrangement, to
or under which the Borrower or any of its Subsidiaries is a party or a
beneficiary on the date hereof or becomes a party or a beneficiary
after the date hereof.
"Investment": as defined in subsection 7.8.
"Investors": Hicks Muse, its principals, their Affiliates and
management of the Borrower and its Subsidiaries and their respective
employees, directors and officers.
"Issuing Lender": Chase or any of its affiliates, in its
capacity as issuer of any Letter of Credit.
"L/C Commitment": $5,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December and the last day of the Revolving Credit
Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
subsection 3.5.
"L/C Participants": with respect to any Letter of Credit, the
collective reference to all the Revolving Credit Lenders other than the
Issuing Lender that issued such Letter of Credit.
"Lenders": as defined in the introductory paragraph of this
Agreement.
"Letters of Credit": as defined in subsection 3.1(a), provided
that to the extent the Borrower shall have deposited amounts in a cash
collateral account for the benefit of the Lenders, the Letters of
Credit relating thereto shall be deemed not to be Letters of Credit for
purposes of this Agreement.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any capital or financing lease having
substantially the same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Loan Documents": this Agreement, the Security Documents and
the Notes, if any.
"Loan Parties": the Borrower and each Subsidiary Guarantor.
<PAGE> 20
15
"Majority Facility Lenders": with respect to any Facility,
Lenders which collectively are the holders of more than 50% of the
aggregate unpaid principal amount of the Term Loans or of the Total
Revolving Extensions of Credit, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Credit Facility, prior
to any termination of the Revolving Credit Commitments, Lenders which
are collectively the holders of more than 50% of the sum of the Total
Revolving Extensions of Credit and the aggregate unused Revolving
Credit Commitments).
"Majority Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the Revolving Credit Facility.
"Material Adverse Effect": a material adverse effect on (a) as
of the Closing Date, the Transactions and the other transactions
contemplated by this Agreement, (b) the business, operations,
properties, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries, taken as a whole (other than, for
purposes of the conditions to the initial funding of Loans on the
Closing Date, changes in general economic conditions), or (c) the
validity or enforceability of this Agreement or any of the other Loan
Documents or the rights or remedies of the Administrative Agent, the
Swingline Lender, the Issuing Lender or the Lenders hereunder or
thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
notarial fees, accountants' fees, investment banking fees, appraisal
fees, survey costs, title insurance premiums, amounts to be applied to
the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset Sale or
Recovery Event (other than any Lien pursuant to a Security Document)
and other customary fees and expenses actually incurred in connection
therewith, net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and net of purchase price
adjustments reasonably expected to be payable in connection therewith
and (b) in connection with any issuance or sale of equity securities or
debt securities or instruments or the incurrence of loans, the cash
proceeds received from such issuance or Incurrence, net of attorneys'
fees, notarial fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and
expenses actually Incurred in connection therewith.
<PAGE> 21
16
"Net Income": at a particular date, all amounts which would,
in conformity with GAAP, be set forth opposite the caption "Net Income"
(or any like caption) on a consolidated statement of operations of the
Borrower and its Subsidiaries at such date, provided that such amount
shall be adjusted to exclude (to the extent otherwise included therein)
earnings or losses attributable to any Person in which the Borrower or
any of its Subsidiaries has a joint interest, except to the extent of
the amount of dividends or other distributions actually paid to the
Borrower or such Subsidiary by such other Person in cash during such
period.
"Non-Consenting Lender": as defined in subsection 2.20.
"Non-Excluded Taxes": as defined in subsection 2.17(a).
"Non-Funding Lender": as defined in subsection 2.15(c).
"Non-U.S. Lender": as defined in subsection 2.17(b).
"Notes": the collective reference to the Term Notes, the
Revolving Credit Notes and the Swingline Notes.
"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of
the Loans and Reimbursement Obligations and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative
Agent, the Swingline Lender, the Issuing Lender or to any Lender (or,
in the case of Interest Rate Protection Agreements, any affiliate of
any Lender), whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, any Notes, any
other Loan Document, the Letters of Credit, any Interest Rate
Protection Agreement entered into with any Lender or any affiliate of
any Lender or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees, charges and disbursements of
counsel to the Administrative Agent, to the Swingline Lender, to the
Issuing Lender or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"Omniholdings": OmniAmerica Holdings Corporation, a Delaware
corporation.
"Participant": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Acquisition": the acquisition by any of the
Subsidiaries of all or substantially all the assets of, or by the
Borrower or any of its Subsidiaries of all the capital
<PAGE> 22
17
stock of, or other equity interests in, any other Person or division or
line of business of a Person if, immediately after giving effect
thereto, (a) no Default or Event of Default has occurred and is
continuing or would result therefrom, (b) 100% of the capital stock of
any acquired or newly formed corporation, partnership, association or
other business entity is owned directly by the Borrower or a Subsidiary
and all actions required to be taken, if any, with respect to such
acquired or newly formed Subsidiary under subsection 6.9 or any other
Loan Document have been taken and (c)(i) the Borrower and its
Subsidiaries are in compliance, on a pro forma basis after giving
effect to such acquisition or formation, with the covenants contained
in subsection 7.1 recomputed as at the last day of the most recently
ended fiscal quarter of the Borrower as if such acquisition had
occurred on the first day of each relevant period for testing such
compliance and (ii) the Borrower has delivered to the Administrative
Agent an officers' certificate to the effect set forth in clauses (a)
and (c)(i) above, together with all appropriate supporting
documentation if reasonably requested by the Administrative Agent,
including, without limitation, any financial data for such Subsidiary
or assets, any acquisition documents in connection with such
acquisition and any opinions of counsel.
"Permitted Issuance": (a) the issuance by the Borrower of
shares of Capital Stock as dividends on issued and outstanding Capital
Stock of the same class of the Borrower or pursuant to any dividend
reinvestment plan, (b) the issuance by the Borrower of options or other
equity securities of the Borrower to outside directors, members of
management or employees of the Borrower or any Subsidiary, (c) the
issuance of securities as interest or dividends on pay-in-kind debt or
preferred equity securities in accordance with their terms permitted
hereunder and under the other Loan Documents, (d) the issuance to the
Borrower or any subsidiary of the Borrower (or any director, with
respect to directors' qualifying shares) by any of its subsidiaries of
any of their respective Capital Stock, provided that, with respect to
this clause (d), such Capital Stock issued to the Borrower or any
Subsidiary shall be pledged to the Administrative Agent to the extent
required by the applicable Loan Document (provided that (i) only 65% of
the voting Capital Stock of any direct foreign Subsidiary of the
Borrower or any domestic Subsidiary is required to be so pledged and
(ii) no voting Capital Stock of any foreign Subsidiary of any other
foreign Subsidiary is required to be so pledged), (e) the issuance by
the Borrower of shares of its common stock in connection with a
Permitted Acquisition, (f) cash payments made in lieu of issuing
fractional shares of the Borrower's Capital Stock in an aggregate
amount not to exceed $100,000, (g) the issuance by the Borrower of
shares of Capital Stock of the Borrower to infuse additional capital
into the Borrower in an aggregate amount not to exceed $2,500,000 and
(h) the issuance by the Borrower of shares of Capital Stock for the
purpose of making an Investment in any Unrestricted Subsidiary as
permitted by, and subject to, subsection 7.8(m).
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan
<PAGE> 23
18
were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledged Debt Securities": as defined in the Guarantee and
Collateral Agreement.
"Pledged Stock": as defined in the Guarantee and Collateral
Agreement.
"Pricing Grid": the pricing grid as follows:
Term Loans, Revolving
Credit Loans and Swingline Loans
<TABLE>
<CAPTION>
Applicable
Applicable Margin Revolving Credit
Margin for for Facility
ABR Eurodollar Commitment
Consolidated Leverage Ratio Loans Loans Fee
--------------------------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
Level 1: Greater than 1.50% 2.50% 0.500%
or equal to 6.50 to 1.00
Level 2: Greater than
or equal to 5.50 to 1.00
and less than 6.50 to
1.00 1.00% 2.00% 0.375%
Level 3: Greater than
or equal to 4.00 to 1.00
and less than 5.50 to
1.00 0.75% 1.75% 0.375%
Level 4: Less than 4.00 to 1.00 0.50% 1.50% 0.375%
</TABLE>
Changes in the Applicable Margins and the Commitment Fee Rate resulting
from changes in the Consolidated Leverage Ratio shall become effective
on the day (the "Adjustment Date") of receipt by the Administrative
Agent of the financial statements delivered pursuant to subsection 6.1
and shall remain in effect until the next change to be effected
pursuant to this paragraph. If any financial statements referred to
above are not delivered within the time periods specified above, then,
until such financial statements are delivered, at the option of the
Administrative Agent or the Required Lenders, the Consolidated Leverage
Ratio as at the end of the fiscal period that would have been covered
thereby shall for the purposes of this definition be determined by
reference to "Level 1". Each determination of the Consolidated Leverage
Ratio pursuant to this paragraph shall be made with respect to the
period of four consecutive fiscal quarters of the Borrower ending at
the end of the period covered by the relevant financial statements,
provided that prior to delivery (the date of such delivery, the
"Delivery Date") of the financial statements for the second full fiscal
quarter ending after the Closing Date, the Consolidated Leverage Ratio
shall be deemed to be that corresponding to "Level 2".
<PAGE> 24
19
"Prime Rate": as defined in the definition of the term "ABR".
"Projections": as defined in subsection 6.2(c).
"Properties": as defined in subsection 4.17(a).
"Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible
or intangible, including, without limitation, Capital Stock.
"Purchase Agreement": as defined in the preamble of this
Agreement.
"Qualified Issuer": any commercial bank (a) which has, or
whose obligations are guaranteed by an affiliated commercial bank which
has, capital and surplus in excess of $500,000,000 and (b) the
outstanding long-term debt securities of which are rated at least A-2
by Standard & Poor's Ratings Services or at least P-2 by Moody's
Investors Service, Inc., or carry an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments.
"Recovery Event": any settlement of or payment in respect of
any property insurance or casualty insurance claim or any condemnation
proceeding or deed in lieu thereof relating to any Property of the
Borrower or any of its Subsidiaries, excluding any such settlement or
payment which, together with any related settlement or payment, yields
gross proceeds to the Borrower or any of its Subsidiaries of less than
$1,000,000.
"Refunded Swingline Loans": as defined in subsection
2.4(c)(ii).
"Register": as defined in subsection 10.6(d).
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts
drawn under Letters of Credit.
"Reincorporation": the merger or other transactions entered
into by the Borrower to cause the Borrower to change its corporate name
to "OmniAmerica, Inc." and/or its jurisdiction of incorporation to the
State of Delaware.
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the
Borrower or any of its Subsidiaries in connection therewith which are
not applied to prepay the Term Loans or reduce the Revolving Credit
Commitments pursuant to subsection 2.9(d) as a result of the delivery
of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in
respect of which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Event of Default has occurred and
is continuing and that the Borrower (directly or
<PAGE> 25
20
indirectly through a Subsidiary) intends and expects to use all or a
specified portion of the Net Cash Proceeds of an Asset Sale or Recovery
Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto
less any amount expended prior to the relevant Reinvestment Prepayment
Date to acquire assets useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring 365 days
after such Reinvestment Event and (b) the date on which the Borrower
shall have determined not to, or shall have otherwise ceased to,
acquire assets useful in the Borrower's business with all or any
portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under the regulations issued pursuant to
Section 4043(b) of ERISA.
"Required Lenders": Lenders, other than Non-Funding Lenders,
which collectively are the holders of more than 50% of the sum of (i)
the Loans and (ii) the aggregate unused Revolving Credit Commitments
(excluding commitments to issue Letters of Credit or make Swingline
Loans) or, if the Revolving Credit Commitments have been terminated,
the Total Revolving Extensions of Credit (other than Swingline Loans).
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation
(including, without limitation, Environmental Laws) or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer": the chief executive officer, the
president, any vice president or senior vice president, the treasurer
or any assistant treasurer, the secretary or assistant secretary and
the chief financial officer (or officer having comparable duties) of
the Borrower (including, in any event, any person who is an officer of
the Borrower and is named on the closing certificate delivered by the
Borrower on the Closing Date in the form of Exhibit C whether or not
such person holds any of the foregoing positions).
"Restricted Payment": as defined in subsection 7.6.
"Revolving Credit Commitment": as to any Revolving Credit
Lender, the obligation of such Revolving Credit Lender, if any, to make
Revolving Credit Loans, and to participate in Swingline Loans and
Letters of Credit, in an aggregate principal and/or face amount not to
exceed the amount set forth under the heading "Revolving Credit
Commitment" opposite
<PAGE> 26
21
such Lender's name on Schedule 1.1A, as the same may be changed from
time to time pursuant to the terms hereof. The original aggregate
amount of the Revolving Credit Commitments is $40,000,000.
"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Facility": as defined in the definition of
the term "Facility".
"Revolving Credit Lender": each Lender that has a Revolving
Credit Commitment or that has made, or acquired pursuant to an
assignment made in accordance with subsection 10.6(c), Revolving Credit
Loans or has participations in outstanding Letters of Credit or
Swingline Loans.
"Revolving Credit Loans": as defined in subsection 2.4(a).
"Revolving Credit Note": as defined in subsection 10.6(f).
"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's Revolving Credit
Commitment then constitutes of the aggregate Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).
"Revolving Credit Termination Date": the earlier of (a) the
Scheduled Revolving Credit Termination Date or, if such date is not a
Business Day, the Business Day next preceding such date and (b) the
date upon which the Revolving Credit Commitments shall be earlier
terminated pursuant hereto.
"Revolving Extensions of Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender then
outstanding, (b) such Lender's Revolving Credit Percentage of the L/C
Obligations then outstanding and (c) such Lender's Swingline Exposure
at such time.
"Scheduled Revolving Credit Termination Date": June 30, 2001.
"Security Documents": the collective reference to the
Guarantee and Collateral Agreement, any mortgage or deed of trust and
all other security documents hereafter delivered to the Administrative
Agent granting a Lien on any Property of any Person to secure the
obligations and liabilities of any Loan Party under any Loan Document.
"Senior Subordinated Indebtedness": any unsecured senior
subordinated Indebtedness of the Borrower to be issued by the Borrower
in a public offering or a Rule 144A or other private placement,
provided such Indebtedness shall (a) have no maturity, amortization,
mandatory redemption, purchase option or sinking fund payment
<PAGE> 27
22
prior to the date that is 180 days later than the Scheduled Revolving
Credit Termination Date, (b) (i) have terms relating to interest rates,
fees, events of default and remedies that are reasonably satisfactory
in all respects to the Administrative Agent and (ii) have terms
relating to subordination that are satisfactory in all respects to the
Administrative Agent, (c) be subject to no covenant or event of default
more restrictive than those contained herein and (d) be reasonably
satisfactory in all other respects to the Administrative Agent.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature, and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an
unreasonably small capital.
"Subsequent Arch Acquisitions": as defined in the preamble of
this Agreement.
"subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
"Subsidiary": a subsidiary of the Borrower, other than any
Unrestricted Subsidiary.
"Subsidiary Guarantor": each Subsidiary of the Borrower party
to the Guarantee and Collateral Agreement.
"Swingline Exposure": at any time, the aggregate principal
amount of all outstanding Swingline Loans at such time. The Swingline
Exposure of any Revolving Credit Lender at any time shall mean its
Revolving Credit Percentage of the aggregate Swingline Exposure at such
time.
"Swingline Lender": as defined in the introductory paragraph
of this Agreement.
"Swingline Loan Participation Certificate": a certificate in
substantially the form of Exhibit E.
<PAGE> 28
23
"Swingline Loan Commitment": the obligation of the Swingline
Lender to make Swingline Loans to the Borrower hereunder. The original
amount of the Swingline Loan Commitment is $5,000,000.
"Swingline Loans": as defined in subsection 2.4(c)(i).
"Swingline Note": as defined in subsection 10.6(f).
"Syndication Agent": as defined in the introductory paragraph
of this Agreement.
"Term Loan Commitment": as to any Term Loan Lender, the
obligation of such Term Loan Lender to make Term Loans to the Borrower
hereunder in a principal amount not to exceed the amount set forth
under the heading "Term Loan Commitment" opposite such Lender's name on
Schedule 1.1A. The original aggregate amount of the Term Loan
Commitments is $35,000,000.
"Term Loan Facility": as defined in the definition of the term
"Facility".
"Term Loan Installment": as defined in subsection 2.3.
"Term Loan Lender": each Lender which has a Term Loan
Commitment or which has made, or acquired pursuant to an assignment
made in accordance with subsection 10.6(c), a Term Loan.
"Term Loan Maturity Date": June 30, 2001.
"Term Loan Percentage": as to any Term Loan Lender (a) at any
time prior to the Closing Date, the percentage which such Lender's Term
Loan Commitment then constitutes of the aggregate Term Loan
Commitments, and (b) at any time after the Closing Date, the percentage
which the principal amount of such Lender's Term Loans then outstanding
constitutes of the aggregate principal amount of the Term Loans then
outstanding.
"Term Loans": as defined in subsection 2.1(a).
"Term Notes": as defined in subsection 10.6(f).
"Test Period": any period of four consecutive fiscal quarters
of the Borrower most recently ended.
"Total Capitalization": at any date and without duplication,
the sum of (a) the aggregate principal amount of all Indebtedness for
borrowed money of the Borrower and its Subsidiaries at such date of
determination, determined on a consolidated basis in accordance with
GAAP, (b) the aggregate amount of cash proceeds received by the
Borrower and its Subsidiaries in respect of the issuance of Capital
Stock of the Borrower or its Subsidiaries after September 1997 and on
or prior to such date of determination, (c) the fair market value of
Capital Stock of the Borrower issued on or prior to such date of
determination in connection with a Permitted Acquisition, valued as of
the date of such Permitted
<PAGE> 29
24
Acquisition, and (d) $108,000,000, minus the amount of cash on the
consolidated balance sheet of the Borrower and its Subsidiaries as of
such date of determination, determined in accordance with GAAP.
"Total Revolving Extensions of Credit": at any time, the
aggregate amount of the Revolving Extensions of Credit of the Revolving
Credit Lenders at such time.
"Tower EBITDA": for any period:
(a) Tower Net Income for such period; plus
(b) without duplication, the sum of the following
items (to the extent deducted in the computation of such Tower
Net Income for such period):
(i) depreciation expense;
(ii) amortization expense and amortization
of intangibles (including, but not limited to,
goodwill and organizational costs (including costs
associated with the Transactions));
(iii) Tower Interest Expense;
(iv) income and franchise tax expense;
(v) any extraordinary and unusual losses
(net of income taxes); and
(vi) other non-cash charges;
less (c) without duplication, the sum of the following items:
(i) any extraordinary and unusual gains
(net of income taxes); and
(ii) non-cash gains included in Tower Net
Income; plus
(c) without duplication and to the extent not
included in the computation of Tower Net Income, (i) for
purposes of subsection 7.1(a)(iii), cash rental revenue of the
Borrower or any Subsidiary less any estimated cash operating
expenses, in each case attributable to the first month of any
lease or sublease of tower space (A) entered into between the
Borrower or any Subsidiary and any lessee or (B) commencing as
the
<PAGE> 30
25
result of the exercise by any lessee of an option to enter
into such a lease or sublease, in each case so long as such
lease or sublease is entered into or such option is exercised
not more than 30 days prior to the last day of the period with
respect to which Tower EBITDA is being calculated, and (ii)
for purposes of subsection 7.1(b)(i), cash rental revenue of
the Borrower or any Subsidiary less any estimated cash
operating expenses, in each case attributable to the first
three months of any lease or sublease of tower space (A)
entered into between the Borrower or any Subsidiary and any
lessee or (B) commencing as the result of the exercise by any
lessee of an option to enter into such a lease or sublease, in
each case so long as such lease or sublease is entered into or
such option is exercised not more than 90 days prior to the
last day of the period with respect to which Tower EBITDA is
being calculated, provided that, in the case of each of
subclauses (i) and (ii), such lease or sublease shall be
effective and such cash rental revenue shall commence being
earned within 90 days after the last day of such period.
For purposes of subsection 7.1(b)(i), Tower EBITDA for any period will
be adjusted to (A) exclude the Tower EBITDA attributable to any asset
or business that was disposed of (either directly or as part of an
exchange) by any member of the Tower Group prior to the date of
determination (as if such asset or business had not been owned by such
member of the Tower Group prior to the date of determination) and (B)
include the Tower EBITDA attributable to any asset or business that was
acquired (either directly or as part of an exchange) by any member of
the Tower Group (including, to the extent identified and reasonably
satisfactory to the Administrative Agent, pro forma cost savings in
connection therewith) prior to the date of determination (as if such
asset or business had been owned by such member of the Tower Group
prior to the date of determination).
"Tower Group": Omniholdings and its consolidated subsidiaries.
"Tower Interest Expense": for any period, the amount of
interest expense, both expensed and capitalized, of the Tower Group,
determined on a consolidated basis in accordance with GAAP, for such
period on the aggregate principal amount of their Indebtedness.
"Tower Net Income": at a particular date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "Net
Income" (or any like caption) on a consolidated statement of operations
of the Tower Group at such date, provided that such amount shall be
adjusted to exclude (to the extent otherwise included therein) earnings
or losses attributable to any Person in which any member of the Tower
Group has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to any member of the
Tower Group by such other Person in cash during such period.
"Transaction Documents": the Purchase Agreement and the other
documents relating to the Transactions.
"Transactions": as defined in the preamble of this Agreement.
"Transferee": as defined in subsection 10.6(g).
"Type": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be revised from time to time.
<PAGE> 31
26
"Unrestricted Subsidiary": shall mean (a) any subsidiary of
the Borrower or any Subsidiary or any other direct or indirect
investment by the Borrower or any Subsidiary in the Capital Stock of
any other Person so long as at the time such subsidiary is acquired or
created or such investment is made, (i) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (ii)
the Borrower shall have notified the Administrative Agent of its
acquisition or creation of such subsidiary or such other investment and
its ownership interest therein and its designation thereof as an
"Unrestricted Subsidiary" concurrently with such acquisition, creation
or investment and the intended purposes of such subsidiary or
investment, (iii) all transactions related thereto shall be consummated
in accordance with applicable Requirements of Law, except to the extent
it could not reasonably be expected to result in a material adverse
effect on such Unrestricted Subsidiary and its subsidiaries taken as a
whole, (iv) the Borrower shall be in compliance, on a pro forma basis
after giving effect to such acquisition, creation or investment, with
covenants contained in subsection 7.1 applicable at the time of such
acquisition or investment, as the case may be, recomputed as at the
last day of the most recently ended fiscal quarter of the Borrower as
if such acquisition had occurred on the first day of each relevant
period for testing such compliance, and the Borrower shall have
delivered to the Administrative Agent a certificate of a Responsible
Officer to such effect, together with all relevant financial
information for such subsidiary or investment and calculations
demonstrating such compliance, (v) any contingent tax liabilities of
the Borrower or any Subsidiary in respect of such investment or
subsidiary shall exist pursuant to a tax sharing agreement with the
other owners of such Unrestricted Subsidiary providing for an
allocation of tax liabilities and benefits customary in similar
circumstances, (vi) any management or service provided by the Borrower
or any Subsidiary to such investment or subsidiary shall be provided in
consideration of cash remuneration in an amount not less than could
have been obtained from a third party on an arm's length basis and
(vii) such investment or subsidiary shall be capitalized solely from
the following sources: (A) investments by persons other than the
Borrower or any Subsidiary; (B) Indebtedness issued by such subsidiary
or any of its subsidiaries that is nonrecourse to the Borrower and its
subsidiaries, or proceeds thereof; (C) subject to subsection 7.8(m),
Capital Stock of such subsidiary or any other Unrestricted Subsidiary,
or proceeds thereof; and (D) investments permitted to be made in
Unrestricted Subsidiaries pursuant to section 7.8(m); and (b) any
subsidiary of an Unrestricted Subsidiary.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or through
other Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower
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and its Subsidiaries not defined in subsection 1.1 and accounting terms partly
defined in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Commitments. (a) Subject to the terms and conditions
hereof, each Term Loan Lender severally agrees to make term loans ("Term Loans")
to the Borrower on the Closing Date in a principal amount not to exceed the
amount of the Term Loan Commitment of such Lender.
(b) The Term Loans may from time to time be Eurodollar Loans
or ABR Loans, as determined by the Borrower and notified to the Administrative
Agent in accordance with subsections 2.2 and 2.10.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give
the Administrative Agent irrevocable written (or telephonic promptly confirmed
in writing) notice (which notice must be received by the Administrative Agent
prior to 12:00 noon, New York City time, one Business Day prior to the
anticipated Closing Date) requesting that the Term Loan Lenders make the Term
Loans on the Closing Date and specifying the amount to be borrowed. Such notice
shall be given by the Borrower in the form of Exhibit G. The Term Loans made on
the Closing Date shall initially be ABR Loans. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Loan Lender thereof. Not
later than 12:00 noon, New York City time, on the Closing Date each Term Loan
Lender shall make available to the Administrative Agent at its office specified
in subsection 10.2 an amount in immediately available funds equal to the Term
Loans to be made by such Lender. The Administrative Agent shall credit the
account of the Borrower on the books of such office of the Administrative Agent
with the aggregate of the amounts made available to the Administrative Agent by
the Term Loan Lenders in like funds as received by the Administrative Agent.
2.3 Repayment of Term Loans. The Term Loans of each Term Loan
Lender shall mature in a single installment (the "Term Loan Installment") on the
Term Loan Maturity Date in an amount equal to the product of (a) the amount of
the outstanding Term Loans as of the Closing Date (as such amount may be reduced
pursuant to subsections 2.8 and 2.9) and (b) such Lender's Term Loan Percentage.
2.4 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Swingline
Exposure at such time and Revolving Credit Percentage of the L/C Obligations
then
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outstanding, does not exceed the amount of such Lender's Revolving Credit
Commitment. During the Revolving Credit Commitment Period the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying and reborrowing the
Revolving Credit Loans in whole or in part, all in accordance with the terms and
conditions hereof. The Revolving Credit Loans may from time to time be
Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsections 2.5 and 2.10, provided that
no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that
is one month prior to the Scheduled Revolving Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit
Loans on the Revolving Credit Termination Date and all outstanding Swingline
Loans on the earlier of the Revolving Credit Termination Date and the first date
after such Swingline Loan is made that is the 15th or last day of a calendar
month and is at least two Business Days after such Swingline Loan is made.
(c)(i) Subject to the terms and conditions hereof, the
Swingline Lender agrees to make swingline loans ("Swingline Loans") to the
Borrower from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed $5,000,000,
provided that at no time may the Total Revolving Extensions of Credit exceed the
aggregate Revolving Credit Commitments. During the Revolving Credit Commitment
Period, the Borrower may use the Swingline Loan Commitment by borrowing,
prepaying, in whole or in part, and reborrowing the Swingline Loans, all in
accordance with the terms and conditions hereof. All Swingline Loans shall be
ABR Loans. The Borrower shall give the Swingline Lender irrevocable written (or
telephonic promptly confirmed in writing) notice (which notice must be received
by the Swingline Lender prior to 12:00 noon New York City time) on the requested
Borrowing Date specifying the amount of the requested Swingline Loan which shall
be in an aggregate minimum amount of $100,000, or a whole multiple of $25,000 in
excess thereof. Each such notice shall be given by the Borrower in the form of
Exhibit G. The proceeds of the Swingline Loan will be made available by the
Swingline Lender to the Borrower at the office of the Swingline Lender by 2:00
p.m. New York City time on the Borrowing Date by crediting the account of the
Borrower at such office with such proceeds. The Borrower may, at any time and
from time to time, prepay the Swingline Loans, in whole or in part, without
premium or penalty, by notifying the Swingline Lender prior to 12:00 noon New
York City time on any Business Day of the date and amount of prepayment. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein. Partial prepayments shall be in an
aggregate principal amount of $100,000, or a whole multiple of $25,000 in excess
thereof.
(ii) The Swingline Lender, at any time in its sole and
absolute discretion, may, on behalf of the Borrower (which hereby irrevocably
directs the Swingline Lender to act on its behalf), and without regard to the
minimum amounts in subsection 2.5, request each Revolving Credit Lender
including the Swingline Lender to make a Revolving Credit Loan in an amount
equal to such Lender's Revolving Credit Percentage of the amount of the
Swingline Loans outstanding on the date such notice is given (the "Refunded
Swingline Loans"). Unless any of the events described in paragraph (f) of
Section 8 shall have occurred with respect to the Borrower (in which event the
procedures of subparagraph (iii) of this subsection 2.4(c) shall apply), each
Revolving Credit Lender shall make the proceeds of its Revolving Credit Loan
available to the Administrative Agent for the account of the Swingline Lender at
the office of the Administrative Agent specified in
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subsection 10.2 prior to 1:00 p.m. New York City time in immediately available
funds on the Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Credit Loans shall be immediately applied to repay
the Refunded Swingline Loans. Effective on the day such Revolving Credit Loans
are made, the portion of such Loans so paid shall no longer be outstanding as
Swingline Loans, shall no longer be due under any Swingline Note and shall be
Revolving Credit Loans made by the Revolving Credit Lenders in accordance with
their respective Revolving Credit Percentages. The Borrower authorizes the
Swingline Lender to charge its accounts with the Administrative Agent (up to the
amount available in each such account) in order to immediately pay the amount of
such Refunded Swingline Loans to the extent amounts received from the Revolving
Credit Lenders are not sufficient to repay in full such Refunded Swingline
Loans.
(iii) If prior to the making of a Revolving Credit Loan
pursuant to subparagraph (ii) of this subsection 2.4(c) one of the events
described in paragraph (f) of Section 8 shall have occurred and be continuing
with respect to the Borrower, each Revolving Credit Lender will, on the date
such Revolving Credit Loan was to have been made pursuant to the notice in
subsection 2.4(c)(ii), purchase an undivided participating interest in the
Refunded Swingline Loan in an amount equal to (i) its Revolving Credit
Percentage times (ii) the Refunded Swingline Loans. Each Revolving Credit Lender
will immediately transfer to the Swingline Lender, in immediately available
funds, the amount of its participation, and upon receipt thereof the Swingline
Lender will deliver to such Revolving Credit Lender a Swingline Loan
Participation Certificate dated the date of receipt of such funds and in such
amount.
(iv) Whenever, at any time after any Revolving Credit Lender
has purchased a participating interest in a Swingline Loan, the Swingline Lender
receives any payment on account thereof, the Swingline Lender will distribute to
such Revolving Credit Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Revolving Credit Lender's participating interest was
outstanding and funded); provided, however, that in the event that such payment
received by the Swingline Lender is required to be returned, such Revolving
Credit Lender will return to the Swingline Lender any portion thereof previously
distributed by the Swingline Lender to it.
(v) Each Revolving Credit Lender's obligation to make the
Loans referred to in subsection 2.4(c)(ii) and to purchase participating
interests pursuant to subsection 2.4(c)(iii) shall be absolute and unconditional
and shall not be affected by any circumstance, including, without limitation,
(A) any set-off, counterclaim, recoupment, defense or other right which such
Revolving Credit Lender or the Borrower may have against the Swingline Lender,
the Borrower or any other Person for any reason whatsoever; (B) the occurrence
or continuance of a Default or an Event of Default; (C) any adverse change in
the condition (financial or otherwise) of the Borrower; (D) any breach of this
Agreement or any other Loan Document by the Borrower or any of its Subsidiaries
or any other Lender; or (E) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable written (or telephonic promptly confirmed in
writing) notice (which notice must be received by the Administrative Agent prior
to 12:00 Noon, New York City time, (a) three Business Days prior to the
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requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business
Day prior to the requested Borrowing Date, in the case of ABR Loans), specifying
(i) the amount and Type of Revolving Credit Loans to be borrowed, (ii) the
requested Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest Period therefor. Each such notice shall be given by the
Borrower in the form of Exhibit G. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (A) in the case of ABR Loans,
$500,000 or a whole multiple of $100,000 in excess thereof (or, if the then
aggregate Available Revolving Credit Commitments are less than $500,000, such
lesser amount) and (B) in the case of Eurodollar Loans, $1,000,000 or a whole
multiple of $100,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Revolving Credit
Lender thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 10.2 prior to 12:00 Noon, New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Revolving Credit Lenders and in like funds as received by the
Administrative Agent.
2.6 Commitment Fees, etc. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Revolving Credit Termination Date, commencing on September 30, 1998. For
purposes of calculating commitment fees under this subsection 2.6(a) only, no
portion of the Revolving Credit Commitments shall be deemed utilized as a result
of outstanding Swingline Loans.
(b) The Borrower agrees to pay to the Administrative Agent the
fees in the amounts and on the dates set forth in the Agency Fee Letter dated
June 30, 1998, in writing among the Borrower, the Administrative Agent and Chase
Securities Inc.
2.7 Termination or Reduction of Commitments.
(a) The Term Loan Commitments shall be automatically and
permanently terminated at 5:00 p.m., New York City time, on the Closing Date.
The Revolving Credit Commitments shall be automatically and permanently
terminated at 5:00 p.m., New York City time, on the Revolving Credit Termination
Date.
(b) The Borrower shall have the right, upon not less than
three Business Days' notice to the Administrative Agent, to terminate the
Revolving Credit Commitments or, from time to time, to reduce the amount of the
Revolving Credit Commitments, provided that no such termination or reduction
shall be permitted if, after giving effect thereto and to any prepayments of the
Swingline Loans and the Revolving Credit Loans made on the effective date
thereof, the Total Revolving Extensions of Credit would exceed the Revolving
Credit Commitments then in effect. Any reduction pursuant to this subsection
2.7(b) shall be in an amount equal to $1,000,000, or a whole multiple of
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$100,000 in excess thereof, and shall reduce permanently the Revolving Credit
Commitments then in effect. Upon receipt of any notice pursuant to this
subsection 2.7(b), the Administrative Agent shall promptly notify each Revolving
Credit Lender and the Swingline Lender, as applicable, of the contents thereof.
2.8 Optional Prepayments. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable written (or telephonic promptly confirmed in writing)
notice delivered to the Administrative Agent at least three Business Days prior
thereto in the case of Eurodollar Loans and at least one Business Day prior
thereto in the case of ABR Loans, which notice shall specify the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each, provided that if a Eurodollar Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto, the Borrower shall also pay
any amounts owing pursuant to subsection 2.18. Upon receipt of any such notice
the Administrative Agent shall promptly notify each relevant Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein. Amounts prepaid on account of the Term
Loans may not be reborrowed. Partial prepayments of Eurodollar Loans shall be in
an aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in
excess thereof. Partial prepayments (other than of a Swingline Loan) of ABR
Loans shall be in an aggregate principal amount of $500,000 or a whole multiple
of $100,000 thereof. Optional prepayments on account of the Term Loans shall be
applied to reduce the Term Loan Installment due on the Term Loan Maturity Date
pursuant to subsection 2.3.
2.9 Mandatory Prepayments and Commitment Reductions. (a) If
any Capital Stock (other than a Permitted Issuance) or Indebtedness shall be
issued or Incurred by the Borrower or any of its Subsidiaries (excluding any
Incurrence of Indebtedness in accordance with subsection 7.2, other than
Indebtedness permitted by subsection 7.2(g)(i)), an amount equal to 100% of the
Net Cash Proceeds thereof shall be applied on the date of such issuance or
Incurrence toward the prepayment of the Term Loans and to the extent of any
excess to the reduction of the Revolving Credit Commitments as set forth in
subsection 2.9(d).
(b) If on any date the Borrower or any of its Subsidiaries
shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then,
unless a Reinvestment Notice shall be delivered in respect thereof, such Net
Cash Proceeds shall be applied, within five Business Days after such date,
toward the prepayment of the Term Loans and the reduction of the Revolving
Credit Commitments as set forth in subsection 2.9(d), provided that if a
Reinvestment Notice shall be delivered in respect thereof, on each Reinvestment
Prepayment Date an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be applied toward the
prepayment of the Term Loans and to the extent of any excess to the reduction of
the Revolving Credit Commitments as set forth in subsection 2.9(d) .
(c) If, for any fiscal year of the Borrower commencing with
the fiscal year ending June 30, 2000, there shall be Excess Cash Flow, the
Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF
Percentage of such Excess Cash Flow toward the prepayment of the Term Loans and
to the extent of any excess to the reduction of the Revolving Credit Commitments
as set forth in subsection 2.9(d). Each such prepayment shall be made on a date
(an "Excess Cash Flow Application Date") no later than five days after the
earlier of (i) the date on
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which the financial statements of the Borrower referred to in subsection 6.1(a),
for the fiscal year with respect to which such prepayment is made, are required
to be delivered to the Lenders and (ii) the date such financial statements are
delivered.
(d) Subject to the other provisions of this subsection 2.9,
(i) 100% of the Net Cash Proceeds of the issuance of any Capital Stock (other
than a Permitted Issuance) or the issuance or Incurrence of any Indebtedness as
provided in subsection 2.9(a), (ii) 100% of the Net Cash Proceeds of any Asset
Sale or Recovery Event as provided in subsection 2.9(b) and (iii) any Excess
Cash Flow pursuant to subsection 2.9(c) shall be applied first, to the
prepayment of the Term Loans, and second, to the permanent reduction of the
Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of first, the Swingline Loans,
and second, the Revolving Credit Loans, to the extent, if any, that the Total
Revolving Extensions of Credit exceed the amount of the aggregate Revolving
Credit Commitments as so reduced, provided that if the aggregate principal
amount of the Swingline Loans and Revolving Credit Loans then outstanding is
less than the amount of such excess (because L/C Obligations constitute a
portion thereof), the Borrower shall, to the extent of the balance of such
excess, deposit an amount in cash in a cash collateral account established with
the Administrative Agent for the benefit of the Lenders on terms and conditions
reasonably satisfactory to the Administrative Agent. The application of any
prepayment pursuant to this subsection 2.9(d) shall be made first to ABR Loans
and second to Eurodollar Loans. Amounts prepaid on account of the Term Loans (i)
shall be applied to the Term Loan Installment due on the Term Loan Maturity Date
pursuant to subsection 2.3 and (ii) may not be reborrowed.
(e) Notwithstanding the foregoing provisions of this
subsection 2.9, if at any time the mandatory prepayment of any Loans pursuant to
this Agreement would result, after giving effect to the procedures set forth in
this Agreement, in the Borrower incurring costs under subsection 2.16, 2.17 or
2.18 as a result of Eurodollar Loans ("Affected Eurodollar Loans") being prepaid
other than on the last day of an Interest Period applicable thereto, which costs
are required to be paid pursuant to subsection 2.18, then, the Borrower may, in
its sole discretion, initially deposit a portion (up to 100%) of the amounts
that otherwise would have been paid in respect of the Affected Eurodollar Loans
with the Administrative Agent (which deposit must be equal in amount to the
amount of the Affected Eurodollar Loans not immediately prepaid) to be held as
security for the obligations of the Borrower to make such mandatory prepayment
pursuant to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent, with such cash collateral
to be directly applied upon the first occurrence (or occurrences) thereafter of
the last day of an Interest Period applicable to the relevant Loan that is a
Eurodollar Loan (or such earlier date or dates as shall be requested by the
Borrower), to repay an aggregate principal amount of such Loan equal to the
Affected Eurodollar Loans not initially repaid pursuant to this sentence.
2.10 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Day's prior irrevocable written (or
telephonic promptly confirmed in writing) notice of such election (but no later
than 12:00 noon, New York City time on the Business Day immediately prior to
such election), provided that unless the Borrower elects to deposit with the
Administrative Agent the amount of any breakage costs and other Eurodollar Loans
related costs to be incurred by the Borrower under this Agreement with respect
to any prepayment or conversion of such Eurodollar Loans prior to the end of an
Interest Period, any such conversion of Eurodollar Loans may only be
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made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable written
(or telephonic promptly confirmed in writing) notice of such election by 12:00
noon, New York City time (which notice shall specify the length of the initial
Interest Period therefor), provided that no ABR Loan may be converted into a
Eurodollar Loan (i) when any Event of Default has occurred and is continuing and
the Administrative Agent or the Required Lenders have determined that such a
conversion is not appropriate or (ii) after the date that is one month prior to
the final scheduled termination or maturity date of such Facility. Upon receipt
of any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable notice to the Administrative Agent, in accordance
with the applicable provisions of the term "Interest Period" set forth in
subsection 1.1, of the length of the next Interest Period to be applicable to
such Loans, provided that no Eurodollar Loan may be continued as such (i) when
any Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined that such a continuation is not
appropriate or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of any Facility, and provided further
that if the Borrower shall fail to give any required notice as described above
in this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Eurodollar Loans shall be automatically converted to ABR
Loans on the last day of such then expiring Interest Period. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof.
2.11 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of Eurodollar
Loans hereunder and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that, after giving effect
thereto, (a) the aggregate principal amount of the Eurodollar Loans comprising
each Eurodollar Tranche shall be equal to $1,000,000 or a whole multiple of
$100,000 in excess thereof and (b) no more than six Eurodollar Tranches in the
aggregate shall be outstanding at any one time.
2.12 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) Upon the occurrence and during the continuance of an Event
of Default under subsection 8(a), (i) all outstanding Loans and any overdue
amounts hereunder shall bear interest at a rate per annum which is (A) in the
case of the Loans, the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this subsection 2.12 plus 2% or (B) in the case
of Reimbursement Obligations, overdue interest, the commitment fee or other
amounts payable at a rate per annum equal to the rate applicable to ABR Loans
under the relevant Facility plus 2% (or, in the case of any such other amounts
that do not relate to a particular Facility, the rate applicable to ABR Loans
under the Revolving Credit Facility plus 2%), in each case, with respect to
clauses (i) and (ii)
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above, from the date of such non-payment until such amount is paid in full
(after judgment as well as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
subsection 2.12 shall be payable from time to time on demand.
2.13 Computation of Interest and Fees. (a) Interest, fees and
other amounts payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to ABR Loans
the rate of interest on which is calculated on the basis of the Prime Rate, the
interest thereon shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Borrower and the relevant Lenders of
each determination of a Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable
notify the Borrower and the relevant Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection
2.12.
2.14 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination, absent manifest error, shall be conclusive and binding
upon the Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Required Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any Loans that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall
be converted to ABR Loans on the last day of the Interest Period applicable
thereto. Until such notice has been withdrawn by the Administrative Agent (which
the Administrative Agent agrees to do when the circumstances that prompted
delivery of such notice no longer exist), no further Eurodollar Loans under the
relevant Facility shall be made or continued as such, nor shall the Borrower
have the right to convert Loans under the relevant Facility to Eurodollar Loans.
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2.15 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee and any reduction of the Commitments of the Lenders shall
be made, with regard to the applicable Facility, pro rata according to the
respective Term Loan Percentages or Revolving Credit Percentages, as the case
may be, of the relevant Lenders.
(b) Whenever (i) any payment received by the Administrative
Agent under this Agreement or any Note or (ii) any other amounts received by the
Administrative Agent for or on behalf of the Borrower (including, without
limitation, proceeds of collateral or payments under any guarantee) is
insufficient to pay in full all amounts then due and payable to the
Administrative Agent and the Lenders under this Agreement and any Note, such
payment shall be distributed by the Administrative Agent and applied by the
Administrative Agent and the Lenders in the following order: first, to the
payment of fees and expenses due and payable to the Administrative Agent under
and in connection with this Agreement; second, to the payment of all expenses
due and payable under subsection 10.5, ratably among the Administrative Agent
and the Lenders in accordance with the aggregate amount of such payments owed to
the Administrative Agent and each such Lender; third, to the payment of fees due
and payable under subsections 2.6 and 3.3, ratably among the Revolving Credit
Lenders in accordance with the Revolving Credit Commitment of each Revolving
Credit Lender, and, in the case of the Issuing Lender, the amount retained by
the Issuing Lender for its own account pursuant to subsection 3.3(a); fourth, to
the payment of interest then due and payable under the Loans, ratably in
accordance with the aggregate amount of interest owed to each such Lender; and
fifth, to the payment of the principal amount of the Loans and the L/C
Obligations then due and payable and, in the case of proceeds of collateral or
payments under any guarantee, to the payment of any other obligations to any
Lender not covered in first through fourth above ratably secured by such
collateral or ratably guaranteed under any such guarantee, ratably among the
Lenders in accordance with the aggregate principal amount and, in the case of
proceeds of collateral or payments under any guarantee, the obligations secured
or guaranteed thereby owed to each such Lender.
(c) If any Revolving Credit Lender (each, a "Non-Funding
Lender") has (x) failed to make a Revolving Credit Loan required to be made by
it hereunder, and the Administrative Agent has determined that such Revolving
Credit Lender is not likely to make such Revolving Credit Loan or (y) given
notice to the Borrower or the Administrative Agent that it will not make, or
that it has disaffirmed or repudiated any obligation to make, any Revolving
Credit Loans in each case by reason of the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended, or
otherwise, any payment made on account of the principal of the Revolving Credit
Loans outstanding shall be made as follows:
(i) in the case of any such payment made on any date when and
to the extent that, in the determination of the Administrative Agent,
the Borrower would be able, under the terms and conditions hereof, to
reborrow the amount of such payment under the Revolving Credit
Commitments and to satisfy any applicable conditions precedent set
forth in subsection 5.2 to such reborrowing, such payment shall be made
on account of the outstanding Revolving Credit Loans held by the
Revolving Credit Lenders other than the Non-Funding Lender pro rata
according to the respective outstanding principal amounts of the
Revolving Credit Loans of such Revolving Credit Lenders;
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(ii) otherwise, such payment shall be made on account of the
outstanding Revolving Credit Loans held by the Revolving Credit Lenders
pro rata according to the respective outstanding principal amounts of
such Revolving Credit Loans; and
(iii) any payment made on account of interest on the Revolving
Credit Loans shall be made pro rata according to the amounts of accrued
and unpaid interest due and payable on the Revolving Credit Loans with
respect to which such payment is being made.
The Borrower agrees to give the Administrative Agent such assistance in making
any determination pursuant to this paragraph as the Administrative Agent may
reasonably request. Any such determination by the Administrative Agent shall be
conclusive and binding on the Lenders.
(d) Subject to subsection 2.15(c), each payment (including
each prepayment) by the Borrower on account of principal of and interest on the
Term Loans shall be made pro rata according to the outstanding principal amounts
of the Term Loans then held by the Term Loan Lenders.
(e) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Loans (other than the Term Loans)
shall be made first to the Swingline Loans and then pro rata according to the
respective outstanding principal amounts of the Revolving Credit Loans then held
by the Revolving Credit Lenders.
(f) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Administrative Agent's office
specified in subsection 10.2, in Dollars and in immediately available funds.
Payments received by the Administrative Agent after such time shall be deemed to
have been received on the next Business Day. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business Day
(except, in the case of Eurodollar Loans, as otherwise provided in clause (i) of
the definition of "Interest Period"). In the case of any extension of any
payment of principal pursuant to the preceding sentence, interest thereon shall
be payable at the then applicable rate during such extension.
(g) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a Borrowing Date that such Lender will not
make the amount that would constitute its share of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the greater of the daily average Federal
Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection 2.15(g) shall be conclusive
in the absence of manifest error. If such Lender's share of such borrowing is
not made
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available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans under the relevant Facility, on demand, from the Borrower. The failure
of any Lender to make any Loan to be made by it shall not relieve any other
Lender of its obligation, if any, hereunder to make its Loan on such Borrowing
Date, but no Lender shall be responsible for the failure of any other Lender to
make the Loan to be made by such other Lender on such Borrowing Date.
2.16 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application
or any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by subsection 2.17 and the establishment of a tax based
on the net income of such Lender and changes in the rate of tax on the
net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems in good faith to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or issuing or
participating in Letters of Credit, or to reduce any amount receivable hereunder
in respect thereof, then, in any such case, the Borrower shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable, provided that
before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, in its reasonable
discretion, in any legal, economic or regulatory manner) to designate a
different Eurodollar lending office if the making of such designation would
allow the Lender or its Eurodollar lending office to continue to perform its
obligations to make Eurodollar Loans or to continue to fund or maintain
Eurodollar Loans and avoid the need for, or materially reduce the amount of,
such increased cost. If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 2.16, it shall promptly notify the Borrower,
through the Administrative Agent, of the event by reason of which it has become
so entitled. If the Borrower notifies the Administrative Agent within five
Business Days after any Lender notifies the Borrower of any increased cost
pursuant to the foregoing provisions of this subsection 2.16(a), the Borrower
may convert all Eurodollar Loans of such Lender then outstanding into ABR Loans
in accordance with subsection 2.10 and shall, additionally, reimburse such
Lender for any cost in accordance with subsection 2.18.
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(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender, to the Borrower, through the Administrative Agent, of
a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such corporation
for such reduction.
(c) A certificate as to any additional amounts payable
pursuant to this subsection 2.16, showing in reasonable detail the calculation
thereof and certifying that it is generally charging such costs to other
similarly situated borrowers under similar credit facilities, submitted by any
Lender through the Administrative Agent shall be conclusive in the absence of
manifest error, provided that the determination of such amounts shall be made in
good faith in a manner generally consistent with such Lender's standard
practices. The obligations of the Borrower pursuant to this subsection 2.16
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder for a period of nine months thereafter.
2.17 Taxes. (a) Except as provided below in this subsection,
all payments made by the Borrower under this Agreement shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income taxes
and franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Administrative Agent or any Lender
hereunder, the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement; provided, however, that the Borrower shall be entitled to deduct and
withhold any Non-Excluded Taxes and shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof to the extent such Lender's compliance with
the requirements of subsection 2.17(b) at the time such Lender becomes a party
to this Agreement fails to establish a complete exemption from such withholding
or to the extent such failure to establish a complete exemption from such
withholding thereafter is attributable to the actions of such Lender. Whenever
any Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the
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Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection 2.17 shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder for a period of nine months thereafter.
(b) Each Lender (or Transferee) that is not a United States
person within the meaning of Section 7701(a)(30) of the Code (a "Non-U.S.
Lender") shall deliver to the Borrower and the Administrative Agent (or, in the
case of a Participant, to the Lender from which the related participation shall
have been purchased) two copies of either U.S. Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from
U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, an annual certificate representing, under penalty of perjury, that
such Non-U.S. Lender is not a "bank" for purposes of Section 881(c) of the Code,
is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of
the Code) of the Borrower and is not a controlled foreign corporation related to
the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms on or before the expiration or obsolescence and
promptly upon the invalidity of any form previously delivered by such Non-U.S.
Lender and after the occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Administrative Agent for filing and
completing such forms. Each Non-U.S. Lender (and, if applicable, any other
Lender or Transferee) agrees, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower (for the benefit
of the Borrower and the Administrative Agent) such other forms as may be
reasonably required in order to establish the legal entitlement of such Lender
to an exemption from withholding with respect to payments of interest under this
Agreement or the other Loan Documents, provided that in determining the
reasonableness of such a request, such Lender shall be entitled to consider the
cost of complying with such request (to the extent unreimbursed by the Borrower)
that would be imposed on such Lender. Each Non-U.S. Lender shall promptly notify
the Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other form
of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this subsection 2.17(b), a Non-U.S.
Lender shall not be required to deliver any form pursuant to this subsection
2.17(b) that such Non-U.S. Lender is not legally able to deliver. If the
Administrative Agent or any Lender (or Transferee) receives a refund in respect
of Non-Excluded Taxes paid by the Borrower, it shall promptly pay such refund,
together with any other amounts paid by the Borrower in connection with such
refunded Non-Excluded Taxes, to the Borrower, net of all out-of-pocket expenses
of such Lender incurred in obtaining such refund, provided that the Borrower
agrees to
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promptly return such refund to the Administrative Agent or the applicable Lender
if it receives notices from the Administrative Agent or applicable Lender that
such Administrative Agent or Lender is required to repay such refund.
2.18 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss (excluding loss of profit) or
expense which such Lender actually incurs as a consequence of (a) withdrawal of
notice given by the Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
failure by the Borrower to make any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any
amounts payable pursuant to this subsection 2.18, showing in reasonable detail
the calculation thereof, submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder for a period of nine months thereafter.
2.19 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of subsection 2.16 or
2.17(a) with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event, provided that such
designation is made on terms that in the reasonable judgment of such Lender,
cause such Lender and its lending office(s) to suffer no economic, legal or
regulatory disadvantage, and provided further that nothing in this subsection
2.19 shall affect or postpone any of the obligations of any Borrower or the
rights of any Lender pursuant to subsection 2.16 or 2.17(a).
2.20 Replacement of Lenders under Certain Circumstances. If at
any time (a) the Borrower becomes obligated to pay additional amounts described
in subsection 2.16 or 2.17 as a result of any condition described in such
subsections or any Lender ceases to make Eurodollar Loans pursuant to subsection
2.16, (b) any Lender becomes insolvent and its assets become subject to a
receiver, liquidator, trustee, custodian or other Person having similar powers,
(c) any Lender becomes a "Non-Consenting Lender" (as defined below in this
subsection 2.20) or (d) any Lender becomes a "Non-Funding Lender", then the
Borrower may, on ten Business Days' prior written notice to the Administrative
Agent and such Lender, replace such Lender by causing such Lender to (and such
Lender shall be obligated to) assign pursuant to subsection 10.6(c) all of its
rights and obligations under this Agreement to a Lender or other entity selected
by the Borrower and reasonably acceptable to the Administrative Agent (and in
the case of Revolving Credit Commitments or Revolving Loans,
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reasonably acceptable to the Issuing Lender and the Swingline Lender) for a
purchase price equal to the outstanding principal amount of such Lender's Loans
and all accrued interest and fees and other amounts payable hereunder (including
amounts payable under subsection 2.18 as though such Loans were being paid
instead of being purchased), provided that (i) neither the Administrative Agent
nor any Lender shall have any obligation to the Borrower to find a replacement
Lender or other such entity, (ii) in the event of a replacement of a
Non-Consenting Lender or a Lender to which the Borrower becomes obligated to pay
additional amounts pursuant to clause (a) of this subsection 2.20, in order for
the Borrower to be entitled to replace such a Lender, such replacement must take
place no later than 180 days after (A) the date the Non-Consenting Lender shall
have notified the Borrower and the Administrative Agent of its failure to agree
to any requested consent, waiver or amendment or (B) the Lender shall have
demanded payment of additional amounts under one of the subsections described in
clause (a) of this subsection 2.20, as the case may be, and (iii) in no event
shall the Lender hereby replaced be required to pay or surrender to such
replacement Lender or other entity any of the fees received by such Lender
hereby replaced pursuant to this Agreement. In the case of a replacement of a
Lender to which the Borrower becomes obligated to pay additional amounts
pursuant to clause (a) of this subsection 2.20, the Borrower shall pay such
additional amounts to such Lender prior to such Lender being replaced and the
payment of such additional amounts shall be a condition to the replacement of
such Lender. In the event that (x) the Borrower or the Administrative Agent has
requested the Lenders to consent to a departure or waiver of any provisions of
the Loan Documents or to agree to any amendment thereto, (y) the consent, waiver
or amendment in question requires the agreement of all Lenders in accordance
with the terms of subsection 10.1 and (z) Required Lenders have agreed to such
consent, waiver or amendment, then any Lender who does not agree to such
consent, waiver or amendment shall be deemed a "Non-Consenting Lender". The
Borrower's right to replace a Non-Funding Lender pursuant to this subsection
2.20 is, and shall be, in addition to, and not in lieu of, all other rights and
remedies available to the Borrower against such Non-Funding Lender under this
Agreement, at law, in equity, or by statute.
2.21 Notice of Certain Costs. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice required by subsection 2.15
through and including subsection 2.18 is given by any Lender more than 90 days
after such Lender has knowledge (or should have had knowledge) of the occurrence
of the event giving rise to the additional cost, reduction in amounts, loss, tax
or other additional amounts described in such subsections, such Lender shall not
be entitled to compensation under such subsections for any such amounts incurred
or accruing prior to the giving of such notice to the Borrower.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Revolving
Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower or any Subsidiary on any
Business Day during the Revolving Credit Commitment Period in such form as may
be approved from time to time by the Issuing Lender, provided that the Issuing
Lender shall not have any obligation to issue any Letter of Credit if, after
giving effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the aggregate amount of the Available Revolving Credit
Commitments would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the earlier of (x) the
first anniversary of its
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date of issuance and (y) the date which is five Business Days prior to the
Scheduled Revolving Credit Termination Date, provided that any Letter of Credit
with a one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at its address for notices specified herein
an Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as the
Issuing Lender may reasonably request. Upon receipt of any Application, the
Issuing Lender will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Lender be required
to issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof. The
Issuing Lender shall promptly furnish to the Administrative Agent notice of the
issuance of each Letter of Credit (including the amount thereof). The
Administrative Agent will furnish to the Revolving Credit Lenders (a) prompt
notice of the issuance of each standby Letter of Credit and (b) a monthly report
setting forth for the relevant month the total aggregate daily amount available
to be drawn under commercial Letters of Credit that were outstanding during such
month.
3.3 Commissions, Fees and Other Charges. (a) The Borrower will
pay to the Administrative Agent, for the account of each Revolving Credit
Lender, a commission on all outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with respect to Eurodollar Loans
under the Revolving Credit Facility, minus the fronting fee referred to below,
shared ratably among the Revolving Credit Lenders and payable quarterly in
arrears on each L/C Fee Payment Date after the issuance date. In addition, the
Borrower shall pay to the Issuing Lender for its own account a fronting fee of
1/4 of 1% per annum of the average daily face amount of each Letter of Credit
issued by the Issuing Lender, payable quarterly in arrears on each L/C Fee
Payment Date after the issuance date.
(b) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Lender for such normal and customary
costs and expenses as are incurred or charged by the Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
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3.4 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued by the Issuing Lender and the
amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit issued by the Issuing Lender for which the
Issuing Lender is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Issuing Lender
upon demand an amount equal to such L/C Participant's Revolving Credit
Percentage of the amount of such draft or any part thereof, which is not so
reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to subsection 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit is paid to the Issuing Lender within three Business Days after the
date such payment is due, such L/C Participant shall pay to the Issuing Lender
on demand an amount equal to the product of (i) such amount, times (ii) the
greater of the daily average Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
subsection 3.4(a) is not made available to the Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans under the Revolving Credit Facility. A
certificate of the Issuing Lender submitted to any L/C Participant with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; provided, however, that in the event that any such payment received by
the Issuing Lender shall be required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft
so paid and (b) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment. Each such payment shall be
made to the Issuing Lender in Dollars and in immediately available funds.
Interest shall be payable on any and all
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amounts remaining unpaid by the Borrower under this subsection from the date
such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in subsection 2.12(c).
3.6 Obligations Absolute. The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Issuing Lender (except to
the extent resulting from the gross negligence or willful misconduct of the
Issuing Lender), any beneficiary of a Letter of Credit or any other Person. The
Borrower also agrees with the Issuing Lender that, subject to the last sentence
of this subsection 3.6, the Issuing Lender shall not be responsible for, and the
Borrower's Reimbursement Obligations under subsection 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors,
omissions or delays in transmission found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the gross negligence
or willful misconduct of the Issuing Lender. The Borrower agrees that any action
taken or omitted by the Issuing Lender under or in connection with any Letter of
Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards or care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on the Borrower and shall not result in any liability of the Issuing
Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit issued by it shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent, the Lenders, the Swingline
Lender and the Issuing Lender to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit, the Borrower hereby
represents and warrants to the Administrative Agent, the Swingline Lender, the
Issuing Lender and each Lender that:
4.1 Financial Condition. (a) (i) The audited consolidated
financial statements of (A) the Borrower and its subsidiaries as of and for the
fiscal years ending June 30, 1995, June 30,
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1996, and June 30, 1997, reported on by KPMG Peat Marwick LLP, and (B)
Omniholdings and its subsidiaries as of and for the fiscal year ending December
31, 1997, reported on by Ernst & Young, LLP, (ii) the unaudited consolidated
financial statements of the Borrower and its subsidiaries as of and for the
portion of the fiscal year ending March 31, 1998, certified by a Responsible
Officer of the Borrower, and (iii) the financial data for each tower site
eligible for acquisition pursuant to the Arch Acquisition consisting of third
party rental revenue and land lease expenses on a monthly basis with respect to
each tower site, present fairly in all material respects (x) with respect to
clauses (i) and (ii) above, the consolidated financial condition of the Borrower
and its subsidiaries and Omniholdings and its subsidiaries, respectively, and
the results of operations and cash flows as of such dates and for such periods
and (y) with respect to clause (iii), above, financial data with respect to such
tower sites. All such financial statements with respect to clauses (i) and (ii)
above, including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except, in the case of clauses (a) (i)(A) and (a)(i)(B), as approved by the
relevant firm of accountants and disclosed therein, and, in the case of clause
(ii), for normal year-end audit adjustments). The most recent balance sheets
referred to above reflect, as required by GAAP, any material Guarantee
Obligations, contingent liabilities and liabilities for taxes, and any long-term
leases and unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, in each case as of the date of
such balance sheet.
(b) The unaudited pro forma consolidated balance sheet of the
Borrower and its consolidated subsidiaries as of May 31, 1998 (including the
notes thereto), copies of which have heretofore been furnished to each Lender,
has been prepared giving effect (as if such events had occurred on such date) to
(i) the consummation of the Transactions (other than the Subsequent Arch
Acquisitions), (ii) the Loans to be made hereunder on the Closing Date and the
use of proceeds thereof and (iii) the payment of fees and expenses in connection
with the foregoing. The aforementioned unaudited pro forma consolidated balance
sheet presents fairly on a pro forma basis in all material respects the
financial position of the Borrower and its consolidated Subsidiaries as of May
31, 1998, and is based upon good faith estimates and assumptions believed by
management of the Borrower to be reasonable at the time made, assuming that the
events specified in the preceding sentence had actually occurred at such date.
4.2 No Change. Since (a) on the Closing Date, the date of the
most recent audited financial statements delivered pursuant to subsection
4.1(a)(i)(A) (taking into account the merger of Omniholdings, the Arch
Acquisition and the Loans being made on the Closing Date), and (b) thereafter,
the statements delivered pursuant to Section 6.1(a), there has been no (a)
development or event which has had or could reasonably be expected to have a
Material Adverse Effect or (b) sale, transfer or other disposition by the
Borrower or any of its Subsidiaries of any material part of its business or
property.
4.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized or formed, as the case may
be, validly existing and in good standing under the laws of the jurisdiction of
its organization or formation, (b) has the requisite power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification except to the extent
that the failure to so qualify could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the
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46
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the requisite power and authority, and the legal right, to
make, deliver and perform the Loan Documents and the Transaction Documents to
which it is a party and, in the case of the Borrower, to borrow and obtain other
extensions of credit hereunder. Each Loan Party has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of the Loan Documents and the Transaction Documents to which it is a party and,
in the case of the Borrower, to authorize the borrowings and other extensions of
credit on the terms and conditions of this Agreement. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
Transactions and the borrowings and other extensions of credit hereunder or with
the execution, delivery, performance, validity or enforceability of this
Agreement, any of the other Loan Documents or the Transaction Documents, except
(i) consents, authorizations, filings and notices described in Schedule 4.4,
which consents, authorizations, filings and notices have been obtained or made
and are in full force and effect, (ii) consents under immaterial Contractual
Obligations and (iii) filings referred to in subsection 4.19. Each Loan Document
and each Transaction Document has been duly executed and delivered on behalf of
each Loan Party thereto. This Agreement and each Transaction Document
constitutes, and each Loan Document upon execution will constitute, a legal,
valid and binding obligation of each Loan Party thereto, enforceable against
each such Loan Party in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of
this Agreement, the Transaction Documents and the Loan Documents, the issuance
of Letters of Credit, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or any material Contractual
Obligation of any of the Loan Parties and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such material Contractual
Obligation (other than the Liens created by the Security Documents).
4.6 No Material Litigation. Except as set forth in Schedule
4.6, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against any of the Loan Parties or against any of their
respective properties or revenues (a) with respect to any of the Loan Documents
or any of the transactions contemplated hereby or thereby, (b) with respect to
the Transaction Documents or any of the transactions contemplated thereby or (c)
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect.
4.7 No Default. None of the Loan Parties is in default under
or with respect to any of its Contractual Obligations (including the Transaction
Documents) in any respect which could
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reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
4.8 Ownership of Property; Liens. (a) Each of the Loan Parties
has title in fee simple to, or a valid leasehold interest in, all its material
real property, and good title to, or a valid leasehold interest in, all its
other material property, and none of such property is subject to any Lien except
as permitted by subsection 7.3.
(b) Each of the Loan Parties has complied with all obligations
under all material leases to which it is a party and all such leases are in full
force and effect. Each of the Loan Parties enjoys peaceful and undisturbed
possession under all such material leases.
4.9 Intellectual Property. Each of the Borrower and each of
its Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
service marks, copyrights, technology, know-how and processes ("Intellectual
Property") necessary for the conduct of its business as currently conducted,
except for those the failure to own or license which could not reasonably be
expected to have a Material Adverse Effect. Except as, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect and to the
knowledge of the Borrower (a) no claim has been asserted and is pending by any
Person challenging or questioning the use of any Intellectual Property or the
validity of any Intellectual Property (nor does the Borrower know of any valid
basis for any such claim) and (b) the use of Intellectual Property by the
Borrower and its Subsidiaries does not infringe on the rights of, and no
Intellectual Property of the Borrower or any of its Subsidiaries is being
infringed upon by, any Person.
4.10 Taxes. Each of the Loan Parties has filed or caused to be
filed all Federal and all other material tax returns which are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any material assessments made against it or any of its property and all other
material taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than (a) any taxes, fees or other charges the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the applicable Loan Party and (b) taxes,
assessments, fees or other charges imposed by any Governmental Authority, other
than income taxes imposed by the United States of America, with respect to which
the failure to make payments could not, by reason of the amount thereof or of
remedies available to such Governmental Authorities, reasonably be expected to
have a Material Adverse Effect); and no tax Lien has been filed, and, to the
knowledge of the Borrower, no material claim is being asserted, with respect to
any such material tax, fee or other charge, other than those being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Loan Parties.
4.11 Federal Regulations. No Letters of Credit and no part of
the proceeds of any Loans will be used for "buying" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board as now and from time to time hereafter in effect or
for any purpose which violates the provisions of the Regulations of the Board.
If requested by any Lender or the Administrative Agent, the Borrower will
furnish to the Administrative Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
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4.12 Labor Matters. Except as set forth on Schedule 4.12,
there are no strikes or other labor disputes against the Borrower or any of its
Subsidiaries pending or, to the knowledge of the Borrower, threatened that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. Hours worked by and payments made to employees of the
Borrower and its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters that (individually or in the aggregate) could reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Borrower, all payments
due from the Borrower or any of its Subsidiaries on account of employee health
and welfare insurance that (individually or in the aggregate) could reasonably
be expected to have a Material Adverse Effect if not paid have been paid or
accrued as a liability on the books of the Borrower or the relevant Subsidiary.
4.13 ERISA. Except where the liability, individually or in the
aggregate, which could reasonably be expected to result has not had or could not
reasonably be expected to have a Material Adverse Effect: (a) neither a
Reportable Event nor an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Single Employer Plan; (b) each Plan (other than
a Multiemployer Plan) has complied in all material respects with the applicable
provisions of ERISA and the Code; (c) no termination of a Single Employer Plan
has occurred, and no Lien in favor of the PBGC or a Single Employer Plan has
arisen and remains outstanding, during such five-year period; (d) the present
value of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefits
in an amount that could reasonably be expected to have a Material Adverse
Effect; (e) none of the Loan Parties nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan, and, to the
knowledge of the Loan Parties, none of the Loan Parties nor any Commonly
Controlled Entity would become subject to any liability under ERISA if the Loan
Parties or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made; (f) no such Multiemployer
Plan is in Reorganization or Insolvent; (g) the present value (determined using
actuarial and other assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the liability of the Borrower and
its Subsidiaries for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(l) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits.
4.14 Investment Company Act; Other Regulations. No Loan Party
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Subsidiaries. The subsidiaries listed on Schedule 4.15
constitute all the Subsidiaries at the date hereof.
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4.16 Use of Proceeds. The proceeds of the Loans and the
issuances of Letters of Credit shall be used solely for the purposes specified
in the preamble of this Agreement.
4.17 Environmental Matters. Except as set forth on Schedule
4.17:
(a) The facilities and properties owned, leased or operated by
the Borrower or any of its subsidiaries (the "Properties") do not contain, and
have not previously contained, any Materials of Environmental Concern in amounts
or concentrations or under such conditions which (i) constitute or constituted a
violation of, or could reasonably be expected to give rise to liability under,
any Environmental Law in effect at the time of the making of this
representation, or (ii) could materially and adversely interfere with the
continued operation of the Properties, or (iii) materially impair the fair
saleable value thereof except in each case insofar as such violation, liability,
interference, or reduction in fair market value, or any aggregation thereof, is
not reasonably likely to result in a Material Adverse Effect.
(b) The business operated by the Borrower or any of its
subsidiaries (the "Business"), the Properties and all operations at the
Properties are, and to the knowledge of the Borrower have been, in compliance in
all respects with all applicable Environmental Laws except for noncompliance
which is not reasonably likely to result in a Material Adverse Effect.
(c) Neither the Borrower nor any of its subsidiaries has
received any written notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or compliance
with Environmental Laws with regard to any of the Properties or the Business,
nor does the Borrower have knowledge or reason to believe that any such notice
will be received or is being threatened except insofar as such notice or
threatened notice, or any aggregation thereof, does not involve a matter or
matters that is or are reasonably likely to result in a Material Adverse Effect.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a manner
or to a location which could reasonably be expected to result in the Borrower or
any of its subsidiaries incurring liability under, any Environmental Law in
effect at the time of the making of this representation, nor have any Materials
of Environmental Concern been generated, treated, stored or disposed of at, on
or under any of the Properties in violation of, or in a manner that could
reasonably be expected to result in the Borrower or any of its Subsidiaries
incurring liability under, any applicable Environmental Law in effect at the
time of the making of this representation except insofar as any such violation
or liability referred to in this paragraph, or any aggregation thereof, is not
reasonably likely to result in a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any of its subsidiaries is or will be
named as a party with respect to the Properties or the Business, nor are there
any consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the Business except
insofar as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to result in a Material Adverse
Effect.
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(f) There has been no release or, to the best knowledge of the
Borrower, threat of release of Materials of Environmental Concern at or from the
Properties, or arising from or related to the operations of the Borrower or any
of its subsidiaries in connection with the Properties or otherwise in connection
with the Business, in violation of or in amounts or in a manner that could
reasonably give rise to liability under Environmental Laws in effect at the time
of making this representation except insofar as any such violation or liability
referred to in this paragraph, or any aggregation thereof, is not reasonably
likely to result in a Material Adverse Effect.
4.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished to the Administrative Agent or the Lenders,
or any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents (but
excluding all projections and pro forma financial information and other
estimates covered by the next sentence), contained as of the date such
statement, information, document or certificate was so furnished, any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements contained herein or therein not misleading. The
projections and pro forma financial information and other estimates and opinions
contained in the materials referenced above are based upon good faith estimates
and assumptions believed by management of the Borrower to be reasonable at the
time made, it being recognized by the Administrative Agent and the Lenders that
such financial information as it relates to future events is not to be viewed as
fact and that actual results during the period or periods covered by such
financial information may differ from the projected results set forth therein by
a material amount. As of the date hereof, the representations and warranties (a)
of the Borrower and any of its Subsidiaries in the Transaction Documents are
true and correct in all material respects and (b) of all other parties to the
Transaction Documents, to the knowledge of the Borrower, are true and correct in
all material respects. As of the Closing Date, there is no fact known to any
Loan Party (other than general economic conditions, which conditions are
commonly known and affect businesses generally) that could reasonably be
expected to have a Material Adverse Effect that has not been expressly disclosed
herein, in the other Loan Documents or in any other documents, certificates and
statements furnished to the Administrative Agent and the Lenders for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
4.19 Security Documents. The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
collateral described therein and proceeds thereof. In the case of the Pledged
Stock and the Pledged Debt Securities, when stock certificates representing such
Pledged Stock or certificates representing such Pledged Debt Securities are
delivered to the Administrative Agent, or when financing statements in
appropriate form are filed in the offices specified on Schedule 4.19, and in the
case of the other collateral described in the Guarantee and Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 4.19, the Guarantee and Collateral Agreement shall
constitute a fully perfected Lien on, and security interest in, all right, title
and interest of the Loan Parties in such collateral and the proceeds thereof, as
security for the Obligations (as defined in the Guarantee and Collateral
Agreement), in each case prior and superior in right to any other Person
subject, except in the case of such Pledged Stock and the Pledged Debt
Securities, to Liens permitted by paragraphs (a) through (f) of subsection 7.3.
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4.20 Solvency. Each Loan Party is, and after giving effect to
the Transactions and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be, Solvent.
4.21 Year 2000 Compliance. On or before June 30, 1999, the
Borrower will complete any reprogramming and testing of major computer systems
and other major equipment containing embedded microchips, in either case owned
or operated by the Borrower or any of its Subsidiaries or used or relied upon in
the conduct of their business, in order to enable their computer systems and
equipment in the aggregate to be year 2000 compliant in all material respects.
The costs to the Borrower and its Subsidiaries that have not been incurred as of
the date hereof for such reprogramming and testing and for the other reasonably
foreseeable consequences to them of any improper functioning of other computer
systems and equipment containing embedded microchips due to the occurrence of
the year 2000 could not reasonably be expected to result in an Event of Default
or to have a Material Adverse Effect.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement
of each Lender to make the initial extension of credit requested to be made by
it is subject to the satisfaction, prior to or concurrently with the making of
such extension of credit on the Closing Date, of the following conditions
precedent:
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a Responsible
Officer of the Borrower, (ii) the Guarantee and Collateral Agreement,
executed and delivered by a Responsible Officer of the Borrower and
each Subsidiary Guarantor and (iii) a notice of borrowing pursuant to
subsection 2.2 and subsection 2.5 of this Agreement.
(b) Lien Searches. The Administrative Agent shall have
received the results of a recent lien, tax and judgment search in each
of the jurisdictions and offices where the material assets of the Loan
Parties or the Arch Towers are located or recorded, and such search
shall reveal no Liens on any of the assets of the Borrower or any of
its Subsidiaries or the Arch Towers, except for Liens permitted by
subsection 7.3 and Liens that will be removed prior to the Closing
Date.
(c) Environmental Audit. The Lenders shall have received the
Phase I Environmental Site Assessments prepared by Environmental
Resources Management, received by the Borrower with respect to the Arch
Towers, and shall be reasonably satisfied with the findings contained
therein with respect to the real properties of the Borrower and its
Subsidiaries after giving effect to the consummation of the
Transactions.
(d) Closing Certificate. The Administrative Agent shall have
received, with a copy for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C,
with appropriate insertions and attachments.
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(e) Legal Opinions. The Administrative Agent shall have
received the executed legal opinion of Weil, Gotshal & Manges LLP,
counsel to the Loan Parties (such legal opinion to cover such matters
incident to the transactions contemplated by this Agreement and the
Transaction Documents as the Administrative Agent may reasonably
require).
(f) Pledged Stock, Stock Powers. The Administrative Agent
shall have received the certificates representing the shares of Capital
Stock pledged pursuant to the Guarantee and Collateral Agreement (other
than the certificates representing the shares of Capital Stock of the
Subsidiaries referred to in subsection 6.11), together with an undated
stock power for each such certificate (other than the certificates
representing the shares of Capital Stock of the Subsidiaries referred
to in subsection 6.11) executed in blank by a Responsible Officer of
the pledgor thereof and the Pledged Debt Securities pledged pursuant to
the Guarantee and Collateral Agreement endorsed in blank by a
Responsible Officer of the pledgor thereof.
(g) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement and any filings with the FCC or the United States Patent and
Trademark Office) required by the Security Documents or under law or
reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected Lien
on the collateral described therein, prior and superior in right to any
other Person (other than with respect to Liens expressly permitted by
subsection 7.3), shall be in proper form for filing, registration or
recordation.
(h) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of subsection 6.5 of
this Agreement.
(i) Fees and Expenses of Lenders. The Administrative Agent and
the Lenders (and their Affiliates) shall have received all fees and
expenses required to be paid by the Borrower on or before the Closing
Date, or provision for payment with proceeds of the initial extensions
of credit hereunder shall have been made by the Borrower.
(j) The Transactions. The Transactions (other than the
Subsequent Arch Acquisitions) shall have been consummated or shall be
consummated substantially simultaneously with the initial borrowing of
Loans under this Agreement in accordance with all applicable
Requirements of Law and the terms of the Transaction Documents (without
giving effect to any amendments or waivers to the Transaction Documents
that could reasonably be expected adversely to impact the Facilities
and are not reasonably satisfactory to the Lenders), and the Lenders
shall be reasonably satisfied (i) that the fees and expenses to be paid
in connection with the Transactions (other than the Subsequent Arch
Acquisitions) shall not exceed $7,500,000 and (ii) with the amount of
contributions to the capital of the Borrower and its Subsidiaries made
by Hicks Muse prior to the Closing Date.
(k) Capitalization of the Borrower. The Investors shall own
beneficially, directly or indirectly, at least 40% of the aggregate
ordinary voting power represented by the issued and outstanding Capital
Stock of the Borrower.
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(l) Outstanding Indebtedness. After giving effect to the
Transactions and the other transactions contemplated by this Agreement
and the Transaction Documents, the Borrower and its Subsidiaries shall
have no outstanding Indebtedness or preferred equity, other than
Indebtedness under (i) this Agreement and (ii) other Indebtedness
permitted under subsection 7.2, and all Existing Indebtedness shall
have been permanently terminated and all obligations thereunder shall
have been discharged.
(m) Delivery of Financial Information. The Lenders shall have
received (i) audited consolidated balance sheets and related statements
of income, stockholder's equity and cash flows for (A) the Borrower and
its subsidiaries as of and for the fiscal years ending June 30, 1995,
June 30, 1996, and June 30, 1997, reported on by KPMG Peat Marwick LLP,
and (B) Omniholdings and its subsidiaries as of and for the fiscal year
ending December 31, 1997, reported on by Ernst & Young, LLP, (ii) the
unaudited consolidated financial statements of the Borrower and its
subsidiaries as of and for the portion of the fiscal year ending March
31, 1998, certified by a Responsible Officer of the Borrower, and (iii)
the financial data for each tower site eligible for acquisition
pursuant to the Arch Acquisition consisting of third party rental
revenue and land lease expenses on a monthly basis with respect to each
tower site, and, with respect to clauses (i) and (ii) above, such
financial statements shall not, in the reasonable judgment of the
Lenders, reflect any material adverse change in the consolidated
financial condition of the Borrower and its subsidiaries, taken as a
whole (other than changes in general economic conditions), as reflected
in the financial statements previously furnished to the Administrative
Agent and, with respect to clause (iii) above, such financial data
shall not, in the reasonable judgment of the Lenders, reflect any
material adverse change in the consolidated financial condition of the
Borrower and its subsidiaries, taken as a whole (other than changes in
general economic conditions), as reflected in the financial statements
previously furnished to the Administrative Agent.
(n) Pro Forma Financial Information. The Lenders shall have
received a pro forma consolidated balance sheet of the Borrower and its
subsidiaries on a consolidated basis as of the Closing Date after
giving effect to the Transactions and the other transactions
contemplated by this Agreement, which balance sheet shall not be
materially inconsistent with the forecasts previously provided to the
Lenders.
(o) Financial Projections. The Borrower shall have delivered a
detailed business plan and financial projections of the Borrower and
its subsidiaries for the fiscal years 1998 through 2005, in each case
in form and substance reasonably satisfactory to the Administrative
Agent.
(p) Judicial Actions. (i) There shall be in effect no
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the
Transactions or the other transactions contemplated by this Agreement,
nor shall any proceeding by any Governmental Authority seeking any of
the foregoing be pending.
(ii) There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed
applicable to the Transactions or the other transactions
<PAGE> 59
54
contemplated by this Agreement that makes the consummation of the
Transactions or the other transactions contemplated by this Agreement
illegal.
(q) Consummation of the Transactions. The consummation of the
Transactions and the other transactions contemplated by this Agreement
shall not (i) violate any material Requirement of Law or (ii) conflict
with, or result in a default or event of default under, any material
Contractual Obligation of the Borrower or any of its Subsidiaries or
relating to the Arch Towers and to be assumed by the Borrower or any of
its Subsidiaries.
(r) Environmental and Other Exposures. The Lenders shall be
reasonably satisfied as to the amount and nature of any environmental
and employee health and safety exposures to which the Borrower and its
Subsidiaries may be subject after giving effect to the Transactions and
the other transactions contemplated by this Agreement, and with the
plans of the Borrower with respect thereto.
(s) Governmental Approvals. All requisite Governmental
Authorities and third parties shall have approved or consented to the
consummation of the Transactions and the other transactions
contemplated by this Agreement to the extent required (but excluding
approvals or consents that reasonably could not be expected to have a
Material Adverse Effect), all applicable appeal periods shall have
expired and there shall be no action, actual or threatened, of any
Governmental Authority that could reasonably be expected to restrain,
prevent or impose materially burdensome conditions on the Transactions
or the other transactions contemplated by this Agreement.
5.2 Conditions to Each Extension of Credit. The agreement of
each Lender and the Swingline Lender to make any extension of credit requested
to be made by it on any date (including, without limitation, its initial
extension of credit) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant to
the Loan Documents shall be true and correct in all material respects
on and as of such date as if made on and as of such date except for any
representation and warranty which is expressly made as of an earlier
date, which representation and warranty shall have been true and
correct in all material respects as of such earlier date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
subsection 5.2 have been satisfied.
<PAGE> 60
55
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender, the Swingline Lender, the Issuing Lender or the
Administrative Agent hereunder, the Borrower shall and (except in the case of
delivery of financial information reports and notices) shall cause each of its
Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent
(which shall in turn be promptly distributed by the Administrative Agent to the
Lenders):
(a) as soon as available but in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of (i) the audited
consolidated balance sheet of the Borrower and its consolidated
subsidiaries and (ii) the unaudited consolidating balance sheet of each
of the Borrower's direct subsidiaries (including Omniholdings) as at
the end of such year and the related audited consolidated statements of
operations and of cash flows for such year, setting forth in
comparative form the figures for the previous year, and reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by independent
certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, (i) the unaudited consolidated balance
sheet of the Borrower and its consolidated subsidiaries and (ii) the
unaudited consolidating balance sheet of each of the Borrower's direct
subsidiaries (including Omniholdings) as at the end of such quarter and
the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in comparative form the figures for
the corresponding period in the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 30
days after the end of each of the first two fiscal months of each
fiscal quarter of the Borrower, (i) the unaudited consolidated balance
sheet of the Borrower and its consolidated subsidiaries and (ii) the
unaudited consolidating balance sheet of each of the Borrower's direct
subsidiaries (including Omniholdings) as at the end of such month and
the related unaudited consolidated statements of income and cash flows
for such month and the portion of the fiscal year through the end of
such month, setting forth in comparative form the figures for the
corresponding period in the previous year, certified by a Responsible
Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments).
All such financial statements shall fairly present in all material respects the
financial position of the Borrower and its subsidiaries and of Omniholdings and
its subsidiaries, as applicable, as of such date and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein).
<PAGE> 61
56
6.2 Certificates; Deliveries; Other Information. Furnish to
the Administrative Agent (which shall in turn be promptly distributed by the
Administrative Agent to the Lenders) or, in the case of clause (f), to the
relevant Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default relating to the
covenants contained in subsections 7.1 and 7.7, except as specified in
such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to subsection 6.1(a), 6.1(b) and 6.1(c), (i) a certificate of
a Responsible Officer stating that, to such Responsible Officer's
knowledge, each Loan Party during such period has observed or performed
all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
which it is a party to be observed, performed or satisfied by it, in
all material respects, and that such Responsible Officer has obtained
no knowledge of any Default or Event of Default except as specified in
such certificate, (ii) (A) a Compliance Certificate containing all
information necessary for determining compliance by the Borrower and
its subsidiaries with the provisions of this Agreement referred to
therein as of the last day of the relevant fiscal quarter or fiscal
year and (B) to the extent not previously disclosed to the
Administrative Agent, a listing of any state within the United States
where any Loan Party keeps inventory or equipment and of any
Intellectual Property arising under the laws of the United States (or
any jurisdiction therein) acquired by any Loan Party since the date of
the most recent list delivered pursuant to this clause (B) (or, in the
case of the first such list so delivered, since the Closing Date) and
(iii) any final accountants' management letters delivered by the
independent certified public accountants reporting on such financial
statements to the Borrower or any of its Subsidiaries;
(c) as soon as available, and in any event no later than 45
days after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the Borrower and its consolidated subsidiaries
for such fiscal year (including a projected consolidated balance sheet
of the Borrower and its subsidiaries, as applicable, as of the end of
such fiscal year, and the related consolidated statements of projected
cash flow, projected changes in financial position and projected
income), and, as soon as available, significant revisions, if any, of
such budget and projections with respect to such fiscal year
(collectively, the "Projections"), which Projections shall in each case
be accompanied by a certificate of a Responsible Officer stating that
such Projections are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial
information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such
financial information may differ from the projected results set forth
therein by a material amount;
(d) concurrently with the delivery of financial statements
under subsection 6.1(a) or 6.1(b), a balance sheet and related
statements of operations, stockholders' equity and cash flows for each
Unrestricted Subsidiary for the applicable period;
<PAGE> 62
57
(e) within five days after the same are sent, copies of all
financial statements and reports which the Borrower or any of its
subsidiaries sends to the holders of any class of its debt securities
or public equity securities and within five days after the same are
filed, copies of all financial statements and reports which the
Borrower or any of its subsidiaries may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(f) promptly following their submission with any Federal,
state or local Governmental Authority, copies of any and all periodic
or special reports filed by the Borrower or any of its subsidiaries, if
such reports are publicly available and indicate any material adverse
change in the business, operations or financial condition of the
Borrower or any of its subsidiaries or if copies thereof are requested
by any Lender or the Administrative Agent (but only to the extent such
reports are publicly available), and copies of any and all material
notices and other material communications from any Federal, state or
local Governmental Authority with respect to the Borrower or any of its
subsidiaries;
(g) at such time as (i) the principal amount of any
Undelivered Instrument (as defined in the Guarantee and Collateral
Agreement) exceeds $1,000,000 or (ii) the aggregate principal amount of
all Undelivered Instruments exceeds $1,500,000, deliver such
Undelivered Instrument or Undelivered Instruments, as the case may be,
to the extent necessary to eliminate such excess to the Administrative
Agent as required under the Guarantee and Collateral Agreement; and
(h) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be,
provided that notwithstanding the foregoing, the Borrower and each of its
Subsidiaries shall have the right to pay any such obligation and in good faith
contest, by proper legal actions or proceedings, the validity or amount of such
claims.
6.4 Conduct of Business and Maintenance of Existence, etc. (a)
Except as contemplated by subsection 7.4, (i) continue to engage in business of
the same general type as now conducted by it, (ii) preserve, renew and keep in
full force and effect its existence and (iii) take all reasonable action to
preserve and maintain all rights, privileges, licenses and franchises necessary
or desirable in the normal conduct of its business, except, in the case of this
clause (iii), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect and except if (A) in the reasonable
business judgment of the Borrower or such Subsidiary, as the case may be, it is
in its best economic interest not to preserve and maintain such privileges,
rights or franchises and (B) such failure to preserve and maintain such
privileges, rights or franchises would not materially adversely affect the
rights of the Lenders hereunder or the value of the collateral security for the
Loans and (b) comply with all Contractual Obligations and Requirements of Law
except to the extent
<PAGE> 63
58
that failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted, and maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business or as otherwise reasonably requested by the Administrative Agent; and
furnish to the Administrative Agent, upon written request, information in
reasonable detail as to the insurance carried except to the extent that the
failure to do any of the foregoing with respect to any such property could not
reasonably be expected to materially adversely affect the value or usefulness of
such property.
(b) All such insurance shall (i) provide that no cancelation,
material reduction in amount or material change in coverage thereof shall be
effective until at least thirty (30) days after receipt by the Administrative
Agent of written notice thereof, (ii) name the Administrative Agent as insured
party or loss payee and (iii) if reasonably requested by the Administrative
Agent, include a breach of warranty clause.
6.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and accounts in accordance with sound business
practices and (b) upon reasonable prior notice and at any reasonable time,
permit representatives of the Administrative Agent or any Lender to visit and
inspect any of its properties and examine and, if reasonably requested, make
copies of its contracts, books and records and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries (and, during the continuance of an Event of Default, any
Unrestricted Subsidiary) with officers and employees of the Borrower and its
Subsidiaries (and, during the continuance of an Event of Default, any
Unrestricted Subsidiary) and with its independent certified public accountants,
provided that the Administrative Agent or such Lender shall notify the Borrower
prior to any contact with such accountants and give the Borrower the opportunity
to participate in such discussions.
6.7 Notices. Promptly give notice to the Administrative
Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its subsidiaries and any Governmental
Authority and which has a reasonable likelihood of being adversely
determined, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its subsidiaries in which the amount involved is $1,000,000 or more
and not covered by insurance or in which injunctive or similar relief
is sought;
<PAGE> 64
59
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof
and if, individually or in the aggregate, the liability that could
reasonably be expected to result would be material to the Borrower and
its subsidiaries taken as a whole: (i) the occurrence of any Reportable
Event with respect to any Plan (other than a Multiemployer Plan), a
failure to make any required contribution to a Plan, the creation of
any Lien in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action
by the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan;
(e) any development or event which has had or could reasonably
be expected to have a Material Adverse Effect; and
(f) the receipt by the Borrower or any of its subsidiaries of
any complaint, order, citation, notice or other written communication
from any Person with respect to the existence or alleged existence of a
violation of any Environmental Laws or Materials of Environmental
Concern or any other environmental matter including the occurrence of
any spill, discharge or release in a quantity that is reportable under
any Environmental Laws on any property owned, leased or utilized by the
Borrower or any of its subsidiaries but only to the extent that such
complaint, order, citation, notice or written communication
individually could reasonably be expected to result in liability or an
obligation under any Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower, the relevant Subsidiary or the
relevant subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Except as could not reasonably be
expected to have a Material Adverse Effect, comply with, and use reasonable
efforts to ensure compliance by all tenants and subtenants, if any, with all
applicable Environmental Laws, and obtain and comply with and maintain, and use
reasonable efforts to ensure that all tenants and subtenants obtain and comply
with and maintain, any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws.
(b) Conduct and complete (or cause to be conducted and
completed) in all material respects all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and in a timely fashion comply in all material respects with
all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws, except to the extent that the failure to do so could not be
reasonably expected to have a Material Adverse Effect.
6.9 Additional Collateral, etc. (a) If at any time following
the Closing Date the aggregate monetary value (as determined by aggregating the
monetary value of each item or items of Property so acquired on the date of the
acquisition thereof) of all Property of any nature whatsoever acquired by the
Borrower or any Subsidiary after the Closing Date is in excess of $1,000,000
(other than (i) any Property described in paragraph (b) or (c) below or (ii) any
Property subject to a Lien
<PAGE> 65
60
expressly permitted by subsection 7.3(g) or (q)) as to which the Administrative
Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly
(i) execute and deliver to the Administrative Agent such amendments to the
Guarantee and Collateral Agreement or such other documents as the Administrative
Agent deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a security interest in such Property and
(ii) take all actions necessary or advisable to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in such Property, including without limitation, the filing of Uniform
Commercial Code financing statements and filings with the United States Patent
and Trademark Office and in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be reasonably requested
by the Administrative Agent.
(b) With respect to any fee interest in any real estate owned
by the Borrower or any of its Subsidiaries, whether acquired before or after the
Closing Date (other than any such real estate subject to a Lien expressly
permitted by subsection 7.3(g) or (q)), promptly after the receipt of written
notice with respect to such real estate from the Administrative Agent (but in no
event before November 30, 1998, unless an Event of Default shall have occurred
and be continuing) (i) execute and deliver a first priority mortgage or deed of
trust (subject only to Liens permitted by subsection 7.3) in favor of the
Administrative Agent, for the benefit of the Lenders, covering such real estate,
in form and substance reasonably satisfactory to the Administrative Agent, (ii)
provide the Lenders with reasonably satisfactory title reports and title and
extended coverage insurance covering such real estate in an amount at least
equal to the purchase price of such real estate as well as, to the extent
reasonably requested by the Administrative Agent, a current ALTA survey thereof,
together with a surveyor's certificate, (iii) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative Agent
and (iv) if reasonably requested by the Administrative Agent, deliver to the
Administrative Agent a Phase I Environmental Site Assessment with respect to
such real estate, prepared by an environmental consulting firm reasonably
satisfactory to the Administrative Agent. Notwithstanding the foregoing, the
Borrower and its Subsidiaries shall only be required to execute and deliver such
a mortgage or deed of trust, title reports, title insurance, environmental
reports and, if reasonably requested by the Administrative Agent, current ALTA
surveys, covering fee properties of the Borrower or its Subsidiaries with a fair
market value (including with respect to improvements (including towers) thereon)
in excess of $500,000.
(c) With respect to any new subsidiary created or acquired
after the Closing Date by the Borrower or any of its Subsidiaries that is not
designated by the Borrower as an Unrestricted Subsidiary, promptly (i) execute
and deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in the Capital Stock and debt
securities of such new Subsidiary which are owned by the Borrower or any of its
Subsidiaries and required to be pledged pursuant to the Guarantee and Collateral
Agreement, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock and debt securities, together with (A) in the
case of such Capital Stock, undated stock powers endorsed in blank, and (B) in
the case of such debt securities, endorsed in blank, in each case executed and
delivered by a Responsible Officer of the Borrower or such Subsidiary, as the
case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the
<PAGE> 66
61
benefit of the Lenders a perfected first priority security interest in the
collateral described in the Guarantee and Collateral Agreement with respect to
such new Subsidiary, including, without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Collateral Agreement or by law or as may be reasonably
requested by the Administrative Agent and (iv) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinion shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent, provided that notwithstanding the foregoing, only 65% of the voting
Capital Stock of any direct foreign Subsidiary of the Borrower or any domestic
Subsidiary need be pledged under this clause (c), no voting Capital Stock of any
foreign Subsidiary of any other foreign Subsidiary need be pledged under this
clause (c) and no direct or indirect foreign Subsidiary shall become a Guarantor
hereunder or shall be required to pledge any of its assets.
6.10 Changes in Locations, Name, etc. The Borrower shall not,
except upon not less than 15 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent of all additional executed
financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for in the Guarantee and Collateral Agreement:
(a) permit any of the Inventory or Equipment (each as defined
in the Guarantee and Collateral Agreement) (other than (i) immaterial Inventory
and Equipment, (ii) Equipment under repair and (iii) Inventory and Equipment in
transit in the ordinary course of business (including Inventory and Equipment
located at construction sites)) to be kept at a location other than those listed
on Schedule 5 of the Guarantee and Collateral Agreement;
(b) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4 of the Guarantee and
Collateral Agreement; or
(c) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative Agent in
connection with the Guarantee and Collateral Agreement would become misleading,
provided that the Borrower may consummate the Reincorporation so long as, prior
to the Borrower's consummation of the Reincorporation, the Administrative Agent
shall have received all additional financing statements and other documents
requested by the Administrative Agent to maintain the validity, perfection and
priority of the security interests provided for in the Guarantee and Collateral
Agreement.
SECTION 6.11 Share Certificates. Deliver to the Collateral
Agent, within 30 days after the Closing Date, certificates representing the
shares of Capital Stock of each of Specialty Combined Resources, Inc., Specialty
Capital Services, Inc., Specialty Training Centers, Inc., Novak & Lackey
Construction Co., Inc. and Microwave Tower Service, Inc., pledged pursuant to
the Guarantee and Collateral Agreement, together with an undated stock power for
each such certificate endorsed in blank by a Responsible Officer of the pledgor
thereof.
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SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall not, and shall not permit (except with respect to subsection 7.1)
any of its Subsidiaries to, directly or indirectly:
7.1 Financial Condition Covenants.
(a) With respect to the period commencing on the Closing Date
and ending on September 30, 1999:
(i) Consolidated Senior Secured Debt to Capitalization Test.
Permit the Consolidated Senior Secured Debt to Total Capitalization
Ratio as of the last day of any fiscal quarter of the Borrower,
commencing with September 30, 1998, to be greater than 0.50 to 1.00.
(ii) Consolidated Total Debt to Capitalization Test. Permit
the Consolidated Total Debt to Total Capitalization Ratio as of the
last day of any fiscal quarter of the Borrower, commencing with
September 30, 1998, to be greater than 0.65 to 1.00.
(iii) Modified Interest Coverage Test. Permit the ratio as of
the last day of any fiscal quarter of the Borrower, which last day
occurs in such period, commencing with September 30, 1998, of (A) the
sum of (x)(I) the product of 2.0 and the Consolidated EBITDA for the
six-month period ending on such date, minus (II) the product of 2.0 and
the Tower EBITDA for the six-month period ending on such date, plus (y)
the product of 12.0 and the Tower EBITDA for the fiscal month ending on
such date, to (B) Consolidated Cash Interest Expense for the
twelve-month period ending on such date to be greater than 1.30 to
1.00.
(b) (i) Modified Leverage Test. Permit the ratio (the
"Adjusted Consolidated Leverage Ratio") as of the last day of any fiscal quarter
of the Borrower, which last day occurs in any period set forth below, of (A)
Consolidated Total Debt as of such date to (B) the sum of (x)(i) Consolidated
EBITDA for the twelve-month period ending on such date, minus (ii) Tower EBITDA
for the twelve-month period ending on such date, plus (y) the product of 4.0 and
the Tower EBITDA for the fiscal quarter ending on such date, to be greater than
the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
December 31, 1999 to 7.00 to 1.00
September 30, 2000
December 31, 2000 to 6.00 to 1.00
Term Loan Maturity Date
</TABLE>
<PAGE> 68
63
(ii) Interest Coverage Test. Permit the Consolidated Interest
Coverage Ratio as of the last day of any Test Period to be less than the ratio
set forth opposite the period or date set forth below that includes such date:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
December 31, 1999 to 1.60 to 1.00
September 30, 2000
December 31, 2000 1.80 to 1.00
March 31, 2001 to 2.25 to 1.00
Term Loan Maturity Date
</TABLE>
7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist (in each case, to "Incur") any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness among the Loan Parties arising as a result of
intercompany loans;
(c) purchase money Indebtedness, provided that the aggregate
amount of Indebtedness incurred pursuant to this subsection 7.2(c)
shall not exceed $5,000,000 at any one time outstanding;
(d) Capital Lease Obligations, provided that the aggregate
principal amount of Capital Lease Obligations incurred pursuant to this
subsection 7.2(d) in any fiscal year of the Borrower, when added to the
aggregate amount of other Capital Expenditures made during such fiscal
year pursuant to subsection 7.7, shall not exceed the amount permitted
to be expended during such fiscal year pursuant to subsection 7.7;
(e) Indebtedness outstanding on the date hereof (after giving
effect to the Transactions occurring on the date hereof) and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof other than pursuant to the instrument creating Lien permitted
by subsection 7.3(f) without any modification thereof after the date
hereof);
(f) (i) indemnities and guarantees (including guarantees of
Indebtedness if such Indebtedness is otherwise permitted hereunder)
made in the ordinary course of business by the Borrower or any of its
Subsidiaries, provided that such indemnities and guarantees could not
individually or in the aggregate have a Material Adverse Effect and
(ii) guarantees by the Borrower or any of its Subsidiaries of (A) real
property leases and (B) personal property operating leases, in each
case entered into in the ordinary course of business by the Borrower or
any of its Subsidiaries;
(g) (i) Senior Subordinated Indebtedness of the Borrower in an
aggregate principal amount not to exceed $200,000,000, and (ii)
Guarantee Obligations of any Subsidiary
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Guarantor in respect of Indebtedness referred to in clause (i) of this
subsection 7.2(g), provided that a Subsidiary Guarantor shall not
guarantee any Senior Subordinated Indebtedness unless such guarantee
(A) is subordinated to the guarantee of such Subsidiary Guarantor of
the Obligations on terms no less favorable to the Lenders than the
subordination provisions of the Senior Subordinated Indebtedness and
(B) provides for the release and termination thereof, and is released
and terminated, without action by any party, upon (I) the sale of all
or substantially all of the assets of such Subsidiary Guarantor or (II)
a sale of all of the equity interest in such Subsidiary Guarantor;
(h) Indebtedness resulting from the endorsement of negotiable
instruments in the ordinary course of business;
(i) Indebtedness in respect of any Interest Rate Protection
Agreements;
(j) Indebtedness incurred pursuant to any Permitted
Acquisition permitted pursuant to subsection 7.8(l);
(k) Indebtedness of any Loan Party (other than the Borrower)
to any other Loan Party from intercompany transfers of assets made in
the ordinary course of business or to the extent permitted under
subsections 7.4, 7.5 and 7.8;
(l) Indebtedness subject to Liens permitted under subsections
7.3(a), (b), (c) and (d);
(m) indemnities made in (i) the Loan Documents, the
Transaction Documents or in any of the agreements contemplated hereby
and thereby, (ii) the monitoring and oversight agreement and financial
advisory agreement described in subsection 7.10(b)(ii) and (iii) and in
the charter and/or bylaws or other comparable constituent documents of
the Borrower and its Subsidiaries;
(n) additional Indebtedness of the Borrower or any of the
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $1,000,000 at any one time outstanding;
(o) Guarantee Obligations of the Borrower or any Subsidiary of
obligations of any Unrestricted Subsidiary to the extent permitted
under subsection 7.8(m); and
(p) contingent tax liabilities of the Borrower or any
Subsidiary in respect of tax liabilities of any Unrestricted Subsidiary
existing pursuant to a tax sharing agreement with the other owners of
such Unrestricted Subsidiary providing for an allocation of tax
liabilities and benefits customary in similar circumstances.
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect to contested taxes are
<PAGE> 70
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maintained on the books of the Borrower or one of its Subsidiaries, as
the case may be, in conformity with GAAP;
(b) carriers', landlord's, warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than 60
days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, insurance contracts, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, restrictions, covenants, minor
exceptions to title and other similar encumbrances (i) previously or
hereinafter incurred in the ordinary course of business which, in the
aggregate, are not material in amount and which do not in the aggregate
materially detract from the value of the Property subject thereto or,
in the case of such encumbrances on Property, materially interfere with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries or (ii) which are set forth in the title reports delivered
to the Administrative Agent pursuant to subsection 6.9(b);
(f) Liens in existence on the date hereof listed on Schedule
7.3(f), securing Indebtedness permitted by subsection 7.2(e) (including
refinancings, refundings, renewals and extensions of such Indebtedness
as permitted by subsection 7.2(e)), provided that no such Lien is
spread to cover any additional Property (other than after acquired
title in or on such Property and proceeds of the existing collateral in
accordance with the instrument creating such Lien) after the Closing
Date and that the amount of Indebtedness secured thereby is not
increased except pursuant to the instrument creating such Lien (without
any modification thereof after the date hereof);
(g) (i) Liens securing Indebtedness of the Borrower or any of
its Subsidiaries permitted pursuant to subsections 7.2(c) and 7.2(d)
(provided that (A) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or capital assets,
(B) such Liens do not at any time encumber any Property other than the
Property financed by such Indebtedness and (C) the amount of
Indebtedness secured thereby is not increased except pursuant to the
instrument creating such Lien (without any modification thereof after
the date hereof)) and (ii) Liens existing on any Property or asset at
the time of acquisition thereof by the Borrower or any Subsidiary or
existing on any Property or asset of any Person that becomes a
Subsidiary after the date hereof at the time such Person becomes a
Subsidiary (provided that (x) such Lien is not created in contemplation
of or in connection with such acquisition or such Person becoming a
Subsidiary, as the case may be, (y) such Lien shall not apply to any
other Property or assets of the Borrower or any of its Subsidiaries and
(z) such Lien shall secure only those obligations which it secures on
the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be);
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66
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered
into by the Borrower or any of its Subsidiaries in the ordinary course
of its business and covering only the assets so leased;
(j) any obligations or duties affecting any of the Property of
the Borrower or its Subsidiaries to any municipality or public
authority with respect to any franchise, grant, license or permit which
do not materially impair the use of such Property for the purposes for
which it is held;
(k) Liens imposed by operation of law with respect to any
judgments or orders not constituting an Event of Default;
(l) attachment or judgment Liens (other than judgment Liens
paid or fully covered by insurance which are not outstanding for more
than 60 days) in an aggregate amount outstanding at any one time not in
excess of $2,000,000;
(m) Liens arising from precautionary Uniform Commercial Code
financing statement filings with respect to operating leases or
consignment arrangements entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(n) Liens in favor of a banking institution arising by
operation of law encumbering deposits (including the right of set-off)
held by such banking institution incurred in the ordinary course of
business and which are within the general parameters customary in the
banking industry;
(o) licenses, leases or subleases permitted hereunder granted
to others not interfering in any material respect with the business of
the Borrower or any of its Subsidiaries, provided that the Borrower and
its Subsidiaries shall not at any time lease, sublease or otherwise
enter into any similar financing arrangement with respect to equipment
with customers of the Borrower and its Subsidiaries (it being
understood that the shared use by tower lessees of generators and
similar shared equipment shall not be considered to be such a financing
arrangement);
(p) Liens on property of the Borrower or any of its
Subsidiaries in favor of landlords securing licenses, subleases and
leases permitted hereunder and granted to others and not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries; and
(q) Liens not otherwise permitted by this subsection 7.3 so
long as the aggregate principal amount of the obligations secured
thereby does not exceed $1,000,000 at any one time outstanding.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or
<PAGE> 72
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convey, sell, lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or make any material
change in its present method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into any Wholly Owned Subsidiary Guarantor
(provided that the Wholly Owned Subsidiary Guarantor shall be the
continuing or surviving corporation);
(b) any Subsidiary of the Borrower may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to any Wholly Owned Subsidiary Guarantor; and
(c) the Borrower may consummate the Reincorporation.
7.5 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests, but
excluding assets of the Borrower constituting an Unrestricted Subsidiary),
whether now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary
course of business or property that is no longer useful in the conduct
of the business of the Borrower or any Subsidiary disposed of in the
ordinary course of business;
(b) transfers resulting from any casualty or condemnation of
property or assets;
(c) any sale or other transfer at fair market value of any
property or assets constituting fixed assets for at least 75% cash,
provided that the aggregate net cash proceeds of the sales and
transfers made pursuant to this paragraph (c) in the aggregate do not
exceed $1,000,000 in any fiscal year;
(d) intercompany sales or transfers of assets among the
Subsidiaries made in the ordinary course of business;
(e) the sale or discount of overdue accounts receivable
arising in the ordinary course of business, but only in connection with
the compromise or collection thereof;
(f) licenses or sublicenses of intellectual property and
general intangibles and licenses, leases or subleases of other property
in each case in the ordinary course of business and which do not
materially interfere with the business of the Borrower and its
Subsidiaries; and
(g) dispositions permitted by subsection 7.4.
7.6 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any shares
of any class of Capital Stock of the Borrower or any of its subsidiaries or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or
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make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower or any of its
Subsidiaries (such declarations, payments, setting apart, purchases,
redemptions, defeasance, retirements, acquisitions and distributions being
herein called "Restricted Payments"), except that:
(a) the Borrower may make Restricted Payments, so long as no
Event of Default has occurred and is continuing or would be continuing
after giving effect to such Restricted Payment if such Restricted
Payment is: (i) a purchase of Capital Stock of the Borrower made in
order to fulfill the obligations of the Borrower or any of its
Subsidiaries under an employee stock purchase plan or similar plan
covering employees of the Borrower or any of its Subsidiaries as from
time to time in effect or (ii) a repurchase of the Capital Stock or
other securities of the Borrower from outside directors, employees, or
members of management of the Borrower or any of its subsidiaries in an
aggregate amount for clauses (i) and (ii) above not to exceed
$2,000,000, net of the proceeds received by the Borrower as a result of
the resale or exercise of options with respect to such Capital Stock or
other securities;
(b) any subsidiary may make Restricted Payments to the
Borrower or any of its Subsidiaries; and
(c) Permitted Issuances may be made.
7.7 Limitation on Capital Expenditures. (a) Make or commit to
make any Capital Expenditure, except Capital Expenditures of the Subsidiaries in
the ordinary course of business not exceeding for any fiscal year $25,000,000,
provided that the Subsidiaries shall not make Capital Expenditures for the
development and construction of tower sites with respect to which written,
binding and enforceable leases are not in effect between the Borrower or any of
its Subsidiaries and at least one Anchor Tenant for such tower site in excess of
$15,000,000 in the aggregate; provided, further, that the amount of Capital
Expenditures permitted in any fiscal year shall be increased by 100% of unused
permitted Capital Expenditures for the immediately preceding fiscal year (less
an amount equal to any unused Capital Expenditures carried forward to such
preceding year).
(b) In addition to the Capital Expenditures permitted pursuant
to paragraph (a) of this subsection 7.7, to the extent such proceeds are not
otherwise utilized pursuant to subsection 7.8(o), the Subsidiaries may make
additional Capital Expenditures (which shall not be counted in the limitations
set forth in paragraph (a) of this subsection 7.7) consisting of (i) the
investment of Net Cash Proceeds not required to be applied pursuant to
subsection 2.9, including (A) with respect to the investment or proceeds of the
insurance and condemnation proceeds not required to be applied pursuant to
subsection 2.9 and (B) with respect to the investment of the proceeds of the
sale of assets which are permitted pursuant to subsection 7.5 and (ii) the
investment of Excess Cash Flow generated during prior fiscal years (beginning
with Excess Cash Flow generated in the fiscal year ended June 30, 2000 but, in
each case, including the retained portion of Excess Cash Flow for only those
periods where the respective Excess Cash Flow payment has theretofore occurred)
and not required to be applied pursuant to subsection 2.9(c).
(c) Notwithstanding the foregoing, in no event shall Capital
Expenditures be made by the Borrower.
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7.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of, or make any other
investment in, any Person ("Investments"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) Investments in connection with the Arch Acquisition;
(d) Investments by the Borrower in any of the Loan Parties,
including any new Subsidiary which becomes a Loan Party;
(e) loans and advances by the Borrower or any of its
Subsidiaries to their respective directors, officers and employees in
an aggregate principal amount not exceeding $1,500,000 at any one time
outstanding;
(f) loans, advances or Investments in existence on the Closing
Date and listed on Schedule 7.8(f), and extensions, renewals,
modifications or restatements or replacements thereof, provided that no
such extension, renewal, modification or restatement shall (i) increase
the amount of the original loan, advance or Investment or (ii)
adversely affect the interests of the Lenders with respect to such
original loan, advance or Investment or the interests of the Lenders
under this Agreement or any other Loan Document in any material
respect;
(g) Investments permitted by subsections 7.2(b), (d), (f),
(g)(ii), (k) and (l), subsections 7.4 and 7.6 and Capital Expenditures
permitted by subsection 7.7;
(h) promissory notes and other similar non-cash consideration
received in connection with the dispositions permitted by subsection
7.5;
(i) Investments in Interest Rate Protection Agreements in the
ordinary course of the business of the Borrower or any of its
Subsidiaries and not for purposes of speculation;
(j) Investments (including debt obligations and Capital Stock)
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the
ordinary course of business;
(k) deposits made in the ordinary course of business in
connection with the purchase price of goods or services;
(l) Investments after the Closing Date by the Borrower or any
of its Subsidiaries constituting (i) the Subsequent Arch Acquisitions
and (ii) other Permitted Acquisitions in an amount (including any
amount of Indebtedness assumed in connection therewith) not to exceed
$15,000,000 in the aggregate;
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(m) Investments of the Borrower or any Subsidiary in any
Unrestricted Subsidiary, provided that at no time shall the sum of (i)
the aggregate amount of all Guarantee Obligations of the Borrower and
its Subsidiaries in respect of any obligations of Unrestricted
Subsidiaries at such time, (ii) the aggregate amount of all
Indebtedness of Unrestricted Subsidiaries to the Borrower and its
Subsidiaries at such time and (iii) the aggregate cash equity
investments made by the Borrower and its Subsidiaries in the Capital
Stock of Unrestricted Subsidiaries at such time, exceed $500,000 in the
aggregate;
(n) in addition to the foregoing, Investments by the Borrower
and its Subsidiaries in an aggregate amount not to exceed $3,000,000
(valued at cost, without regard to any write down or write up thereof)
at any one time outstanding; and
(o) in addition to the foregoing, to the extent such proceeds
are not otherwise utilized pursuant to subsection 7.7(b), the Borrower
and its Subsidiaries may make additional Investments (which shall not
be counted in the limitations set forth above) as follows: (i)
Investments consisting of the Investment of Net Cash Proceeds not
required to be applied pursuant to subsection 2.9, including (A) with
respect to the Investment of proceeds of the insurance and condemnation
proceeds not required to be applied pursuant to subsection 2.9 and (B)
with respect to the Investment of proceeds of the sale of assets which
are permitted pursuant to subsection 7.5; and (ii) Investments
consisting of the Investment of Excess Cash Flow generated during prior
fiscal years (beginning with Excess Cash Flow generated in the fiscal
year ended June 30, 2000 but, in each case, including the retained
portion of the respective Excess Cash Flow for only those periods where
the respective Excess Cash Flow payment has theretofore occurred) and
not required to be applied pursuant to subsection 2.9(c).
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make any optional payment or prepayment on or redemption
of or any payments in redemption, defeasance or repurchase of any Senior
Subordinated Indebtedness (except pursuant to a permanent refinancing of Senior
Subordinated Indebtedness pursuant to terms no less favorable to the Lenders
than the Senior Subordinated Indebtedness) except mandatory payments of
interest, fees and expenses required by the terms of the agreement governing or
instrument evidencing such Indebtedness but only to the extent permitted under
the subordination provisions applicable thereto;
(b) amend, supplement, waive or otherwise modify any of the
provisions of any Senior Subordinated Indebtedness:
(i) which amends or modifies the subordination provisions
contained therein;
(ii) which shortens the fixed maturity, or increases the rate
or shortens the time of payment of interest on, or increases the amount
or shortens the time of payment of any principal or premium payable
whether at maturity, at a date fixed for prepayment or by acceleration
or otherwise of such Indebtedness, or increases the amount of, or
accelerates the time of payment of, any fees payable in connection
therewith;
(iii) which relates to the affirmative or negative covenants,
events of default or remedies under the documents or instruments
evidencing such Indebtedness and the effect of
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which is to subject the Borrower or any of its Subsidiaries to any more
onerous or more restrictive provisions; or
(iv) which otherwise adversely affects the interests of the
Lenders as senior creditors or the interests of the Lenders under this
Agreement or any other Loan Document in any respect;
(c) make any payment in cash on any equity or debt security
that may be made under the terms thereof by the issuance of any security of the
same nature;
(d) designate any Indebtedness (other than the Loans) as
"Designated Senior Indebtedness" under any Senior Subordinated Indebtedness.
7.10 Limitation on Transactions with Affiliates. (a) Enter
into any transaction, including, without limitation, any purchase, sale, lease
or exchange of Property or the rendering of any service, with any Affiliate
(including any transaction with any Unrestricted Subsidiary) unless such
transaction is (i) otherwise permitted under this Agreement, (ii) in the
ordinary course of business of the Borrower or the relevant Subsidiary, as the
case may be, and (iii) upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate.
(b) In addition, notwithstanding the foregoing, the Borrower
and its Subsidiaries shall be entitled to make the following payments and/or to
enter into the following transactions:
(i) the payment of reasonable and customary fees and
reimbursement of expenses payable to directors of the Borrower;
(ii) the payment to Hicks Muse or an Affiliate of Hicks Muse
of fees and expenses pursuant to a monitoring and oversight agreement
and a financial advisory agreement approved by the board of directors
of the Borrower;
(iii) the payment to Mr. Jerry Kline of fees and expenses
pursuant to a consulting agreement approved by the Board of Directors
of the Borrower;
(iv) the employment arrangements with respect to the
procurement of services of directors, officers and employees in the
ordinary course of business and the payment of reasonable fees in
connection therewith; and
(v) any transaction specifically permitted under this
Agreement (other than with respect to any Unrestricted Subsidiary).
7.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal, immovable or movable, Property which has been or
is to be sold or transferred by the Borrower or such Subsidiary to such Person
or to any other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of the Borrower or
such Subsidiary, provided that this subsection 7.11 shall not prohibit any sale
and leaseback by any Subsidiary resulting from
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the incurrence of any lease in respect of any capital asset entered into within
120 days of the acquisition of such capital asset by such Subsidiary for the
purpose of providing permanent financing of such capital asset.
7.12 Limitation on Changes in Fiscal Periods. Permit the
fiscal year of the Borrower to end on a day other than June 30, provided that
the Borrower may change such fiscal year upon the approval of the Administrative
Agent or change the Borrower's method of determining fiscal quarters upon
approval of the Administrative Agent.
7.13 Limitation on Negative Pledge Clauses. Enter into with
any Person, or suffer to exist, any agreement, other than (a) this Agreement and
the other Loan Documents, (b) any agreement evidencing Senior Subordinated
Indebtedness or Indebtedness permitted under subsection 7.2(j) and (c) in the
case of clause (i) below only, any agreements governing any purchase money
Liens, Capital Lease Obligations, Liens permitted under subsection 7.3(j) or any
other similar agreement or transaction otherwise permitted hereby (in which
case, any prohibition or limitation shall only be effective against the assets
financed thereby), which prohibits or limits the ability of the Borrower or any
of its Subsidiaries to (i) create, incur, assume or suffer to exist any Lien
upon any of its Property or revenues, whether now owned or hereafter acquired,
or (ii) pay dividends or make other distributions, or pay any Indebtedness owed,
to the Borrower or any of its Subsidiaries.
7.14 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrower and its Subsidiaries are engaged on the date of this Agreement or
which are reasonably related thereto.
7.15 Limitation on Amendments to Constituent Documents. Amend,
supplement or otherwise modify its certificate of incorporation, by-laws or
other organizational documents unless such amendment, supplement or other
modification does not adversely affect the interests of any Lender in any
material respect (it being understood that any such modifications undertaken in
order to cause the Borrower to be reincorporated as a Delaware corporation shall
not adversely affect the interests of any Lender in any material respect).
7.16 Limitations on Changes in Holding Company Status.
Notwithstanding anything to the contrary contained in this Agreement, permit the
Borrower to engage in any activities, own any assets or incur any Indebtedness
or Guarantee Obligations other than (i) owning the stock of its Subsidiaries and
the Unrestricted Subsidiaries, (ii) its activities incident to the performance
of its obligations under this Agreement and the other Loan Documents, (iii)
making Permitted Issuances, (iv) its activities incident to the performance of
its obligations under any Senior Subordinated Indebtedness (including Guarantee
Obligations thereof) in accordance with the terms of this Agreement, (v) its
activities incidental to its status as a public company, (vi) Guarantee
Obligations specifically permitted under subsection 7.2, (vii) Indebtedness
permitted under subsections 7.2(j) and 7.2(n) (to the extent incurred in
connection with a Permitted Acquisition) and (viii) activities in connection
with the Reincorporation.
7.17 Limitation on Changes to Tower Group. Modify the
allocation between the Tower Group, on the one hand, and the Borrower and the
other Subsidiaries, on the other hand, of the respective lines of business
engaged in by such Persons and the assets and liabilities owned, possessed or
incurred, as applicable, as of the Closing Date after giving effect to the
Transactions to
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occur on or before the Closing Date, in any manner that would materially alter
the effect of the provisions of subsection 7.1 after giving effect to such
modification, without the consent of the Administrative Agent (which consent may
be withheld pending the execution of an amendment to this Agreement made in
accordance with subsection 10.1 with respect to the provisions of subsection 7.1
so that the provisions of subsection 7.1 are reasonably satisfactory to the
Required Lenders after giving effect to such modification), provided that this
subsection 7.17 shall not prohibit the members of the Tower Group, on the one
hand, and the other Subsidiaries, on the other hand, from acquiring assets or
equity interests in other Persons pursuant to transactions permitted by the
terms of this Agreement so long as such assets or the business of such other
Person are in substantially the same or a complimentary line of business as the
business of such members of the Tower Group or such other Subsidiaries, as the
case may be, as conducted prior to the consummation of any such acquisition (it
being understood that the principal business engaged in by the members of the
Tower Group as of the Closing Date is the leasing of space on telecommunications
and broadcast towers).
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or Reimbursement Obligation when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or
under any other Loan Document, within five days after any such interest
or other amount becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained
in any certificate, document or financial or other statement furnished
by it at any time under or in connection with this Agreement or any
such other Loan Document shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made; or
(c)(i) The Borrower or any of its Subsidiaries shall default
in the observance or performance of any agreement contained in
subsection 6.4(a)(ii), subsection 6.7(a), subsection 6.10 or Section 7
of this Agreement; or
(d) The Borrower or any of its Subsidiaries shall default in
the observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this subsection), and such default shall
continue unremedied for a period of 30 days after notice thereof from
the Administrative Agent to the Borrower (which notice will be given at
the request of any Lender); or
(e) The Borrower or any of its Subsidiaries shall (i) default
in making any payment of any principal of or interest on any
Indebtedness (other than pursuant to the Loan Documents) beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (ii) default in the observance
or performance
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of any other agreement or condition relating to any such Indebtedness
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become due prior to
its stated maturity or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable, provided that a
default, event or condition described in clause (i) or (ii) of this
paragraph (e) shall not at any time constitute an Event of Default
under this Agreement unless, at such time, one or more defaults, events
or conditions (without duplication as to the same item of Indebtedness)
of the type described in clauses (i) and (ii) of this paragraph (e)
shall have occurred and be continuing with respect to Indebtedness the
outstanding amount of which exceeds in the aggregate $2,000,000; or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, winding-up,
liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or the Borrower or any of its
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any
of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof, or (iv) the Borrower or any of its Subsidiaries shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts (other than intercompany
debt) as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed (or a trustee
shall be appointed) to administer, or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall,
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or in the reasonable opinion of the Required Lenders is likely to,
incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist under ERISA or the Code with
respect to a Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events or
conditions, if any, could reasonably be expected to have a Material
Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $2,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or
(i) Any Loan Document shall, at any time, cease to be in full
force and effect (unless released by the Administrative Agent at the
direction of the Required Lenders or all Lenders (to the extent
required by subsection 10.1) or as otherwise permitted under this
Agreement or the other Loan Documents) or shall be declared null and
void (and, if such invalidity is such so as to be amenable to cure
without materially disadvantaging the position of the Administrative
Agent and the Lenders thereunder, the relevant Loan Party shall have
failed to cure such invalidity within 30 days after notice from the
Administrative Agent or such shorter time period as is specified by the
Administrative Agent in such notice and is reasonable in the
circumstances), or the validity or enforceability thereof shall be
contested by any Loan Party, or any of the Liens intended to be created
by any Security Document shall cease to be or shall not be a valid and
perfected Lien having the priority contemplated thereby (and, if such
invalidity is such so as to be amenable to cure without materially
disadvantaging the position of the Administrative Agent and the Lenders
as secured parties thereunder, the relevant Loan Party shall have
failed to cure such invalidity within 30 days after notice from the
Administrative Agent or such shorter time period as specified by the
Administrative Agent in such notice and is reasonable in the
circumstances); or
(j) A Change of Control shall occur; or
(k) The Borrower or any of its subsidiaries shall incur any
liability (not paid or fully covered by insurance) under any
Environmental Law in an amount which would result in a Material Adverse
Effect;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or any of the following actions may be taken:
(i) with the consent of the Majority Revolving Credit Facility Lenders, the
Administrative Agent may, or upon the request of the Majority Revolving Credit
Facility Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Revolving Credit Commitments to be terminated forthwith, whereupon
the Revolving Credit Commitments shall immediately terminate; and (ii) with the
consent
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of the Required Lenders, the Administrative Agent may, or upon the request of
the Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) to be due and payable forthwith, whereupon the
same shall immediately become due and payable. With respect to all Letters of
Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower (or such other Person as may be lawfully entitled thereto).
Except as otherwise expressly provided above in this Section 8, the Borrower
waives presentment, demand, protest or other notice of any kind.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto
to the extent permitted by applicable law. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's
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77
own gross negligence or willful misconduct) or (b) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by any Loan Party or any officer thereof contained in this Agreement or any
other Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party a
party thereto to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement and the other Loan Documents in accordance with a request
of the Required Lenders (or, if so specified by this Agreement, all Lenders),
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders), provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
9.6 Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations or warranties to
it and that no act by the Administrative Agent hereafter taken, including any
review of
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the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Loan Parties and their affiliates. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Loan Party or any
affiliate of a Loan Party which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their pro rata share of the aggregate Revolving Credit
Exposure, Term Loans outstanding and unused Commitments in effect on the date on
which indemnification is sought under this subsection 9.7 (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such share immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing, provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements which are found by a final
and nonappealable decision of a court of competent jurisdiction to have resulted
from the Administrative Agent's gross negligence or willful misconduct. The
agreements in this subsection 9.7 shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. The Administrative Agent
and its affiliates may make loans to, accept deposits from and generally engage
in any kind of business with any Loan Party as though the Administrative Agent
were not an Agent. With respect to its Loans made or renewed by it and with
respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not an Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
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9.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection 10.1. The
Required Lenders and each Loan Party to the relevant Loan Documents may, or,
with the written consent of the Required Lenders, the Administrative Agent and
each Loan Party to the relevant Loan Document may, from time to time, (a) enter
into written amendments, supplements or modifications hereto and to the other
Loan Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) forgive the principal amount or extend the
final scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of the Term Loans, reduce the stated rate of any
interest, fee or letter of credit commission payable hereunder or extend the
scheduled date of any payment thereof, or increase the amount or extend the
expiration date of any Lender's Revolving Credit Commitment, in each case
without the consent of each Lender directly affected thereby; (ii) amend, modify
or waive any provision of this subsection 10.1 or reduce any percentage
specified in the definition of Required Lenders, consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, release all or substantially all of the
collateral or release all or substantially all of the Subsidiary Guarantors from
their obligations under the Guarantee and Collateral Agreement other than
pursuant to a transaction permitted by this Agreement, in each case without the
written consent of all Lenders; (iii) change the allocation of payments between
the Facilities pursuant to subsection 2.9(d), in each case without the consent
of the Majority Facility Lenders in respect of each Facility adversely affected
thereby; (iv) amend the definition of the term "Majority Facility Lenders" or
"Majority Revolving Credit Facility Lenders" or modify in any other manner the
number, percentages or class of Lenders required to make any determinations or
waive any rights hereunder without the consent of each Lender directly affected
thereby; (v) amend, modify or waive any provision of Section 9 without the
written consent of the Administrative Agent; (vi) amend, modify or waive any
provision of Section 3 without the written
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consent of the Issuing Lender or (vii) amend, modify or waive any provision of
subsection 2.4(c) without the written consent of the Swingline Lender. Any
waiver and any amendment, supplement or modification in accordance with this
subsection 10.1 shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth on the signature pages hereto or in any
Assignment and Acceptance in the case of the Lenders, or to such other address
as may be hereafter notified by the respective parties hereto:
The Borrower: Specialty Teleconstructors, Inc.
2 Summit Park Dr.
Independence, OH 44131
Attention: F. Howard Mandel, Esq.
Telecopy: (216) 447-4450
with a copy to: Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention to: Lawrence D. Stuart, Jr.
Telecopy: 214-740-7313
The Administrative Agent: Chase Agency Services
One Chase Manhattan Plaza
New York, New York 10081
Attention: Ms. Gloria Javier
Telecopy: 212-552-5700
with a copy to: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ms. Tracy Navin Ewing
Telecopy: 212-270-4164
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or
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privilege hereunder or under the other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Administrative Agent for all its reasonable
costs and expenses incurred in connection with the enforcement or preservation
of any rights under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent and, at any time after and during the
continuance of an Event of Default, of one counsel to all the Lenders, (c) to
pay, indemnify, and hold harmless each Lender and the Administrative Agent from
and against any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or administration
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the other Loan Documents and any such other documents, and (d) to
pay, indemnify and hold harmless each Lender and the Administrative Agent and
their respective officers, directors, trustees, professional advisors,
employees, affiliates, agents and controlling persons (each, an "indemnitee")
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
provided that the Borrower shall have no obligation hereunder to any indemnitee
with respect to indemnified liabilities to the extent such indemnified
liabilities are (i) found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such indemnitee or, in the case of indemnified liabilities arising
under this Agreement, any Notes and the other documents, from material breach by
the indemnitee of this Agreement, any Notes or the other Loan Documents, or (ii)
a result of a dispute solely between or among the Lenders (other than the
Administrative Agent) as the case may be. The agreements in this subsection 10.5
shall survive repayment of the Loans and all other amounts payable hereunder.
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10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the Loans
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
(b) Any Lender may in the ordinary course of its business and
in accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
permit any Participant to have (and no participant shall have) the right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Loans or any fees payable hereunder, or postpone the date of the final
maturity of the Loans, in each case to the extent subject to such participation.
The Borrower agrees that if amounts outstanding under this Agreement and the
Loans are due or unpaid, or shall have been declared or shall have become due
and payable upon the occurrence of an Event of Default, each Participant shall,
to the maximum extent permitted by applicable law, be deemed to have the right
of setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement, provided that in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in subsection
10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that
each Participant shall be entitled to the benefits of subsections 2.16, 2.17 and
2.18 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it were a Lender, provided that in the case
of subsection 2.17, such Participant shall have complied with the requirements
of said subsection and provided further that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender (an "Assignor") may, in the ordinary course of
its business and in accordance with applicable law, at any time and from time to
time assign to any Lender, affiliate or Approved Fund thereof or, with the
consent of the Borrower and the Administrative Agent (which, in each case, shall
not be unreasonably withheld or delayed), to an additional bank, financial
institution or other entity (an "Assignee") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit D, executed by such Assignee and such
Assignor (and, in the case of an Assignee that is not then a Lender, an
affiliate or an Approved Fund thereof, by the Borrower and the Administrative
Agent) and delivered to the Administrative Agent for its acceptance and
recording in the Register, provided, that no such assignment to an Assignee
(other than any Lender or any affiliate thereof or an Approved Fund) shall
<PAGE> 88
83
be in an aggregate principal amount of less than $5,000,000 (other than in the
case of an assignment of all of a Lender's interests under this Agreement),
unless otherwise agreed by the Borrower and the Administrative Agent. Any such
assignment need not be ratable as between the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (A) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (B) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto). Notwithstanding any provision of this
subsection 10.6, the consent of the Borrower shall not be required, and, unless
requested by the Assignee and/or the Assignor, Notes shall not be required to be
executed and delivered by the Borrower, for any assignment which occurs at any
time when any of the events described in Section 8(f) shall have occurred and be
continuing.
(d) The Administrative Agent shall maintain at its address
referred to in subsection 10.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitments of, and the principal amount of
the Loans owing to, each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, each
other Loan Party, the Administrative Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loan recorded
therein for all purposes of this Agreement. Any assignment of any Loan or other
obligation hereunder (whether or not evidenced by a Note) shall be effective
only upon appropriate entries with respect thereto being made in the Register.
The Register shall be available for inspection by the Borrower of any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assignor and an Assignee (and, in the case of an Assignee that is not then
a Lender, an affiliate thereof or an Approved Fund, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,500, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) record the information
contained therein in the Register on the effective date determined pursuant
thereto and give notice of such acceptance and recordation to the Borrower.
On or prior to such effective date, upon request the Borrower,
at its own expense, shall execute and deliver to the Administrative Agent (in
exchange for any Revolving Credit Note, Term Note or Swingline Note of the
assigning Lender) a new Revolving Credit Note, Term Note or Swingline Note, as
the case may be, to the order of such Assignee in an amount equal to the
Revolving Credit Commitment or portion of the Term Loans assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Revolving Credit Commitment or portion of a Term Loan hereunder, a new Revolving
Credit Note or Term Note, as the case may be, to the order of the assigning
Lender in an amount equal to the Revolving Credit Commitment or Term Loan, as
the case may be, retained by it hereunder. Such new Notes shall be in the form
of the Note replaced thereby.
<PAGE> 89
84
(f) The Borrower agrees that, upon request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender (i) a promissory note of the Borrower evidencing the Revolving
Credit Loans of such Lender, substantially in the form of Exhibit F-1 (each as
amended, supplemented, replaced or otherwise modified from time to time, a
"Revolving Credit Note"), and/or (ii) a promissory note of the Borrower
evidencing the Term Loans of such Lender, substantially in the form of Exhibit
F-2 (each as amended, supplemented, replaced or otherwise modified from time to
time, a "Term Note"), and/or (iii) a promissory note of the Borrower evidencing
the Swingline Loans of the Swingline Lender, substantially in the form of
Exhibit F-3) (as amended, supplemented, replaced or otherwise modified from time
to time, the "Swingline Note").
(g) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
any and all financial information concerning the Loan Parties and their
respective affiliates which has been delivered to such Lender by or on behalf of
any Loan Party pursuant to this Agreement or any other Loan Document or which
has been delivered to such Lender by or on behalf any Loan Party in connection
with such Lender's credit evaluation of the Loan Parties and their respective
affiliates, under the condition that such Transferee or prospective Transferee
shall previously have agreed to be bound by the provisions of subsection 10.15.
(h) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection 10.6 concerning assignments
of Loans and Notes relate only to absolute assignments and that such provisions
do not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law, provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
lender as a party hereunder.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loans and/or of the Reimbursement
Obligations owing to each such other Lender, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise)
<PAGE> 90
85
to set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender, provided that the failure to give such notice shall not affect
the validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof or thereof not expressly
set forth or referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of
<PAGE> 91
86
mail), postage prepaid, to the Borrower at its address set forth in
subsection 10.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection 10.12 any special, exemplary, punitive
or consequential damages.
10.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. Each Lender agrees to keep information
obtained by it pursuant hereto and the other Loan Documents identified as
confidential in writing at the time of delivery confidential in accordance with
such Lender's customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (a) to such Lender's
employees, representatives, directors, attorneys, auditors, agents, professional
advisors, trustees or affiliates who are advised of the confidential nature of
such information, (b) to the extent such information presently is or hereafter
becomes available to such Lender on a non-confidential basis from any source or
such information that is in the public domain at the time of disclosure, (c) to
the extent disclosure is required by law (including applicable securities laws),
regulation, subpoena or judicial order or process (provided that notice of such
requirement or order shall be promptly furnished to the Borrower unless such
notice is legally prohibited) or requested or required by bank, securities,
insurance or investment company regulations or auditors or any administrative
body or commission to whose jurisdiction such Lender may be subject, (d) to any
rating agency to the extent required in connection with any rating to be
assigned to such Lender, (e) to Transferees or prospective Transferees who agree
to be bound by the provisions of this subsection 10.15, (f) to the extent
<PAGE> 92
87
required in connection with any litigation between any Loan Party and any Lender
with respect to the Loans or this Agreement and the other Loan Documents or (g)
with the Borrower's prior written consent. The agreements in this subsection
10.15 shall survive repayment of the Loans and all other amounts payable
hereunder.
<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
SPECIALTY TELECONSTRUCTORS, INC.,
by
/s/ HOWARD MANDEL
--------------------------------------------
Name: Howard Mandel
Title: V.P., Assistant Secretary & General
Counsel
THE CHASE MANHATTAN BANK, as
Administrative Agent,
by
/s/ TRACY NEVIN EWING
--------------------------------------------
Name: Tracy Nevin Ewing
Title: Vice President
BANKERS TRUST COMPANY, as
Documentation Agent,
by
/s/ VICTORIA PAGE
--------------------------------------------
Name: Victoria Page
Title: Authorized Signatory
BANKBOSTON, N.A., as
Syndication Agent,
by
/s/ LENNY MASON
--------------------------------------------
Name: Lenny Mason
Title: Vice President
<PAGE> 94
SCHEDULE 1.1A
<TABLE>
<CAPTION>
REVOLVING CREDIT COMMITMENTS
----------------------------
Lender Revolving Credit Commitment
- ------ ---------------------------
<S> <C>
The Chase Manhattan Bank $12,000,000
Bankers Trust Company $12,000,000
BankBoston, N.A. $6,000,000
TERM LOAN COMMITMENTS
---------------------
Lender Term Loan Commitment
- ------ --------------------
The Chase Manhattan Bank $18,000,000
Bankers Trust Company $18,000,000
BankBoston, N.A. $9,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.8
EXECUTION COPY
- --------------------------------------------------------------------------------
GUARANTEE AND COLLATERAL AGREEMENT
MADE BY
SPECIALTY TELECONSTRUCTORS, INC.
AND
CERTAIN OF ITS SUBSIDIARIES,
IN FAVOR OF
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
DATED AS OF JUNE 30, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1. DEFINED TERMS
1.1 Definitions...............................................................................1
1.2 Other Definitional Provisions.............................................................5
SECTION 2. GUARANTEE
2.1 Guarantee................................................................................6
2.2 Right of Contribution....................................................................6
2.3 No Subrogation...........................................................................7
2.4 Amendments, etc. with respect to the Borrower Obligations................................7
2.5 Guarantee Absolute and Unconditional.....................................................7
2.6 Reinstatement............................................................................8
2.7 Payments.................................................................................8
SECTION 3. GRANT OF SECURITY INTEREST
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations in Credit Agreement......................................................9
4.2 Title. No Other Liens...................................................................10
4.3 Perfected First Priority Liens..........................................................10
4.4 Chief Executive Office..................................................................10
4.5 Inventory and Equipment.................................................................10
4.6 Farm Products...........................................................................10
4.7 Pledged Securities......................................................................10
4.8 Receivables.............................................................................11
4.9 Intellectual Property...................................................................11
SECTION 5. COVENANTS
5.1 Covenants in Credit Agreement...........................................................11
5.2 Delivery of Instruments and Chattel Paper...............................................11
5.3 Insurance...............................................................................11
5.4 Maintenance of Perfected Security Interest; Further Documentation.......................11
5.5 Changes in Locations, Name, etc.........................................................12
5.6 Pledged Securities......................................................................12
5.7 Receivables.............................................................................13
5.8 Intellectual Property...................................................................13
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Related to Receivables..................................................14
6.2 Communications with Obligors, Grantors Remain Liable....................................15
6.3 Pledged Securities......................................................................15
6.4 Proceeds to be Turned Over To Administrative Agent......................................16
6.5 Application of Proceeds.................................................................16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
6.6 Code and Other Remedies.................................................................16
6.7 Registration Rights.....................................................................17
6.8 Waiver; Deficiency......................................................................18
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.............................18
7.2 Duty of Administrative Agent............................................................19
7.3 Execution of Financing Statements.......................................................20
7.4 Authority of Administrative Agent.......................................................20
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing...................................................................20
8.2 Notices.................................................................................20
8.3 No Waiver by Course of Conduct; Cumulative Remedies.....................................20
8.4 Enforcement Expenses, Indemnification...................................................21
8.5 Successors and Assigns..................................................................21
8.6 Set-Off.................................................................................21
8.7 Counterparts............................................................................21
8.8 Severability............................................................................22
8.9 Integration.............................................................................22
8.10 GOVERNING LAW...........................................................................22
8.11 Submission To Jurisdiction; Waivers.....................................................22
8.12 Acknowledgments.........................................................................23
8.13 WAIVERS OF JURY TRIAL...................................................................23
8.14 Section Headings........................................................................23
8.15 Additional Grantors.....................................................................23
8.16 Releases................................................................................23
8.17 Conflicts...............................................................................24
</TABLE>
<PAGE> 4
GUARANTEE AND COLLATERAL AGREEMENT, dated as of June 30, 1998,
made by each of the signatories hereto listed on Schedule 7 attached hereto
(together with any other entity that may become a party hereto as provided
herein, the "Grantors"), in favor of THE CHASE MANHATTAN BANK, as Administrative
Agent (in such capacity, the "Administrative Agent") for the banks and other
financial institutions or entities (the "Lenders") from time to time parties to
the Credit Agreement, dated as of June 30, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among SPECIALTY
TELECONSTRUCTORS, INC., a Nevada corporation (the "Borrower"), the Lenders,
Bankers Trust Company, as Documentation Agent, BankBoston, N.A., as Syndication
Agent, and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrower thereunder, each Grantor hereby agrees with the Administrative Agent
for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Uniform Commercial Code in effect in the State of New York on the date hereof
are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment,
Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on (including, without limitation, interest accruing
after the maturity of the Loans and Reimbursement Obligations and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower,
whether or not a claim for post-filing
<PAGE> 5
2
or post-petition interest is allowed in such proceeding) the Loans, the
Reimbursement Obligations and all other obligations and liabilities of the
Borrower to the Administrative Agent, the Swingline Lender, the Issuing Lender
or to any Lender (or, in the case of Interest Rate Protection Agreements, any
affiliate of any Lender), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit Agreement, any Notes, any other
Loan Documents, the Letters of Credit, any Interest Rate Protection Agreement
entered into with any Lender (or any affiliate of any Lender) or any other
document made, delivered or given in connection therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees, charges and disbursements of
counsel to the Administrative Agent, to the Swingline Lender, to the Issuing
Lender or to any Lender that are required to be paid by the Borrower pursuant to
the Credit Agreement) or otherwise.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by
the Administrative Agent as provided in Section 6.1 or 6.4.
"Commodity Account": an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract": a commodity futures contract, an option
on a commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a contract pursuant to the
federal commodities laws or (b) traded on a foreign commodity board of trade,
exchange or market, and is carried on the books of a Commodity Intermediary for
a Commodity Customer.
"Commodity Customer": a person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary": (a) a person who is registered as a
futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Communications Act": the Communications Act of 1934, as
amended.
"Copyrights": (i) all copyrights, in the United States or any
other country, whether registered or unregistered, or published or unpublished
(including, without limitation, those listed in Schedule 6 ), all registrations
and recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor
as licensor or licensee (including, without limitation, those listed in Schedule
6), granting any right under any Copyright, including, without limitation, the
grant of rights to manufacture, distribute, exploit and sell materials derived
from any Copyright.
<PAGE> 6
3
"Entitlement Holder": a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"Financial Asset": (a) a Security, (b) an obligation of a
person or a share, participation or other interest in a person or in property or
an enterprise of a person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"Fixtures": all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements, limited
partnership interests, limited liability company interests, instruments and
indentures in any form, and portions thereof, to which such Grantor is a party
or under which such Grantor has any right, title or interest or to which such
Grantor or any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (ii) all rights of such Grantor
to damages arising thereunder and (iii) all rights of such Grantor to perform
and to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
thereto (it being understood that the foregoing shall not be deemed to obligate
such Grantor to obtain such consents), provided that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such Grantor of a
security interest pursuant to this Agreement in any Receivable or any money or
other amounts due or to become due under any such contract, agreement,
instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all obligations
and liabilities of such Guarantor which may arise under or in connection with
this Agreement, or any other Loan Document to which such Guarantor is a party,
in each case whether on account of guarantee obligations, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or
to the Secured Parties that are required to be paid by such Guarantor pursuant
to the terms of this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Grantor other
than the Borrower.
<PAGE> 7
4
"Intellectual Property": the collective reference to the
Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the
Trademarks and the Trademark Licenses.
"Investment Property": all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"Issuers": the collective reference to each issuer of a
Pledged Security.
"License": any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule 6 (other than those license agreements in
existence on the date hereof and listed on Schedule 6 and those license
agreements entered into after the date hereof, which by their terms prohibit
assignment or a grant of a security interest by such Grantor as licensee
thereunder).
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
"Patents": (i) all letters patent of the United States or any
other country and all reissues and extensions thereof, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof, including,
without limitation, any of the foregoing referred to in Schedule 6, and (iii)
all rights to obtain any reissues or extensions of the foregoing.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, use or
sell any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.
"Pledged Debt Securities": (i) the debt securities listed
opposite the name of the Pledgor on Schedule 2 hereto, (ii) any debt securities
in the future issued to the Pledgor and (iii) the promissory notes and any other
instruments evidencing such debt securities.
"Pledged Securities": the collective reference to the Pledged
Debt Securities and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, stock certificates, options or
rights of any nature whatsoever in respect of the Capital Stock of any Person
that may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(l) of the Uniform Commercial Code in effect in the State of New York on
the date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
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"Secured Parties": (a) the Lenders, (b) the Administrative
Agent, (c) the Issuing Lender, (d) each counterparty to an Interest Rate
Protection Agreement entered into with the Borrower if such counterparty was a
Lender (or any Affiliate of a Lender) at the time the Interest Rate Protection
Agreement was entered into, (e) the beneficiaries of each indemnification
obligation undertaken by any Grantor under any Loan Document and (f) the
successors and assigns of each of the foregoing.
"Securities": any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"Securities Account": an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Securities Act": the Securities Act of 1933, as amended.
"Security Entitlements": the rights and property interests of
an Entitlement Holder with respect to a Financial Asset.
"Security Intermediary": (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in Schedule 6.
"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, including, without limitation, any of the foregoing
referred to in Schedule 6, and (ii) the right to obtain all renewals thereof.
"Undelivered Instruments": as defined in Section 4.8.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
<PAGE> 9
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(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, endorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating to
the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any Secured
Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations of
each Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower
Obligations.
(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any
payment received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until, subject to Section 2.6, the
Borrower Obligations are paid in full, no Letter of Credit shall be outstanding
and the Commitments are terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Secured
Parties, and each Guarantor shall remain liable to the Administrative Agent and
the Secured Parties for the full amount guaranteed by such Guarantor hereunder.
<PAGE> 10
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2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Secured Party, no Guarantor shall be entitled to
be subrogated to any of the rights of the Administrative Agent or any Secured
Party against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Secured
Party for the payment of the Borrower Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from the Borrower or
any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Administrative Agent and the Secured Parties by
the Borrower on account of the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Borrower Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Administrative Agent and
the Secured Parties, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Administrative
Agent in the exact form received by such Guarantor (duly indorsed by such
Guarantor to the Administrative Agent, if required), to be applied against the
Borrower Obligations, whether matured or unmatured, in accordance with the
Credit Agreement.
2.4 Amendments, etc. with respect to the Borrower Obligations.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Secured Party may be
rescinded by the Administrative Agent or such Secured Party and any of the
Borrower Obligations continued, and the Borrower Obligations, or the liability
of any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Secured Party, and the Credit Agreement and the other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or appropriate Secured Parties, as the case may be, in accordance with
the Credit Agreement) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Secured Party for the payment of the Borrower Obligations may be
sold, exchanged, waived, surrendered or released in accordance with the terms of
the Credit Agreement. Neither the Administrative Agent nor any Secured Party
shall have any obligation to protect, secure, perfect or insure any Lien at any
time held by it as security for the Borrower Obligations or for the guarantee
contained in this Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by the
Administrative Agent or any Secured Party upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Borrower Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2; and all dealings
between the Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, likewise shall
be conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Credit Agreement, any other Loan Document, any of the Borrower Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any
<PAGE> 11
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time or from time to time held by the Administrative Agent or any Secured Party,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent or any Secured
Party, other than payment in full of the Borrower Obligations (except as set
forth elsewhere in this Agreement), or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance (other than a defense of payment or performance). When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder against
any Guarantor, the Administrative Agent or any Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Secured Party to make any such demand, to pursue
such other rights or remedies or to collect any payments from the Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
the Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Secured Party against any Guarantor. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Borrower or any Guarantor, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, the Borrower or any Guarantor or any substantial part of
its property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in, all of the following property now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations:
(a) all Accounts;
(b) all cash and cash accounts;
(c) all Chattel Paper;
<PAGE> 12
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(d) all Documents;
(e) all Equipment;
(f) all Fixtures
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property;
(l) all Pledged Securities;
(m) all books and records pertaining to the Collateral;
(n) all Undelivered Instruments; and
(o) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
"Collateral" shall not include, with respect to any Grantor,
any General Intangible, Intellectual Property or Investment Property to the
extent the grant by such Grantor of a security interest pursuant to this
Agreement in its rights under such General Intangible, Intellectual Property or
Investment Property, as the case may be, is prohibited or restricted by such
General Intangible, Intellectual Property or Investment Property, as the case
may be, and the consent of applicable Persons has not been obtained, provided
that the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in any
Account or any money or other amounts due or to become due under any such
General Intangible, Intellectual Property or Investment Property, as the case
may be, to the extent provided in Section 9-318 of the Code as in effect on the
date hereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Secured Parties to
enter into the Credit Agreement and to induce the Secured Parties to make their
respective extensions of credit to the Borrower thereunder, each Grantor hereby
represents and warrants to the Administrative Agent and each Secured Party that:
4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents or
Transaction Documents to which such Guarantor is a party, each of which is
hereby incorporated herein by reference, are true and correct, and the
Administrative Agent and each Secured Party shall be entitled to rely on each of
them as if they were fully set forth herein, provided that each reference in
<PAGE> 13
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each such representation and warranty to the Borrower's knowledge shall, for the
purposes of this Section 4.1, be deemed to be reference to each Guarantor's
knowledge.
4.2 Title. No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of the Secured
Parties pursuant to this Agreement and the other Liens expressly permitted to
exist on the Collateral by the Credit Agreement, such Grantor owns each item of
the Collateral free and clear of any and all Liens or claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, pursuant to this Agreement or as are expressly permitted by the
Credit Agreement.
4.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) that are capable of perfection pursuant
to the Code upon completion of the filings and other actions specified on
Schedule 3 (which, in the case of all filings and other documents referred to on
said Schedule, have been delivered to the Administrative Agent in completed and
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Administrative Agent, for the ratable benefit of
the Secured Parties, as collateral security for such Grantor's Obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor
and (b) are prior to all other Liens on the Collateral in existence on the date
hereof except for Liens expressly permitted by the Credit Agreement.
4.4 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office is specified on Schedule 4.
4.5 Inventory and Equipment. On the date hereof, the Inventory
and the Equipment (other than mobile goods) of such Grantor are kept at the
locations listed on Schedule 5.
4.6 Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
4.7 Pledged Securities. (a) The shares of Pledged Stock
pledged by such Grantor hereunder and delivered to the Administrative Agent on
the Closing Date constitute all the issued and outstanding shares of all classes
of the Capital Stock of each Issuer.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) The Pledged Debt Securities pledged by such Grantor
hereunder delivered to the Administrative Agent on the Closing Date constitute
all of the Pledged Debt Securities held by such Grantor.
(d) Each of the Pledged Debt Securities in existence on the
date hereof are set forth in Schedule 2 and each of the Pledged Debt Securities
constitutes, to the knowledge of the Grantor that is the payee thereof, the
legal, valid and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
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(e) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities pledged by it
hereunder, free of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement.
4.8 Receivables. No amount payable to the Grantors under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent (collectively,
"Undelivered Instruments") and that is in excess of $1,000,000.
4.9 Intellectual Property. (a) Schedule 6 lists all
Intellectual Property owned or licensed by such Grantor in its own name on the
date hereof.
(b) To such Grantor's knowledge, all material Intellectual
Property is on the date hereof valid, subsisting, unexpired, enforceable and has
not been abandoned.
(c) Except as set forth in Schedule 6, none of the material
Intellectual Property is on the date hereof the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending on the date hereof
seeking to limit, cancel or question the validity, or such Grantor's ownership,
of any Intellectual Property which, if adversely determined, would have a
Material Adverse Effect.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative
Agent and the Secured Parties that, from and after the date of this Agreement
until the Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Covenants in Credit Agreement. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If the
aggregate of all amounts payable to the Grantors pursuant to Undelivered
Instruments shall exceed $1,500,000, such Undelivered Instruments, to the extent
necessary to eliminate such excess, shall be immediately delivered to the
Administrative Agent duly indorsed in a manner satisfactory to the
Administrative Agent to be held as Collateral pursuant to this Agreement.
5.3 Insurance. Each Grantor shall maintain insurance policies
insuring Inventory and Equipment pursuant to and in accordance with subsection
6.5 of the Credit Agreement.
5.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least
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the priority described in Section 4.3 and shall defend such security interest
against the claims and demands of all Persons whomsoever.
(b) Upon the reasonable written request of the Administrative
Agent, such Grantor will furnish to the Administrative Agent and the Lenders
from time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Code (or other similar laws) in effect in any jurisdiction with respect to
the security interests created hereby.
5.5 Changes in Locations, Name, etc. Such Grantor will not,
except upon not less than 15 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent of all additional executed
financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for herein:
(a) permit any of the Inventory or Equipment (other than (i)
immaterial Inventory and Equipment, (ii) Equipment under repair and (iii)
Inventory and Equipment in transit in the ordinary course of business (including
Inventory and Equipment located at construction sites)) to be kept at a location
other than those listed on Schedule 5;
(b) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4; or
(c) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading, provided that the
Borrower may consummate the Reincorporation so long as, prior to the Borrower's
consummation of the Reincorporation, the Administrative Agent shall have
received all additional financing statements and other documents requested by
the Administrative Agent to maintain the validity, perfection and priority of
the security interests provided for in the Guarantee and Collateral Agreement.
5.6 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Administrative Agent and the Secured Parties, hold the
same in trust for the Administrative Agent and the Secured Parties and deliver
the same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in blank by such
Grantor to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations. If an Event of Default shall
have occurred and be continuing, (i) any sums paid upon or in respect of the
Pledged Securities upon the liquidation or dissolution of any Issuer shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations and (ii) in case any distribution of
capital shall be made on or in respect of the
<PAGE> 16
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Pledged Securities or any property shall be distributed upon or with respect to
the Pledged Securities pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Administrative Agent, hold such money or property in trust for the
Secured Parties, segregated from other funds of such Grantor, as additional
collateral security for the Obligations.
In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.7(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.
5.7 Receivables. (a) Other than in the ordinary course of
business or as otherwise permitted by the Loan Documents, such Grantor will not
(i) grant any extension of the time of payment of any Receivable, (ii)
compromise or settle any Receivable for less than the full amount thereof, (iii)
release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable or
(v) amend, supplement or modify any Receivable in any manner that could
materially and adversely affect the value thereof.
(b) Such Grantor will take all actions necessary to give
notice pursuant to the United States Assignment of Claims Act of 1940, as
amended, or such other analogous law if a material portion of the total amount
of the Receivables is owing from Governmental Authorities.
5.8 Intellectual Property. (a) Such Grantor (either itself or
through licensees) will (i) continue to use each material Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its then-current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under each
material Trademark, (iii) use such Trademark with all appropriate notices of
registration and (iv) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any material Trademark
may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not
do any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) will not
(and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of the Copyrights may
become invalidated. Such Grantor will not (either itself or through licensees)
do any act whereby any material portion of the Copyrights may fall into the
public domain.
(d) Such Grantor (either itself or through licensees) will not
do any act that knowingly uses a material Intellectual Property to infringe the
Intellectual Property rights of a third party.
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14
(e) Such Grantor will notify the Administrative Agent and the
Secured Parties immediately if it knows, or has reason to know, that any
application or registration relating to any material Patent, Copyright or
Trademark may become abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the U.S. Copyright Office or any court or tribunal
in any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any
agent employee, licensee or designee, shall file an application for any Patent
or Trademark with the United States Patent and Trademark Office or any Copyright
in the U.S. Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon written request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent's security
interest in any such Copyright, Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the U.S. Copyright Office or any similar office or agency
in any other country or any political subdivision thereof, to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent and the Secured Parties after it learns thereof.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Related to Receivables. (a) The
Administrative Agent hereby authorizes each Grantor to collect such Grantor's
Receivables, and the Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Secured Parties only as provided in Section 6.5, and (ii) until
so turned over, shall be held by such Grantor in trust for the Administrative
Agent and the Secured Parties, segregated from other funds of such Grantor. Each
such deposit of Proceeds of Receivables shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.
(b) At the Administrative Agent's request, each Grantor shall
deliver to the Administrative Agent, all original and other documents
evidencing, and relating to, the agreements and transactions which
<PAGE> 18
15
gave rise to the then existing Receivables, including, without limitation, all
original orders, invoices and shipping receipts.
6.2 Communications with Obligors, Grantors Remain Liable. (a)
The Administrative Agent in its own name or in the name of others may at any
time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to the
Administrative Agent's reasonable satisfaction the existence, amount and terms
of any Receivables.
(b) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Receivables that the Receivables have been
assigned to the Administrative Agent for the ratable benefit of the Secured
Parties and that payments in respect thereof shall be made directly to the
Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Secured Party shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any Secured Party of any payment relating thereto, nor
shall the Administrative Agent or any Secured Party be obligated in any manner
to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 Pledged Securities. (a) Unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
notice to the relevant Grantor of the Administrative Agent's intent to exercise
its corresponding rights pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged Stock and
all payments made in respect of the Pledged Debt Securities, in each case paid
in the normal course of business of the relevant Issuer, to the extent permitted
in the Credit Agreement, and to exercise all voting and corporate rights with
respect to the Pledged Securities; provided, however, that no vote shall be cast
or corporate right exercised or other action taken which, in the Administrative
Agent's reasonable judgment would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give written notice of its intent to exercise
such rights to the relevant Grantor or Grantors, (i) the Administrative Agent
shall have the right to receive any and all cash dividends, payments or other
Proceeds paid in respect of the Pledged Securities and make application thereof
to the Obligations in such order as the Administrative Agent may determine, and
(ii) any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative
<PAGE> 19
16
Agent of any right, privilege or option pertaining to such Pledged Securities,
and in connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Administrative
Agent may determine), all without liability except to account for property
actually received by it, but the Administrative Agent shall have no duty to any
Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer
of any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the Secured Parties
specified in Section 6.1 with respect to payments of Receivables, if an Event of
Default shall occur and be continuing, all Proceeds received by any Grantor
consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in a Collateral Account maintained
under its sole dominion and control. All Proceeds while held by the
Administrative Agent in a Collateral Account (or by such Grantor in trust for
the Administrative Agent and the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. At any time after the occurrence
and during the continuance of an Event of Default, at the Administrative Agent's
election, the Administrative Agent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to the Borrower or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrower or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Secured
Parties, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code or any other applicable law. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any
<PAGE> 20
17
exchange, broker's board or office of the Administrative Agent or any Secured
Party or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Administrative Agent or any Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released.
Each Grantor further agrees, at the Administrative Agent's request, to assemble
the Collateral and make it available to the Administrative Agent at places which
the Administrative Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Secured Parties hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Administrative Agent may elect, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(l)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to any Grantor. To the extent permitted by applicable law, each Grantor
waives all claim, damages and demands it may acquire against the Administrative
Agent or any Secured Party arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Securities
pursuant to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Securities, or that portion thereof
to be sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Securities, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Securities, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Securities, by
reason of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Securities for the period of time
<PAGE> 21
18
necessary to permit the Issuer thereof to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Securities pursuant to this Section 6.7 valid
and binding and in compliance with any and all other applicable Requirements of
Law. Each Grantor further agrees that a breach of any of the covenants contained
in this Section 6.7 will cause irreparable injury to the Administrative Agent
and the Secured Parties, that the Administrative Agent and the Secured Parties
have no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
Code. Each Grantor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action to the extent permitted
by law and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Receivable or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Administrative Agent for
the purpose of collecting any and all such moneys due under any
Receivable or with respect to any other Collateral whenever payable;
(ii) in the case of any Copyright, Patent or Trademark,
execute, deliver and have recorded, any and all agreements,
instruments, documents and papers as the Administrative Agent may
request to evidence the Administrative Agent's and the Secured Parties'
security interest in such Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or
represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;
<PAGE> 22
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(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (2) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent
may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine, and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Administrative Agent's and the
Secured Parties' security interests therein and to effect the intent of
this Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable under the Credit Agreement on past due Loans that
are or would be ABR Loans (whether or not any ABR Loans are then outstanding),
from the date of payment by the Administrative Agent to the date reimbursed by
the relevant Grantor, shall be payable by such Grantor to the Administrative
Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the
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Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, any Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Secured Parties hereunder are
solely to protect the Administrative Agent's and the Secured Parties' interests
in the Collateral and shall not impose any duty upon the Administrative Agent or
any Secured Party to exercise any such powers. The Administrative Agent and the
Secured Parties shall be accountable only for amounts that they actually receive
as a result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to any Grantor for
any act or failure to act hereunder, except for their own gross negligence or
willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the Code and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Secured Parties, be governed by the Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Administrative Agent and the Grantors, the Administrative
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and no
Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. Subject to the terms of the Credit
Agreement, the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified by a written instrument executed by each
affected Grantor and the Administrative Agent, provided that, subject to the
terms of the Credit Agreement, any provision of this Agreement imposing
obligations on any Grantor may be waived by the Administrative Agent and the
Secured Parties in a written instrument executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any Secured Party shall by any act (except
by a written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
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acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Secured Party of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Administrative Agent or
such Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
8.4 Enforcement Expenses, Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Secured Party and the Administrative Agent for
all its costs and expenses incurred in collecting against such Guarantor under
the guarantee contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents to which such Guarantor
is a party, including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Secured Parties harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Secured Parties harmless from any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement to the same extent the Borrower would be required to do so pursuant to
subsection 9.7 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment
of the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Administrative Agent and the Secured Parties and their successors and
assigns, provided that no Grantor may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
8.6 Set-Off. In addition to any rights and remedies of the
Administrative Agent and the Secured Parties provided by law, the Administrative
Agent and each Secured Party shall have the right, without prior notice to any
Grantor, any such notice being expressly waived by each Grantor to the extent
permitted by applicable law, upon any amount becoming due and payable by any
Grantor hereunder (whether at the stated maturity, by acceleration or otherwise)
to set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Secured Party or any branch or agency thereof to or for
the credit or the account of such Grantor. The Administrative Agent and each
Secured Party agrees promptly to notify the relevant Grantor and (if applicable)
the Administrative Agent after any such set off and application made by the
Administrative Agent or such Secured Party, provided that the failure to give
such notice shall not affect the validity of such setoff and application.
8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken
<PAGE> 25
22
together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Grantors, the Administrative Agent and the
Secured Parties with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties of the
Administrative Agent or any Secured Party relative to subject matter hereof and
thereof not expressly set forth or referred to herein or in the other Loan
Documents.
8.10 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.11 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
<PAGE> 26
23
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section 8.11 any special, exemplary, punitive or consequential
damages.
8.12 Acknowledgments. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Secured Party has
any fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Secured Parties, on one hand, and
the Grantors, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Secured Parties or among the Grantors and the Secured Parties.
8.13 WAIVERS OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.14 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.15 Additional Grantors. Each Subsidiary of the Borrower that
is required to become a party to this Agreement pursuant to subsection 6.10 of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of an Assumption Agreement in the
form of Annex I hereto.
8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Guarantor shall be released from its obligations hereunder in the event that all
the
<PAGE> 27
24
Capital Stock of such Guarantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Credit Agreement.
8.17 Conflicts. In the event of a conflict between the terms
and conditions of this Agreement and the terms and conditions of the Credit
Agreement, the terms and conditions of the Credit Agreement shall control.
<PAGE> 28
25
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.
SPECIALTY TELECONSTRUCTORS, INC.
By:/s/ HOWARD MANDEL
----------------------------------------------------
Name: Howard Mandel
Title: V.P., Assistant Secretary and General Counsel
EACH OF THE OTHER SIGNATORIES LISTED ON
SCHEDULE 7 ATTACHED HERETO
By:/s/ HOWARD MANDEL
----------------------------------------------------
Name: Howard Mandel
Title: V.P., Assistant Secretary and General Counsel
<PAGE> 29
Schedule 7
SIGNATORIES
SPECIALTY TELECONSTRUCTORS, INC.
OmniAmerica Holdings Corporation
OmniAmerica, Inc.
South Atlantic Tower Corporation
OnmiTower Ltd.
Specialty Management, Inc.
Specialty Fortress, Inc.
Specialty Capital Services, Inc.
Specialty Constructors Coatings, Inc.
Specialty Training Centers, Inc.
Specialty Constructors, Inc.
Novak & Lackey Construction Co., Inc.
Micronare Tower Service, Inc.
Specialty Combined Resources, Inc.
<PAGE> 1
EXHIBIT 10.9
MONITORING AND OVERSIGHT AGREEMENT
THIS MONITORING AND OVERSIGHT AGREEMENT (this "Agreement") is
made and entered into as of April 23, 1998, among Specialty Teleconstructors,
Inc., a Nevada corporation ("Holdings"), OmniAmerica Holdings Corporation, a
Delaware corporation ("OmniAmerica"), OmniAmerica, Inc., a Delaware corporation
("OAI"), Novak & Lackey Construction Co., Inc., an Oklahoma corporation
("Novak"), Specialty Management, Inc., a Nevada corporation ("SMI"), Microwave
Tower Services, Inc., an Oregon corporation ("MTS"), Specialty Constructors,
Inc., a New Mexico corporation ("SCI"), Specialty Constructors Coatings, Inc., a
Nevada corporation ("SCCI"), Specialty Capital Services, Inc., a Nevada
corporation ("SCS"), Specialty Combined Resources, Inc., a Texas corporation
("SCR"), Specialty Fortress, Inc., a Nevada corporation ("SFI"), Specialty
Training Centers, Inc., a Nevada corporation ("STC"), South Atlantic Tower
Corporation, a Delaware corporation ("SATC"), and OmniTower, Ltd., a Florida
limited partnership ("OmniTower" and, together with Holdings, OmniAmerica, OAI,
Novak, SMI, MTS, SCI, SCCI, SCS, SCR, SFI, STC and SATC, the "Clients") and
Hicks, Muse & Co. Partners, L.P., a Texas limited partnership (together with its
successors, "HMCo").
1. Retention. The Clients hereby acknowledge that they have
retained HMCo, and HMCo acknowledges that, subject to reasonable advance notice
in order to accommodate scheduling, HMCo will provide financial oversight and
monitoring services to the Clients as requested by the board of directors or
other governing body of each of the Clients during the term of this Agreement.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof, or (ii) the
date on which Hicks, Muse, Tate & Furst Incorporated ("HMTF") or its successors
and their respective affiliates (including, without limitation, any equity fund
sponsored by HMTF or its successors including, without limitation, Hicks, Muse,
Tate & Furst Equity Fund III, L.P., a Delaware limited partnership, and its
affiliates) shall cease to own beneficially, directly or indirectly, at least
33.33% of the number of shares of common stock, par value $.01 per share, of
Holdings issued to HMTF/Omni Partners, L.P., a Delaware limited partnership
("OmniPartners"), on the Closing Date; provided, however, that notwithstanding
the foregoing, this Agreement shall continue for so long as HMTF and its
affiliates own
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY
OTHER INDEMNIFIED PERSON INDENTIFIED THEREIN.
<PAGE> 2
beneficially, directly or indirectly, securities of Holdings or its successors
with a market value of at least $25 million. "Closing Date" shall mean the date
on which the transactions contemplated by that certain Amended and Restated
Agreement and Plan of Merger, dated as of April 22, 1998, among Holdings, OAI
Acquisition Corp., a Delaware corporation, OmniAmerica, OAI, OmniPartners and
Omni/HSW Acquisition, Inc., a Delaware corporation, are consummated. For
purposes of this Section 2, any calculation of the number of securities owned
beneficially, directly or indirectly, by HMTF and its affiliates shall be
determined in good faith by the Board of Directors of Holdings, as follows: (i)
"owned" shall mean beneficial ownership, determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) each calculation shall be adjusted for subsequent stock splits,
reverse stock splits, stock combinations, recapitalizations, stock dividends and
the like.
3. Compensation.
(a) As compensation for HMCo's services to the Clients under
this Agreement, the Clients hereby irrevocably agree, jointly and severally, to
pay to HMCo an annual fee (the "Monitoring Fee") of $180,000 (the "Base Fee"),
which Monitoring Fee shall be subject to adjustment pursuant to paragraphs (b)
and (c) below and prorated on a daily basis for any partial calendar year during
the term of this Agreement. The Monitoring Fee shall be payable in equal
quarterly installments on each January 1, April 1, July 1, and October 1 during
the term of this Agreement (each a "Payment Date"), beginning with the first
Payment Date following the date hereof. All payments shall be made by wire
transfer of immediately available funds to the account described on Exhibit A
hereto (or such other account as HMCo may hereafter designate in writing).
(b) On July 1 of each calendar year during the term of this
Agreement, the Monitoring Fee shall be adjusted to an annual amount equal to (i)
the budgeted consolidated annual net sales of Holdings and its subsidiaries for
the then-current fiscal year (which, for the purposes hereof shall include
Holdings' and its subsidiaries' proportionate share of the annual net sales of
any entity in which Holdings or any of its subsidiaries owns a minority
interest), multiplied by (ii) .2% (the "Percentage"); provided, however, that in
no event shall the annual Monitoring Fee be less than the Base Fee.
(c) On each occasion that Holdings or any of its subsidiaries
shall acquire an interest in another entity or business during the term of this
Agreement, the annual Monitoring Fee for the calendar year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods subsequent
to such acquisition until the next adjustment pursuant to clause (b) above), as
of the closing of such acquisition, to an annual amount equal to (i) the pro
forma combined budgeted consolidated annual net sales of Holdings and its
subsidiaries for the entire then-current fiscal year of Holdings (including
Holdings' and its
2
<PAGE> 3
subsidiaries' proportionate share of the budgeted annual net sales of the
acquired entity or business for such entire fiscal year, on a pro forma basis),
multiplied by (ii) the Percentage; provided, however, that in no event shall the
annual Monitoring Fee be less than the Base Fee.
(d) All past due payments in respect of the Monitoring Fee
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the prime commercial lending rate per annum of
The Chase Manhattan Bank or its successors (which rate is a reference rate and
is not necessarily its lowest or best rate of interest actually charged to any
customer) (the "Prime Rate") as in effect from time to time, plus five percent
(5%), from the due date of such payment to and including the date on which
payment is made to HMCo in full, including such interest accrued thereon.
4. Reimbursement of Expenses. In addition to the compensation
to be paid pursuant to Section 3 hereof, the Clients jointly and severally agree
to pay or reimburse HMCo for all "Reimbursable Expenses," which shall consist of
(i) all reasonable disbursements and out-of-pocket expenses (including without
limitation costs of travel, postage, deliveries, communications, etc.) incurred
by HMCo or its affiliates for the account of any of the Clients, or in
connection with the performance by HMCo of the services contemplated by Section
1 hereof and (ii) the Clients' Pro Rata Share of Allocable Expenditures as
defined in Exhibit B hereto. Promptly (but not more than 10 days) after request
by or notice from HMCo, the applicable Client shall pay HMCo, by wire transfer
of immediately available funds to the account described on Exhibit A hereto (or
such other account as HMCo may hereafter designate in writing), the Reimbursable
Expenses for which HMCo has provided such Client invoices or reasonably detailed
descriptions. All past due payments in respect of the Reimbursable Expenses
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the Prime Rate plus 5% from the Payment Date to
and including the date on which such Reimbursable Expenses plus accrued interest
thereon are fully paid to HMCo.
5. Indemnification. The Clients jointly and severally shall
indemnify and hold harmless each of HMCo, its affiliates, and the respective
directors, officers, controlling persons (within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20(a) of the Exchange Act),
if any, agents and employees of HMCo and/or any of its affiliates (HMCo, its
affiliates, and such other specified persons being collectively referred to as
"Indemnified Persons" and individually as an "Indemnified Person") from and
against any and all claims, liabilities, losses, damages and expenses incurred
by any Indemnified Person (including those arising out of an Indemnified
Person's negligence and fees and disbursements of the respective Indemnified
Person's counsel) which (A) are related to or arise out of (i) actions taken or
omitted to be taken (including, without limitation, any untrue statements made
or any statements omitted to be made) by any of the Clients or (ii) actions
3
<PAGE> 4
taken or omitted to be taken by an Indemnified Person with any Client's consent
or in conformity with any Client's instructions or any Client's actions or
omissions or (B) are otherwise related to or arise out of HMCo's engagement
hereunder, and will reimburse each Indemnified Person for all costs and
expenses, including, without limitation, fees and disbursements of any
Indemnified Person's counsel, as they are incurred, in connection with
investigating, preparing for, defending, or appealing any action, formal or
informal claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of or
in connection with HMCo's acting pursuant to HMCo's engagement, whether or not
any Indemnified Person is named as a party thereto and whether or not any
liability results therefrom. None of the Clients will, however, be responsible
for any claims, liabilities, losses, damages or expenses pursuant to clause (B)
of the preceding sentence that have resulted primarily from HMCo's bad faith,
gross negligence or willful misconduct. Each of the Clients also agrees that
neither HMCo nor any other Indemnified Person shall have any liability to any
Client for or in connection with such engagement except for any such liability
for claims, liabilities, losses, damages or expenses incurred by any Client that
have resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Clients further agree that none of them will, without the prior
written consent of HMCo, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnifications may be sought hereunder (whether or not any
Indemnified Person is an actual or potential party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of HMCo and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding. EACH CLIENT
HEREBY ACKNOWLEDGES THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL
CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE
ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR
CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any
rights that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each of the Clients hereby consents to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against HMCo or any other
Indemnified Person.
It is understood that, in connection with HMCo's engagement,
HMCo may also be engaged to act for any Client in one or more additional
capacities, and that the terms of this engagement or any such additional
engagement may be embodied in one or more separate written agreements. This
indemnification shall apply to the engagement specified in
4
<PAGE> 5
the first paragraph hereof as well as to any such additional engagement(s)
(whether written or oral) and any modification of said engagement or such
additional engagement(s) and shall remain in full force and effect following the
completion or termination of said engagement or such additional engagement(s).
Each of the Clients further understands and agrees that if
HMCo is asked to furnish any Client a financial opinion letter or act for any
Client in any other formal capacity, such further action may be subject to a
separate agreement containing provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the
performance of the services hereunder, HMCo agrees not to divulge any
confidential information, secret processes or trade secrets disclosed by any
Client or any of its direct or indirect subsidiaries to it solely in its
capacity as a financial advisor, unless such Client consents to the divulging
thereof or such information, secret processes, or trade secrets are publicly
available or otherwise available to HMCo without restriction or breach of any
confidentiality agreement or unless required by any governmental authority or in
response to any valid legal process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned (other than with respect to the rights and obligations of HMCo,
which may be assigned to any one or more of its principals or affiliates) by any
of the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
10. Other Understandings. All discussions, understandings, and
agreements heretofore made between any of the parties hereto with respect to the
subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the agreement of the parties hereto. All calculations of
the Monitoring Fee and Reimbursable Expenses shall be made by HMCo and, in the
absence of mathematical error, shall be final and conclusive.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC., its General
Partner
By: /s/ LAWRENCE D. STUART, JR.
-------------------------------------
Name: Lawrence D. Stuart, Jr.
-----------------------------------
Title: Managing Director and Principal
----------------------------------
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
OMNIAMERICA HOLDINGS CORPORATION
By: /s/ DANIEL S. DROSS
----------------------------------------
Name: Daniel S. Dross
--------------------------------------
Title: Vice President and Secretary
-------------------------------------
OMNIAMERICA, INC.
By: /s/ DANIEL S. DROSS
----------------------------------------
Name: Daniel S. Dross
--------------------------------------
Title: Vice President and Secretary
-------------------------------------
6
<PAGE> 7
NOVAK & LACKEY CONSTRUCTION CO.,
INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: Assistant Secretary
-------------------------------------
SPECIALTY MANAGEMENT, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
MICROWAVE TOWER SERVICES, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: Assistant Secretary
-------------------------------------
SPECIALTY CONSTRUCTORS, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
7
<PAGE> 8
SPECIALTY CONSTRUCTORS COATINGS,
INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
SPECIALTY CAPITAL SERVICES, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
SPECIALTY COMBINED RESOURCES, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
SPECIALTY FORTRESS, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
SPECIALTY TRAINING CENTERS, INC.
By: /s/ MICHAEL R. BUDAGHER
----------------------------------------
Name: Michael R. Budagher
--------------------------------------
Title: President
-------------------------------------
8
<PAGE> 9
SOUTH ATLANTIC TOWER CORPORATION
By: /s/ F. HOWARD MANDEL
-------------------------------------------
Name: F. Howard Mandel
-----------------------------------------
Title: Vice President and Assistant Secretary
----------------------------------------
OMNITOWER, LTD.
By: South Atlantic Tower Corporation,
its general partner
By: /s/ F. HOWARD MANDEL
-------------------------------------------
Name: F. Howard Mandel
-----------------------------------------
Title: Vice President and Assistant Secretary
----------------------------------------
9
<PAGE> 10
EXHIBIT B
PRO RATA SHARE OF ALLOCABLE EXPENDITURES AND RELATED DEFINITIONS
Pro Rata Share of Allocable Expenditures shall equal the
product obtained by multiplying (i) the sum of all Allocable Expenditures that
have not previously been paid or reimbursed to HMCo by the Clients and other
Participating Acquired Companies, by (ii) a fraction, the numerator of which
shall equal the total amount of Invested Capital (as from time to time
outstanding) that any Fund has invested in the Clients' securities or
instruments, as applicable, and the denominator of which shall equal the total
amount of Invested Capital (as from time to time outstanding) that any Fund has
invested in the securities or instruments of any and all Participating Acquired
Companies.
The capitalized terms used in the foregoing definition have
the meanings set forth below:
Allocable Expenditures shall mean all variable, fixed, and
other costs, expenses, expenditures, charges, or obligations (including without
limitation letters of credit, deposits, etc.) that are reasonably related to
assets utilized, services provided, or programs administered by HMCo or its
affiliates in connection with the performance by HMCo of financial oversight and
monitoring services on behalf of any of the Clients and other Participating
Acquired Companies, including without limitation corporate airplanes, charitable
contributions, retainers for lobbyists and other professionals, and premiums and
finance charges for director and officer insurance maintained for
representatives of HMCo or its affiliates.
Fund shall mean any one or more of the equity funds now or
hereafter sponsored by HMTF or its successors, including any LP Investment
Entity (as defined in the limited partnership agreement for any such equity
fund) formed under or with respect to any such equity fund.
Invested Capital shall mean the total amount of partner
capital that a Fund from time to time invests in the purchase of securities or
instruments of a Participating Acquired Company, less the total cash
distributions that constitute a return of such partner capital with proceeds
from the disposition of all or any part of such securities or instruments. For
each period for which the Pro Rata Share of Allocable Expenditures is being
made, the applicable Invested Capital shall equal the amount outstanding as of
the end of the respective period.
11
<PAGE> 11
Participating Acquired Company shall mean any partnership,
corporation, trust, limited liability company, or other entity that is, for the
period for which the Pro Rata Share of Allocable Expenditures is being
determined, a party to a monitoring agreement or similar contract with HMCo or
its affiliates (a "Monitored Company") and is, as of the end of such period,
designated by HMCo to bear a portion of such allocable expenditures. HMCo may,
in its sole and absolute discretion, determine not to designate an entity as a
Participating Acquired Company with respect to such period; provided, however,
that substantially all domestic entities that are Monitored Companies shall be
designated as Participating Acquired Companies during any such period. HMCo may
make such determination of non-designation for no reason or for any reason,
including without limitation the respective entity's bankruptcy or other
temporary or permanent inability to pay fees or expenses to HMCo or its
affiliates.
12
<PAGE> 1
EXHIBIT 10.10
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT (this "Agreement") is made
and entered into effective as of April 23, 1998, among Specialty
Teleconstructors, Inc., a Nevada corporation ("Holdings"), OmniAmerica Holdings
Corporation, a Delaware corporation ("OmniAmerica"), OmniAmerica, Inc., a
Delaware corporation ("OAI"), Novak & Lackey Construction Co., Inc., an Oklahoma
corporation ("Novak"), Specialty Management, Inc., a Nevada corporation ("SMI"),
Microwave Tower Services, Inc., an Oregon corporation ("MTS"), Specialty
Constructors, Inc., a New Mexico corporation ("SCI"), Specialty Constructors
Coatings, Inc., a Nevada corporation ("SCCI"), Specialty Capital Services, Inc.,
a Nevada corporation ("SCS"), Specialty Combined Resources, Inc., a Texas
corporation ("SCR"), Specialty Fortress, Inc., a Nevada corporation ("SFI"),
Specialty Training Centers, Inc., a Nevada corporation ("STC"), South Atlantic
Tower Corporation, a Delaware corporation ("SATC"), and OmniTower, Ltd., a
Florida limited partnership ("OmniTower" and, together with Holdings,
OmniAmerica, OAI, Novak, SMI, MTS, SCI, SCCI, SCS, SCR, SFI, STC and SATC, the
"Clients") and Hicks, Muse & Co. Partners, L.P., a Texas limited partnership
(together with its successors, "HMCo").
WHEREAS, HMTF/Omni Partners, L.P., a Delaware limited
partnership controlled by an affiliate of HMCo ("OmniPartners"), owns as of the
date hereof and prior to the Merger (as defined in the Merger Agreement) all of
the issued and outstanding shares of capital stock of OmniAmerica, which in turn
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock and partnership interests, as applicable, of OAI, SATC and
OmniTower; and
WHEREAS, OmniPartners simultaneously herewith is acquiring
approximately 45.8% of the issued and outstanding shares of common stock, par
value $.01 per share, of Holdings ("Holdings Common Stock") pursuant to that
certain Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 22, 1998, among Holdings, OAI Acquisition Corp.,
a Delaware corporation and wholly-owned
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY
OTHER INDEMNIFIED PERSON IDENTIFIED THEREIN.
<PAGE> 2
subsidiary of Holdings, OmniAmerica, OAI, OmniPartners and Omni/HSW Acquisition,
Inc., a Delaware corporation (the "Merger Transaction"); and
WHEREAS, the Clients have requested that HMCo render, and HMCo
has rendered, financial advisory services to them in connection with the
negotiation of the Merger Transaction; and
WHEREAS, the Clients have requested that HMCo render financial
advisory, investment banking, and other similar services to them with respect to
any future proposals for a tender offer, acquisition, sale, merger, exchange
offer, recapitalization, restructuring, or other similar transaction directly or
indirectly involving the Clients or any of their respective subsidiaries, and
any other person or entity (collectively, "Subsequent Transactions").
NOW, THEREFORE, in consideration of the services rendered and
to be rendered by HMCo to the Clients, and to evidence the obligations of the
Clients to HMCo and the mutual covenants herein contained, the Clients hereby
jointly and severally agree as follows:
1. Retention.
(a) Each of the Clients hereby acknowledges that it has
retained HMCo, and HMCo acknowledges that it has acted, as financial advisor to
the Clients in connection with the Merger Transaction.
(b) Each of the Clients acknowledges that it has retained HMCo
as its exclusive financial advisor in connection with any Subsequent
Transactions that may be consummated during the term of this Agreement, and that
the Clients will not retain any other person or entity to provide such services
in connection with any such Subsequent Transaction without the prior written
consent of HMCo. HMCo agrees that it shall provide such financial advisory,
investment banking, and other similar services in connection with any such
Subsequent Transaction as may be requested from time to time by the Board of
Directors of Holdings.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof or (ii) the
date on which Hicks, Muse, Tate & Furst Incorporated ("HMTF") or its successors
and their respective affiliates (including, without limitation, any equity fund
sponsored by HMTF or its successors including, without limitation, Hicks, Muse,
Tate & Furst Equity Fund III, L.P., a Delaware limited partnership, and its
affiliates) shall cease to own beneficially, directly or indirectly, at
2
<PAGE> 3
least 33.33% of the number of shares of Holdings Common Stock issued to
OmniPartners on the Closing Date; provided, however, that notwithstanding the
foregoing, this Agreement shall continue for so long as HMTF and its affiliates
own beneficially, directly or indirectly, securities of Holdings or its
successors with a market value of at least $25 million. "Closing Date" shall
mean the date on which the transactions contemplated by the Merger Agreement are
consummated. For purposes of this Section 2, any calculation of the number of
securities owned beneficially, directly or indirectly, by HMTF and its
affiliates shall be determined in good faith by the Board of Directors of
Holdings, as follows: (i) "owned" shall mean beneficial ownership, determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and (ii) each calculation shall be adjusted for subsequent
stock splits, reverse stock splits, stock combinations, recapitalizations, stock
dividends and the like.
3. Compensation. As compensation for HMCo's financial
advisory, investment banking, and other similar services rendered in connection
with any Subsequent Transaction pursuant to Section 1(b) hereof, the applicable
Client shall, and the other Clients shall cause such Client to, pay to HMCo, at
the closing of any such Subsequent Transaction, a cash fee equal to 1.5% of the
Transaction Value of such Subsequent Transaction. As used herein, the term
"Transaction Value" means the total value of the Subsequent Transaction,
including, without limitation, the aggregate amount of the funds required to
complete the Subsequent Transaction (excluding any fees payable pursuant to this
Section 3) including the amount of any indebtedness, preferred stock or similar
items assumed (or remaining outstanding).
4. Reimbursement of Expenses. In addition to the compensation
to be paid pursuant to Section 3 hereof, the Clients agree, jointly and
severally, to reimburse HMCo, promptly following demand therefor, together with
invoices or reasonably detailed descriptions thereof, for all reasonable
disbursements and out-of-pocket expenses (including, without limitation, fees
and disbursements of counsel) incurred by HMCo (a) as financial advisor to the
Clients in connection with the Merger Transaction; provided, however, that such
reimbursable disbursements and expenses shall not exceed $50,000.00 or (b) in
connection with the performance by it of the services contemplated by Section
1(b) hereof.
5. Indemnification. The Clients jointly and severally shall
indemnify and hold harmless each of HMCo, its affiliates, and their respective
directors, officers, controlling persons (within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20(a) of the Exchange Act, if
any, agents and employees (HMCo, its affiliates, and such other specified
persons being collectively referred to as "Indemnified Persons" and individually
as an "Indemnified Person") from and against any and all claims, liabilities,
losses, damages and expenses incurred by any Indemnified Person (including,
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<PAGE> 4
without limitation, those arising out of an Indemnified Person's negligence and
reasonable fees and disbursements of the respective Indemnified Person's
counsel) which (A) are related to or arise out of (i) actions taken or omitted
to be taken (including, without limitation, any untrue statements made or any
statements omitted to be made) by any Client or (ii) actions taken or omitted to
be taken by an Indemnified Person with any Client's consent or in conformity
with any Client's instructions or any Client's actions or omissions or (B) are
otherwise related to or arise out of HMCo's engagement hereunder, and will
reimburse each Indemnified Person for all costs and expenses, including, without
limitation, reasonable fees and disbursements of any Indemnified Person's
counsel, as they are incurred, in connection with investigating, preparing for,
defending, or appealing any action, formal or informal claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, caused by or arising out of or in connection with HMCo's
acting pursuant to HMCo's engagement, whether or not any Indemnified Person is
named as a party thereto and whether or not any liability results therefrom.
None of the Clients will, however, be responsible for any claims, liabilities,
losses, damages or expenses pursuant to clause (B) of the preceding sentence
that have resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Clients also agree that neither HMCo nor any other Indemnified
Person shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages or expenses incurred by any Client that have resulted primarily from
HMCo's bad faith, gross negligence or willful misconduct. Each of the Clients
further agrees that none of them will, without the prior written consent of
HMCo, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Indemnified Person
is an actual or potential party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of HMCo and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any
rights that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each of the Clients hereby consents to
personal jurisdiction and to service and venue in any court in which any claim
which is subject to this Agreement is brought against HMCo or any other
Indemnified Person.
4
<PAGE> 5
It is understood that, in connection with HMCo's engagement,
HMCo may also be engaged to act for any Client in one or more additional
capacities, and that the terms of this engagement or any such additional
engagement may be embodied in one or more separate written agreements. This
indemnification shall apply to the engagement specified in the first paragraph
hereof as well as to any such additional engagement(s) (whether written or oral)
and any modification of said engagement or such additional engagement(s) and
shall remain in full force and effect following the completion or termination of
said engagement or such additional engagement(s).
Each of the Clients further understands and agrees that if
HMCo is asked to furnish any Client a financial opinion letter or act for any
Client in any other formal capacity, such further action may be subject to a
separate agreement containing provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the
performance of the services hereunder, HMCo agrees not to divulge any
confidential information, secret processes or trade secrets disclosed by any
Client or any of its direct or indirect subsidiaries to it solely in its
capacity as a financial advisor, unless the applicable Client consents to the
divulging thereof or such information, secret processes, or trade secrets are
publicly available or otherwise available to HMCo without restriction or breach
of any confidentiality agreement or unless required by any governmental
authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed,
interpreted, and enforced in accordance with the laws of the State of Texas,
excluding any choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned (other than with respect to the rights and obligations of HMCo,
which may be assigned to any one or more of its principals or affiliates) by any
of the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
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<PAGE> 6
10. Other Understandings. All discussions, understandings, and
agreements heretofore made between any of the parties hereto with respect to the
subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the agreement of the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC., its General
Partner
By: /s/ LAWRENCE D. STUART, JR.
------------------------------------
Name: Lawrence D. Stuart, Jr.
----------------------------------
Title: Managing Director and Principal
---------------------------------
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
OMNIAMERICA HOLDINGS CORPORATION
By: /s/ DANIEL S. DROSS
------------------------------------
Name: Daniel S. Dross
----------------------------------
Title: Vice President and Secretary
---------------------------------
OMNIAMERICA, INC.
By: /s/ DANIEL S. DROSS
------------------------------------
Name: Daniel S. Dross
----------------------------------
Title: Vice President,Secretary
---------------------------------
and Treasurer
---------------------------------
NOVAK & LACKEY CONSTRUCTION CO.,
INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: Assistant Secretary
---------------------------------
<PAGE> 8
SPECIALTY MANAGEMENT, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
MICROWAVE TOWER SERVICES, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: Assistant Secretary
---------------------------------
SPECIALTY CONSTRUCTORS, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
SPECIALTY CONSTRUCTORS COATINGS,
INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
SPECIALTY CAPITAL SERVICES, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
<PAGE> 9
SPECIALTY COMBINED RESOURCES, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
SPECIALTY FORTRESS, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
SPECIALTY TRAINING CENTERS, INC.
By: /s/ MICHAEL R. BUDAGHER
------------------------------------
Name: Michael R. Budagher
----------------------------------
Title: President
---------------------------------
SOUTH ATLANTIC TOWER CORPORATION
By: /s/ F. HOWARD MANDEL
------------------------------------
Name: F. Howard Mandel
----------------------------------
Title: Vice President and
---------------------------------
Assistant Secretary
---------------------------------
OMNITOWER, LTD.
By: South Atlantic Tower Corporation,
its general partner
By: /s/ F. HOWARD MANDEL
------------------------------------
Name: F. Howard Mandel
----------------------------------
Title: Vice President and
---------------------------------
Assistant Secretary
---------------------------------
<PAGE> 1
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
Dated as of June 1, 1998
among
SPECIALTY CAPITAL SERVICES, INC.,
SPECIALTY TELECONSTRUCTORS, INC.,
TELEFORCE, LLC,
and
Richard H. Statler
and
Terry A. Klein
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this 1st
day of June, 1998, is entered into by and among Specialty Capital Services,
Inc., Inc., a Nevada corporation ("Buyer"), Specialty Teleconstructors, Inc., a
Nevada corporation ("Parent" and together with Buyer, the "Acquiring
Companies"), Teleforce, LLC, a California limited liability company ("Seller")
and Richard H. Statler and Terry A. Klein, owners of 100% of the issued and
outstanding equity interests of Seller (collectively, the "Members").
WITNESSETH:
WHEREAS, Seller owns all of the assets described in Section 1.1 of this
Agreement and listed on Exhibits 1.1(a), 1.1(b), 1.1(d) and 1.1(e) attached
hereto (collectively, the "Assets") and the real property and improvements, if
any, described in Section 1.1 of this Agreement and more fully described on
Exhibit 1.1(g) attached hereto (the "Real Property"), and Seller desires to sell
such Assets and Real Property to Buyer on the terms and conditions set forth in
this Agreement; and
WHEREAS, the Member owns 10O% of the outstanding equity of Seller; and
WHEREAS, Buyer desires to purchase the Assets and the Real Property on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations and warranties herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Sale and Purchase of Assets. At the Closing (as hereinafter
defined), subject to the terms and conditions herein set forth, and on the
basis of the representations, warranties and agreements herein contained,
Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of
Seller's interest in and to the following described Assets and Real Property,
free and clear of all liens, claims, restrictions and encumbrances of any
nature, except as otherwise set forth in Section 1.2 hereof:
(a) All customer and vendor contracts, personal property
leases, real property leases, licenses, permits and other agreements or
commitments related to the operation of the business of Seller as
listed on Exhibit 1.1(a) attached hereto;
(b) All tangible personal property, including without
limitation, all equipment, furniture, fixtures, machinery, vehicles,
spare parts, inventories, leasehold improvements, supplies, and other
personal property used in the business of Seller, including, without
limitation, as listed on Exhibit 1.1(b) attached hereto;
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<PAGE> 3
(c) All books, documents and records relating to the business
of Seller excluding only the minute book, corporate seal and stock
records of Seller and including customer records and lists, marketing
and sales records and literature, employee records and information,
accounting books and records, and insurance records;
(d) All intangible or intellectual property of Seller,
including, without limitation, all rights in and to the name
"Teleforce, LLC" and all patents, copyrights, trade names, trademarks
or service marks owned by Seller, including, without limitation, as
listed on Exhibit 1.1(d) hereto;
(e) All prepaid expenses, deposits, prepaid taxes, accounts
receivable, notes receivable, other receivables and other monies,
securities, cash and cash equivalents of Seller as listed on Exhibit
1.1(e) attached hereto;
(f) All insurance proceeds arising in connection with damage
to the Assets or relating to the business of Seller occurring prior to
the Closing; and
(g) Fee simple title to the real property and improvements,
if any, more fully described on Exhibit 1.1(g) attached hereto.
Seller and the Members, jointly and severally, represent that the Assets and
the Real Property constitute all property and contractual rights necessary for
the conduct of the business of Seller.
1.2 Assumption of Liabilities. Buyer agrees to assume at Closing only
the following liabilities (collectively, the "Assumed Liabilities"): liabilities
and obligations of Seller with respect to the period after the Closing Date
under contracts which meet all of the following conditions: (a) they are entered
in the ordinary course of the business of the Seller, (b) they are disclosed an
Exhibit 1.1(a) to this Agreement, and (c) they are conveyed to Buyer pursuant to
this Agreement. Notwithstanding anything to the contrary contained herein,
except for the Assumed Liabilities, Buyer shall not assume, shall not be deemed
to have assumed, and shall not be liable for, any liabilities or obligations
(whether absolute, accrued, contingent, direct, indirect, due or becoming due,
or otherwise) of Seller existing, arising out of or in any way connected with
the conduct of its business prior to the closing Date (as hereinafter defined),
or the sale by Seller of the Assets and Real Property to Buyer, including,
without limitation, (i) any and all claims of persons employed by Seller prior
to the closing Date, (ii) any and all liability of Buyer arising as a result of
the failure of Seller to file any tax returns or to pay any income, sales,
excise or other taxes, employment or workers, compensation payments, and (iii)
any and all losses, liabilities, damages or expenses resulting from the
assertion of claims made against the Assets by creditors of Seller as a result
of the failure to comply with any Bulk sales law. Seller and The Members agree
to indemnify and hold the Acquiring Companies harmless with respect to any such
liabilities in accordance with Article IX of this Agreement.
1.3 Consideration and Terms. As consideration for the Assets (the
"Purchase Price"), at the Closing, Buyer will deliver or cause to be delivered
2
<PAGE> 4
to Seller $640,000 in the form of a cashier's check or wire transfer and 81,270
newly issued shares (collectively, as subject to adjustment in accordance with
the last sentence of this Section 1.3, the "Parent Shares") of Common Stock of
Parent (i.e. the same class of shares as the Parent's shares that are currently
traded on NASDAQ under the symbol SCTR). Notwithstanding anything to the
contrary contained herein the Purchase Price shall be subject to reduction by an
amount equal to the aggregate amount of claims, charges, liabilities or
payables, if any, that are paid by Buyer after the Closing Date but before the
first anniversary of the Closing Date (the "Final Determination Date"), which
claims, charges, liabilities or payables arise out of actions, events,
liabilities or other circumstances existing before the Closing Date that are not
Assumed Liabilities. If on the Final Determination Date, the Purchase Price is
required to be reduced in accordance with the foregoing, then such reduction
shall be effected by the cancellation by Parent of that number of Parent Shares
issued on the Closing Date to Seller having an aggregate value (determined by
valuing each such Parent Share at $31.50 per share (the "Original Issue Price")
equal to the amount of such reduction (shares so canceled are referred to herein
collectively as the "Canceled Parent Shares"), but in no case shall the cash
portion of the Purchase Price be reduced pursuant to this Section 1.3. In order
to facilitate the reduction of the Purchase Price, if any, that may occur on the
Final Determination Date, each of Seller and The Members agrees that Parent may
cancel the Canceled Parent Shares regardless of whether certificates evidencing
such Canceled Parent Shares are then in the possession of Parent or Buyer. This
Section 1.3 is subject to the terms of the Lock-Up Letter (as hereinafter
defined). In the event that, subsequent to the date of this Agreement but prior
to the date that all Parent Shares are released from the restrictions under the
Lock-Up Letter, the shares of the Parent shall have been changed into or
exchanged for a different number or kind of shares or securities through a
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, or other similar change in capitalization, then an appropriate and
proportionate adjustment shall be made in the Parent Shares and the Original
Issue Price.
1.4 Instruments of Conveyance and Transfer. At the Closing, Seller
shall execute and deliver to Buyer bills of sale and assignments and such other
instruments of conveyance and transfer, in form and substance satisfactory to
Buyer and its counsel, as shall be reasonably necessary or appropriate to vest
in Buyer good and indefeasible title to the Assets and the Real Property and to
comply with the purpose of this Agreement.
1.5 Certification as of Closing. At the Closing, Seller and each of the
Acquiring Companies shall execute and deliver a written certification that its
representations and warranties contained in this Agreement remain true and
correct as of the Closing Date.
1.6 Transaction Taxes and Other Closing Costs. Any sales, use, transfer
or similar taxes and any assumption, recording and other similar fees, arising
in connection with the transfer of the Assets from Seller to Buyer shall be
borne solely by Seller.
3
<PAGE> 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE MEMBERS
In order to induce the Acquiring companies to enter into this Agreement
and to consummate the transactions contemplated herein, Seller and the Members
hereby, jointly and severally, represent and warrant, as of the date hereof and
as of the Closing Date as follows:
2.1 Corporate Existence and Authority. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California and has all requisite corporate power, licenses,
permits and authority to own and lease its properties and assets and to carry
on its business as has been and is being conducted currently. Seller is
qualified to do business in every jurisdiction in which the character and
location of the assets owned or leased by Seller or the nature of the business
transacted by Seller makes such qualification necessary.
2.2 Articles of Organization And Regulations. Attached as Exhibit 2.2
to this Agreement are complete and correct copies of Seller's Articles of
Organization, as amended to date, certified by the Secretary of State of the
State of California, and Seller's Regulations, as currently in effect,
certified by the Secretary of Seller (such Articles of Organization and
Regulations are sometimes referred to herein collectively as Seller's
"Organizational Documents"). Such Organizational Documents were duly adopted
and are in full force and effect, and Seller is not in violation of any
provision thereof.
2.3 Books and Records. Seller keeps its books, records and accounts
(including, without limitation, those kept for financial reporting purposes and
for tax purposes) in accordance with good business practice and in sufficient
detail to reflect accurately and fairly the transactions and dispositions of
its assets, liabilities and equities. The minute books of Seller contain
complete and accurate records of all of the meetings of its members and
managers and of all action taken by such members and managers. The stock
certificate book and stock transfer ledger of Seller are correct and complete
and reflect accurately the number of shares of stock held by its members.
2.4 Capitalization. Each of the Members owns 50% of the membership
interests in Seller; neither Member has conveyed or pledged any portion of such
membership interests. All presently exercisable voting rights in Seller are
vested exclusively in its outstanding equity interests and there are no voting
trusts or other voting arrangements with respect to any of such equity
interests.
2.5 Subsidiaries And Affiliates. Except as and to the extent set forth
on Exhibit 2.5 attached hereto, Seller does not own, directly or indirectly,
any equity interest in any person, corporation, partnership, joint venture or
other business association.
2.6 Authorization and Effect of Agreement. Seller has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement, and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite company and member action. The execution and delivery of this
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<PAGE> 6
Agreement and the consummation of the transactions contemplated herein do not
and will not:
(a) violate, conflict with, modify or cause any default under
or acceleration of (or give any party any right to declare any default
or acceleration upon notice or passage of time or both), in whole or in
part, of any Organizational Document, mortgage, lien, deed of trust,
lease, agreement, instrument, order, decree, judgment, law or any other
restriction of any kind to which Seller is a party or by which it or
any of its properties are bound;
(b) result in the creation of any security interest, lien,
encumbrance, adverse claim or restriction on any property or asset of
Seller; or
(c) violate any law, rule or regulation of any federal or
state regulatory agency.
This Agreement has been duly executed and delivered by Seller and constitutes a
valid and binding obligation of Seller enforceable in accordance with its
terms.
2.7 Financial Information. Attached as hereto as Exhibit 2.7 are
true and complete copies of the following financial statements of Seller
compiled or audited as required by ___________________ , certified public
accountants, (i) unaudited statements of income, changes in financial position
and shareholders equity for the fiscal period ended March 31, 1998; and (ii)
unaudited balance sheet at March 31, 1998 (collectively, the "Financial
Statements"). The Financial Statements, together with the related notes
thereto, are true, correct and complete and present fairly the financial
condition of Seller. The Financial Statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise expressly disclosed in
such Financial Statements.
2.8 Value of Net Assets Acquired; Adjustment of Purchase Prime. If
within 60 days following the Closing Date, in good faith, Buyer determines that
on the Closing Date, the excess (the "Net Value of Assets Received") of the
aggregate fair market value of the assets acquired by Buyer pursuant to this
Agreement as set forth on Exhibits 1.1(a), (b), (d), (e) and (g) over the
aggregate amount of liabilities assumed by Buyer pursuant to this Agreement as
set forth in Section 1.2, was less than $375,000, then the Acquiring Companies
may cancel that number of Parent Shares previously delivered or issued in the
name of Seller that when multiplied by the Original Issue Price equals the
amount difference between the Net Value of Assets Received and $375,000. This
Section 2.8 is subject to the terms of the Lock-Up Letter (as hereinafter
defined).
2.9 Tax Matters: Tax Allocation. Except as set forth in Exhibit 2.9
attached hereto, Seller has timely filed with appropriate federal, state and
local governmental agencies all income, excise, corporate, franchise, property,
sales, payroll, withholding and other tax returns and reports required to be
filed and has paid all taxes and assessments shown to be due or claimed to be
due. The consummation of the transaction contemplated by this Agreement will
not
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<PAGE> 7
result in any transferee tax liability to the Acquiring Companies. The Parties
agree to allocate the Purchase Price (and all other capitalizable costs) among
the Assets for all purposes (including financial accounting and tax purposes)
in accordance with the allocation schedule to be prepared by Buyer following
the Closing.
2.10 Real Property and Improvements; Condition of Tangible Personal
Property. All Real Property, if any, owned by Seller that is being sold to Buyer
pursuant to this Agreement is described in Exhibit 1.1(g) attached hereto.
Seller has good and marketable title to the Real Property and improvements, free
and clear of all mortgages, liens, pledges, charges or encumbrances, except (a)
mortgages and other encumbrances specifically set forth on Exhibit 1.1.(g)
attached hereto; and (b) liens for current taxes not yet due and payable. The
Assets comprised of items of tangible personal property are in good operating
condition and repair (except ordinary wear and tear and such minor defects that
do not affect their value or use in normal operations), are suitable and
sufficient for their current operations and comply in all material respects with
all applicable laws and ordinances. All items of tangible personal property or
parcels of real property leased by Seller are listed on Exhibit 1.1.(a) or
Exhibit 1.1(b) attached hereto (or the agreements or documents attached or
referred to in such Exhibits) and are held under valid, subsisting and
enforceable leases. Except as set forth on Exhibit 1.1(a) or Exhibit 1.1(b)
attached hereto attached hereto, Seller has not received notice of any default
under any such lease and has no knowledge of any basis for default in any
respect under any such lease. All rentals due and payable under all such leases
on or prior to the date hereof and as of the Closing Date have been or will have
been paid in full.
2.11 Commitments and Contracts. Except as described on Exhibit 2.11
attached hereto, as of the date hereof, Seller is not a party to or bound by
any oral or written (a) contract for the employment of any officer or employee
that is not terminable on notice of thirty (30) days (or less) without payment
of any amount on account of such termination; (b) bonus, deferred compensation,
savings, stock option, retirement, pension, profit sharing or severance pay
agreement, plan or arrangement; (c) agreement, contract or indenture relating
to the borrowing of money involving an aggregate unpaid balance of one thousand
dollars ($1,000) or more; (d) guaranty of any obligation for the borrowing of
money or otherwise, excluding endorsements made for collection; (e) management
agreement, consulting or other similar contract or arrangement; (f) collective
bargaining agreement; (g) agreement with any present or former officer,
director or shareholder; (h) license, whether as licensor or licensee; (i)
contract or commitment for the purchase of materials or supplies or for the
performance of services over a period of more than sixty (60) days not in the
ordinary course of business; (j) contract or commitment to make capital
expenditures in excess of $500 in the aggregate; (k) contract or option to
purchase or sell any real property; (1) consent decree; or (m) other contract,
agreement or other commitment that is material to the business, operations,
prospects, properties or assets or to the condition, financial or otherwise, of
Seller. Except as disclosed on Exhibit 2.11 attached hereto, as of the date
hereof seller is not aware of any basis for the termination or cancellation of
any such contracts other than the stated expiration thereof. As of the date
hereof, all of the contracts, commitments and agreements to which Seller is a
party are in full
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force and effect without any default or breach thereof in any material respect
by Seller or any other party thereto.
2.12 Customers. A complete and accurate list of all customers of Seller
from inception of Seller through March 31, 1998, including addresses, telephone
numbers and the names of primary contacts with each customer, has been
delivered by Seller to Buyer, accompanied by a complete and accurate list of
all of Seller's standard prices and any applicable discounts by customer name.
2.13 Litigation and Proceedings. Except as set forth on Exhibit 2.13
attached hereto, (a) there are no actions, suits or proceedings pending or
threatened and there are no claims against or affecting Seller or its
properties or assets, at law or in equity or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, that involve the possibility of
any judgment or liability that may result in any material adverse change in the
operations, properties, or assets or in the condition, financial or otherwise,
of Seller's business, and (b) Seller is not in default under or in violation of
any judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental department, commission, board, bureau, agency or
instrumentality.
2.14 Governmental Authorizations. Except as disclosed on Exhibit 2.14,
Seller has all licenses, franchises, permits and other governmental
authorizations that are legally required to enable it to conduct its business
in all respects as conducted on the date hereof. Seller is in compliance with
all applicable federal, state and local laws, rules and regulations, including,
without limitation, those imposing taxes; and the execution, delivery and
performance of this Agreement, and the consummation by Seller of the
transactions contemplated hereby, will not violate in any material respect any
provisions of, or constitute a default under, any applicable judgment, order,
writ, injunction, decree or award, of any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality.
2.15 Insurance. Except as disclosed on Exhibit 2.15, all material
insurable properties used by Seller in conducting its business are insured in
amounts and against all risks usually insured against by persons operating
similar properties in the localities where such properties are located. Seller
maintains all other insurance coverage in such amounts, types and forms as is
customarily carried by persons similarly situated to protect Seller and its
operations, assets and properties, against such casualties, risks and
contingencies that may arise in the course of its business and operations. All
of the foregoing insurance policies are issued by insurers of recognized
responsibility, are in full force and effect and are fully paid as to all
premiums heretofore due. Exhibit 2.15, attached hereto contains a summary of
the policies of fire, liability, worker's compensation and other forms of
insurance held by Seller that relate to the Assets, the Real Property or
Seller's business.
2.16 Inventory. All inventory of Seller (a) is in good and merchantable
condition, of a quantity and quality usable or saleable in the normal course of
business and has a value, at March 31, 1998, as reflected in the financial
statements, fairly stated at the lower of cost (determined on last-in,
first-out basis) or market; and (b) is not obsolete or defective.
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2.17 Employee Benefit Plans and ERISA. Except as disclosed on Exhibit
2.17, Seller does not maintain or sponsor or make and is not required to make
contributions to any pension, profit-sharing, stock bonus, stock option, thrift
or other retirement plan, medical, hospitalization, vision, dental, life,
disability, vacation or other insurance or benefit plan, employee stock
ownership plan, deferred compensation plan, stock ownership, stock purchase,
performance share, bonus, benefit or other incentive plan, severance plan or
other similar plan, agreement, arrangement or understanding relating to Seller
or its employees, including, without limitation, any such plan, agreement,
arrangement or understanding subject to the Employee Retirement Income Security
Act of 1974 ("ERISA") (collectively, the "Employee Benefit Plans").
2.18 Employees. Seller has provided Buyer with a copy of all written
employment contracts with its officers or employees and a complete and accurate
list of the name and current annual compensation of each manager, salesman,
employee and independent contractor employed by Seller, together with each such
person's job title and amounts and forms of special fringe benefits. Seller is
in full compliance with all federal, state and local laws regarding employment,
wages and hours, and occupational safety and health standards with respect to
its employees. To the best knowledge, information and belief of Seller and The
Members, no officer, manager, salesman, other employee or independent contractor
employed by Seller has any plans to terminate his or her employment with Seller.
2.19 Intellectual Property. Exhibit 1.1(d) attached hereto sets forth a
complete and correct list of each trademark (whether or not registered),
trademark application, trade name, service mark, copyright, patent, patent
application, and proprietary intellectual property (including, without
limitation, proprietary computer software, whether in object or source form)
(collectively, "Intellectual Property") owned, used or licensed by Seller and a
description of whether such Intellectual Property is owned or licensed by
Seller. Except as disclosed in such Exhibit 1.1 (d), Seller has the exclusive
right to use such Intellectual Property and the current use by Seller of such
Intellectual Property does not infringe the rights of any other person.
2.20 Toxic or Hazardous Substances. Except as disclosed on Exhibit 2.20
attached hereto, Seller has not directly or indirectly used, stored, generated,
treated, buried, dumped, disposed of or transported any toxic or hazardous
substances on, to or from any real property owned or leased by Seller. Except as
disclosed on Exhibit 2.20, to the best knowledge and belief of Seller, (a) all
real property owned or leased by Seller or used in connection with its business
has not been, and is not now, listed on the Environmental Protection Agency's
list of violating facilities established pursuant to the Clean Water Act or the
National Priorities List established pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), (b) there are no orders,
judgments, claims, suits, actions or proceedings including, but not limited to,
governmental investigations or requests for information, that could have an
adverse effect upon the assets or business of Seller, and (c) there are no
underground storage tanks, contaminated soil, asbestos or other toxic or
hazardous substances on the real property owned or leased by Seller.
2.21 Liabilities. Except as reflected in the Financial Statements or
disclosed on Exhibit 2.21 attached hereto, Seller has no liabilities or
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obligations, whether absolute, accrued, contingent, direct, indirect, due or
becoming due, or otherwise.
2.22 Title; Leased Assets. Upon consummation of the transactions
contemplated hereby, (a) Buyer shall receive good, valid and marketable title
to the Assets and the Real Property, free and clear of all liens, claims and
encumbrances and (b) Buyer will be entitled to use, as Lessee, all leased
assets used in Seller's business, free and clear of all liens, claims and
encumbrances except for Assumed Liabilities.
2.23 Brokers and Finders. There is no agent's, broker's or finder's fee
or commission payable in connection with the transaction contemplated hereby by
virtue of or resulting from any action or agreement by Seller or the Members.
2.24 Full Disclosure. No representation or warranty made by Seller or
the Members in this Agreement and no documentation or certification furnished
or to be furnished to either or both of the Acquiring Companies pursuant to
this Agreement contains any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
2.25 Restrictive Documents. Except as disclosed on Exhibit 2.25
attached hereto, neither Seller nor either of the members is subject to, or a
party to, any charter, bylaw, hypothec, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character, that
materially adversely affects the business practices, operations or condition of
Seller or any of assets or property, or that would prevent consummation of the
transactions contemplated by this Agreement, compliance by the Members with the
terms, conditions and provisions hereof or the operation by Buyer after the
Closing Date of the business conducted by Seller prior to the Closing Date on
substantially the same basis as heretofore operated or that would restrict the
ability of Buyer to acquire any property or conduct business in any area.
2.26 Purchase for Investment; Restrictive Legend. Seller will acquire
the Parent Shares for investment and not with a view to resale or for
distributing all or any part thereof in any transaction which would constitute
a "distribution" within the meaning of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act") The
offering of the Parent Shares to Seller was made only through direct, personal
communication between a duly authorized representative of Seller and a duly
authorized representative of Parent and not through public solicitation or
advertising. Seller and each of the Members acknowledge that the Parent Shares
have not been registered under the Securities Act and Parent is under no
obligation to file a registration statement with the United States Securities
and Exchange Commission with respect to the Parent Shares. Seller and each of
the members understand and agrees that the Parent Shares may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Parent Shares or an available exemption
from registration under the Securities Act and any applicable state laws, the
Parent Shares must be held indefinitely. In particular, Seller and each of the
Members
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are aware that the Parent Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Seller and each of the Members represent that, in the absence of an
effective registration statement covering the Parent Shares, Seller will sell,
transfer, or otherwise dispose of the Parent Shares only in a manner consistent
with its representations and agreements set forth herein and in that certain
Lock-up Letter (as hereinafter defined) executed by Seller as a condition to
the Closing and the consummation of the transactions contemplated by this
Agreement. The certificate(s) evidencing the Parent Shares will bear the
following legend:
"THE SHARES OF THE COMMON STOCK REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THE TRANSFERABILITY OF THESE
SECURITIES IS SUBJECT TO THE PROVISIONS OF LOCK-UP LETTER
DATED AS OF ________________________, 1998 AMONG Specialty Capital
Services, Inc., A NEVADA CORPORATION, SPECIALTY
TELECONSTRUCTORS, INC., A NEVADA CORPORATION AND TELEFORCE,
LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, A COPY OF WHICH
MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
PRINCIPAL PLACE OF BUSINESS OR THE REGISTERED OFFICE OF
SPECIALTY TELECONSTRUCTORS, INC."
2.27 Investor Qualification. Seller and the Members each represent and
warrant that it, he or she (a) has such knowledge and experience in financial
and business matters that it, he or she is capable of evaluating the merits and
risks of its, his or her investment in the Parent Shares and has the financial
ability to assume the monetary risk associated therewith; (b) is able to bear
the complete loss of its, his or her investment in the Parent Shares; (c) has
received such other documents and information as it, he or she has requested and
has had the opportunity to ask questions of, and receive answers from, Parent
and its management concerning Parent and the terms and conditions of the
offering of the Parent Shares and to obtain additional information; (d) is an
"accredited investor" as defined in Rule 501(a) of the Regulation D promulgated
under the securities Act; (e) is not an entity formed solely to make this
investment; and (f) is not relying upon any statements or instruments made or
issued by any person other than Parent and its officers in making its decision
to invest in the Parent Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES
In order to induce Seller and the Members to enter into this Agreement
and to consummate the transactions contemplated herein, each of the Acquiring
Companies hereby represent and warrant as follows:
3.1 Organization and Capitalization. It is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to consummate
the transactions contemplated hereby. Buyer is a subsidiary of Parent.
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3.2 Authorization and Effect of Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated herein
have been duly authorized and approved by its Board of Directors. No further
corporate approvals or authorizations on its part are necessary to authorize
the consummation of the transactions contemplated herein. This Agreement has
been duly executed and delivered by the Acquiring Companies and constitutes the
valid and binding obligation of the Acquiring Companies, enforceable in
accordance with its terms.
3.3 Consents and Approvals. Except as shall have been obtained prior to
Closing, no filing with, and no permit, authorization, consent or approval of,
any public body or authority is necessary for the consummation by it of the
transactions contemplated hereby. The execution and delivery of this Agreement,
and the consummation by it of the transactions contemplated hereby, will not
conflict with any provisions of its Articles of Incorporation or Bylaws, and
will not violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it.
3.4 Brokers and Finders. Buyer represents and warrants that there is no
agents', broker's or finder's fee or commission payable in connection with the
transactions contemplated herein by virtue of or resulting from any action or
agreement by it.
3.5 Litigation And Proceedings. There are no actions, suits or
proceedings pending or threatened and there are no claims against or affecting
the Acquiring Companies or their properties or assets, at law or in equity or
before or by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
that involve the possibility of any judgment or liability that may result in
any material adverse change in the operations, properties, or assets or in the
condition, financial or otherwise, of either Acquiring Company's business taken
as a whole.
3.6 Form 10-QSB. The Form 10-QSB filed by Parent with the U.S.
Securities and Exchange Commission for the quarterly period ended March 31,
1998, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
COVENANTS OF SELLER AND THE MEMBERS
Seller and the Members hereby, jointly and severally, covenant and
agree with the Acquiring Companies as follows:
4.1 Conduct of Business. Prior to the Closing Date, Seller shall
conduct its business only in the ordinary course consistent with present
business practices and policies and shall use all reasonable efforts to (a)
preserve intact its present business organization and relationships, (b)
maintain and keep the Assets and the Real Property in good repair and condition
except for deterioration due to ordinary wear and tear, (c) maintain in full
force and effect insurance comparable in amount and in scope of coverage to
that now
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maintained, (d) pay and perform, when due, all material obligations under
contracts, leases and documents relating to or affecting the assets, properties
and business of Seller, and (e) comply with and perform all material
obligations and duties imposed by federal, state and local laws, and all rules,
regulations and orders imposed by federal, state or local governmental
authorities.
4.2 Access to Properties and Records. Between the date of this
Agreement and the Closing Date, Seller shall afford to the officers and
authorized representatives of Buyer full access during normal business hours to
the properties, books and records (including tax returns filed and those in
preparation) of Seller in order that Buyer may have full opportunity to make
such investigation as it shall desire of the affairs and business of Seller,
and Seller's officers shall furnish Buyer and its representatives with such
additional financial and operating data and other information relating to the
business and properties of Seller as Buyer shall from time to time reasonably
request.
4.3 Approvals of Third Parties. As soon as practicable, Seller will use
its best efforts to secure all necessary approvals, if any, of third parties,
that are required of them in order to effect the transactions contemplated by
this Agreement or that are required to be obtained by them prior to the Closing
to permit Buyer to own after the Closing all of the Assets and the Real
Property.
4.4 Additional Documents. Prior to the Closing, Seller shall furnish to
Buyer true and complete copies of all notes, mortgages, instruments and
documents relating to its ownership of the Real Property, all written
contracts, all insurance policies covering the Assets and all documents
regarding Seller's Intellectual Property.
4.5 Certain Changes. Notwithstanding anything in Section 4.1 to the
contrary, Seller has not from December 31, 1997 to the date hereof (except as
disclosed on Exhibit 4.5) and will not, from the date hereof until the Closing
Date (without the written consent of Buyer):
(a) make any material change in the conduct of its business
and will operate its business in the ordinary course consistent with
past practices;
(b) enter into, or amend in any material respect, any contract
or agreement of a type required to be disclosed pursuant to Section
2.11, other than in the ordinary course of business, or contract or
commit to make capital expenditures for more than five hundred dollars
($500) in the aggregate;
(c) issue, deliver or agree to issue or deliver any stock, or
other securities of Seller, or grant or agree to grant any
subscriptions, options, warrants, rights or other agreements or
commitments obligating Seller to issue additional shares of its capital
stock or any securities convertible into its capital stock;
(d) borrow any funds or incur, or become subject to, any
obligation or liability (absolute or contingent), except obligations
and
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liabilities incurred in the ordinary course of business and in no event
more than one thousand dollars ($1,000) in the aggregate, other than
trade payables, normal accrued expenses and payroll expenses;
(e) declare or make any payment of dividends or
distributions of any kind whatsoever to the Members of Seller except
a distribution to the Members no greater than an amount required to
pay income taxes estimated to be imposed on the Members solely by
reason of the inclusion in their income of the net income of Seller for
the period between January 1, 1998 and the Closing Date;
(f) except in the ordinary course of business and for
adequate consideration, sell, transfer or otherwise dispose of, any
material assets;
(g) enter or agree to enter into any agreement or
arrangement granting any preferential rights to purchase any of its
assets, properties or rights or requiring the consent of any party to
the transfer and assignment of any such asset, property or right;
(h) make any loan, accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or
termination pay to any of its present or former officers, directors or
employees;
(i) enter into an agreement with a person other than Buyer
or any of its affiliates to merge or consolidate with another
corporation or to sell all or substantially all of the assets of
Seller, or acquire a material amount of assets constituting all or
substantially all of the business or assets of any person;
(j) take any action that might reasonably be expected to
impair the business or assets of Seller or fail to take any action that
would cause or permit the representations made in Article II hereof to
be inaccurate at the time of the Closing;
(k) make any change in its articles of incorporation or
bylaws; or
(l) commit itself to do any of the foregoing.
4.6 Notification of Material Events. Prior to the Closing, Seller will
immediately advise Buyer in writing of (i) any event occurring subsequent to the
date hereof which would render any representation or warranty of Seller
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, and (ii) any other
event that would cause a material adverse change in the business of Seller.
4.7 Amendment to Organizational Documents. Immediately following the
Closing, Seller shall cease using the name "Teleforce, LLC" and take such steps
as necessary to amend its organizational documents to change its name.
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ARTICLE V
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1 Efforts. Buyer will use its best efforts to obtain from all third
parties approvals, if any, necessary for the consummation of the transactions
contemplated by this Agreement.
5.2 Notification of Material Events. Prior to the Closing, Buyer will
immediately advise Seller in writing of (i) any event occurring subsequent to
the date hereof which would render any representation or warranty of Buyer
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, and (ii) any other
event that would cause a material adverse change in the business of Parent on a
consolidated basis.
ARTICLE VI
CONDITIONS TO RESPECTIVE OBLIGATIONS
The respective obligations of the Acquiring Companies, Seller and the
Members to cause the transactions contemplated by this Agreement to be
consummated shall be subject to the satisfaction on or before the Closing Date
of all of the following conditions, except as such parties may waive such
conditions in writing:
6.1 Approvals And Consents. All consents, approvals and authorizations
of, filings and registrations with, and notifications to, all applicable
governmental authorities, licensors or other parties required for the
consummation of the transactions contemplated by this Agreement shall have been
duly obtained or made in form and substance reasonably satisfactory to the
parties hereto and shall be in full force and effect.
6.2 Litigation. On the Closing Date, there shall not be pending or
threatened litigation in any court or any proceeding by any governmental
commission, board or agency, with a view to seeking or in which it is sought to
restrain or prohibit consummation of the transactions contemplated by this
Agreement.
6.3 Employment Agreements. Buyer and each of the Members shall have
entered into a mutually acceptable Employment Agreement on substantially the
terms contained in Exhibit 6.3 hereto and Buyer and each of the employees of
Seller listed on Exhibit 6.3(a) hereto shall have entered into a mutually
acceptable Employment Agreement on substantially the terms contained in Exhibit
6.3(b) hereto.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER AND THE MEMBERS
The obligations of Seller and the Members to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as Seller and The Members may waive such conditions in writing:
7.1 Representations, Warranties and Covenants. All representations and
warranties of the Acquiring Companies contained in this Agreement shall be true
in all material respects on the date of this Agreement and on and as of the
Closing Date as if such representations and warranties that are made on and as
of the Closing Date (except for representations and warranties that are made as
of a specified date).
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE ACQUIRING COMPANIES
The obligations of the Acquiring Companies to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Closing Date of all of the following conditions,
except as the Acquiring Companies may waive such conditions in writing:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Seller and the Members contained in this Agreement shall be true
in all material respects on the date of this Agreement and as of the Closing
Date as if such representations and warranties were made on and as of the
Closing Date (except for representations and warranties which are made as of a
specified date). Seller and the Members shall have complied in all material
respects with all agreements and covenants required by this Agreement to be
performed by them on or prior to the Closing Date and shall have furnished to
the Acquiring Companies a certificate, dated the Closing Date, signed by Seller
and the Members to such effect.
8.2 Documents of Transfer and Assignment; Lock-Up Letter. All documents
required to be executed and delivered by Seller at or prior to the Closing
shall have been so executed and delivered, including but not limited to, a
Lock-up Letter ("Lock-up Letter") in substantially the form attached hereto as
Exhibit 8.2, all bills of sale, assignments, deeds, transfers and other
documents of conveyance or instruments necessary to transfer the Assets and the
Real Property to Buyer and to consummate the transactions contemplated hereby.
8.3 Consent of Seller's Secured Lenders. Buyer shall have received from
each of its secured lenders, if any, executed documents (in form and substance
reasonably satisfactory to Buyer) terminating their liens.
8.4 Third Party Consents. Buyer shall have received all consents of
third parties requested by Buyer pursuant to this Agreement or required to
consummate the transactions in accordance with this Agreement, including without
limitation, the transfer and assignment to Buyer of the Assets and the Real
Property and all assumed liabilities with the modifications requested by Buyer;
provided, however, that if (a) Seller and the Members have used best efforts to
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obtain all third party consents, (b) as to contracts or other matters requiring
third party consents that have not been obtained as of the Closing
("Non-Consented Matters"), Seller and the Members will continue to use best
efforts to obtain such consents following the Closing, (c) Seller and the
Members will take all actions necessary or appropriate to convey to Buyer the
benefit of any Non-Consented Matters notwithstanding the lack of consent, and
(d) Buyer is satisfied that the Non-Consented Matters are not material and that
the benefits will be effectively conveyed to Buyer, then Buyer shall waive the
requirement of receiving consents with respect thereto.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 survival of Representation inns; and Warranties. The
representations and warranties of the parties contained in this Agreement shall
survive beyond the Closing Date and any investigation by or on behalf of the
Acquiring Companies.
9.2 Indemnification by Seller and the Members.
(a) Seller and the Members, jointly and severally, hereby
agree to indemnify, defend and hold harmless each of the Acquiring
Companies against and in respect of any and all claims, demands,
losses, costs (including court costs and attorneys I fees), expenses,
obligations, liabilities, damages, including interest and penalties
that it may incur or suffer as a result or arising out of any breach of
or failure by Seller or The Members to perform any of their respective
representations, warranties or covenants contained in this Agreement or
any exhibit or other instrument furnished or to be furnished by Seller
and the Members under this Agreement.
(b) Seller and the Members, jointly and severally, hereby
agree to indemnify, defend and hold harmless the Acquiring Companies
against and in respect of any and all claims, demands, losses, costs
(including court costs and attorneys' fees), expenses, obligations,
liabilities, damages, including interest and penalties that each of the
Acquiring Companies may incur or suffer as a result of or arising out
of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed
on or prior to the Closing, whether or not then known, due or payable.
9.3 Indemnification by Buyer. The Acquiring Companies will indemnify,
defend and hold harmless Seller and the Members against and in respect of any
and all claims demands, losses, costs including court costs and attorneys'
fees), expenses, obligations, liabilities, damages, including interest and
penalties that they may incur or suffer as a result of or arising out of any
breach of or failure by the Acquiring Companies to perform any of their
representations, warranties or covenants contained in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by them under this Agreement.
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ARTICLE X
GENERAL
10.1 Closing. The closing ("Closing") of the transactions contemplated
by this Agreement shall be held at 2:00 p.m., on the Closing Date at the
offices of Parent located at 12001 Hwy. 14 North, Cedar Crest, New Mexico 87008
or at such other time on the Closing Date and place as the parties hereto may
mutually agree. The Closing Date (herein so called) shall be the later of (i)
May __, 1998 or (ii) as soon as practicable after the time each of the
conditions set forth in Articles VI through VIII have been satisfied or waived
by the party or parties entitled to the benefit of such conditions, but in no
event later than May 30, 1998.
10.2 Expenses. Each of the Acquiring Companies, Seller and the Members
shall be responsible for all their respective costs and expenses incurred by
them in connection with the transactions contemplated by this Agreement.
10.3 Exhibits. All statements contained in the Exhibits hereto (and any
amendments or supplements to this Agreement) shall be deemed additional
representations and warranties of Seller and the Members.
10.4 Amendment. This Agreement may be amended at any time only by
written agreement of the parties hereto. Any of the terms or conditions of this
Agreement may be waived in writing at any time or prior to the Closing Date by
the party that is entitled to the benefits thereof.
10.5 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual consent in writing of the Acquiring
Companies and Seller;
(b) by either the Acquiring Companies or Seller if the Closing
Date shall not have occurred by June 30, 1998, provided that the right
to terminate under this provision may not be asserted by a party if the
failure to consummate the transactions contemplated herein is
attributable to a breach by such party of any of its representations
and warranties contained in this Agreement or a failure of such party
to fulfill its obligations pursuant to this Agreement;
(c) by either the Acquiring Companies or Seller if any court
of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable; or
17
<PAGE> 19
(d) by the Acquiring Companies if there has been a material
misrepresentation or material breach on the part of Seller or the
Members in the representations, warranties and covenants of Seller or
the Members set forth herein or if there has been any failure by Seller
or the Members to comply with their respective obligations hereunder,
or by Seller if there has been a material misrepresentation or material
breach on the part of the Acquiring Companies in the representations,
warranties or covenants of the Acquiring Companies set forth herein or
if there has been any failure by the Acquiring Companies to comply with
their obligations hereunder; provided, in either case, the terminating
party must give the other party written notice and 10 days to cure any
such matter.
In the event of the termination and abandonment of this Agreement
pursuant to this Section 10.5, this Agreement shall forthwith become void and
have no effect, without any liability on the part of any party or its
directors, officers, shareholders or members (except the liability of any party
for any breach of this Agreement).
10.6 Bulk Transfer Laws. The Acquiring Companies hereby waive
compliance by Seller with the provisions of any applicable Bulk Transfer Laws
of any state, and Seller warrants and agrees to pay and discharge when due all
claims of creditors asserted against either of the Acquiring Companies by
reason of such noncompliance to the extent that such liabilities are not
specifically assumed by Buyer under this Agreement. Seller hereby indemnifies
and agrees to hold each of the Acquiring Companies harmless from, against and
in respect of (and shall on demand reimburse Buyer for) any loss, liability,
costs or expenses, including, without limitation, attorneys' fees, suffered or
incurred by it by reason of the failure of Seller to pay or discharge such
claims.
10.7 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time either personally delivered or sent by certified mail,
postage prepaid, as follows:
(a) If to Seller or the Members, to:
Teleforce, LLC
31522 Monterey Street
Laguna Beach, California 92677
With a copy to:
Wayne Avrashow, Esq.
16133 Ventura Blvd., Suite 700
Encino, California 91436
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<PAGE> 20
(b) If to the Acquiring Companies, to:
Specialty Teleconstructors, Inc.
12001 Hwy. 14 North
Cedar Crest, New Mexico 87008
Attention: Michael R. Budagher, President
With a copy to:
OmniAmerica, Inc.
2 Summit Park Drive
Suite 105
Cleveland, Ohio 44131
Attention: F. Howard Mandel,
Vice President and General Counsel
10.8 Public Announcements. None of the Acquiring Companies, Seller or
The Members shall issue any press release or otherwise make any public
statement with respect to the transactions contemplated hereby without the
prior consent of the other parties.
10.9 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
provided, however, that Buyer shall have the right to assign to one (1) or more
direct or indirect wholly-owned subsidiaries of Buyer or Parent any and all of
the rights and obligations of Buyer under this Agreement (such subsidiary
assuming all of the obligations of Buyer in connection with the transactions
contemplated herein and making representations, warranties and covenants
comparable to those made by Buyer herein). No assignment shall relieve the
assignor of its obligations under this Agreement.
10.10 Miscellaneous. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one agreement. Headings contained in this Agreement
are for reference purposes only and shall not affect in any manner the meaning
or interpretation of this Agreement. This Agreement and the documents and
instruments referred to herein constitute the entire Agreement between the
parties HERETO AND SUPERSEDES all other understandings with respect to the
subject matter hereof. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Mexico.
10.11 Severability. The provisions of this Agreement shall be deemed
independent and severable, and the invalidity or partial invalidity or
unenforceability of any one (1) provision shall not affect the validity or
enforceability of any other provision.
10.12 Intent of the Parties With Respect to Tax Treatment. The
parties hereto hereby acknowledge that the acquisition of the assets and the
Real Property contemplated by this Agreement is intended to qualify as a
tax-free
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<PAGE> 21
exchange pursuant to Section 368 of the Internal Revenue Code of 1986, as
amended, to the extent of that portion of the Purchase Price that is paid with
Parent Shares.
20
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have executed this
Agreement to be effective as of the date first above written.
BUYER:
Specialty Capital Services, Inc.
a Nevada corpora Mi
By: /s/ MICHAEL R. BUDAGHER
-----------------------------------
Michael R. Budagher, President
PARENT:
SPECIALTY TELECONSTRUCTORS, INC.
a Nevada corporation
By: /s/ MICHAEL R. BUDAGHER
-----------------------------------
Michael R. Budagher, President
SELLER:
TELEFORCE, LLC
a California limited liability company
By: /s/ RICHARD H. STATLER
-----------------------------------
Richard H. Statler, Manager
By: /s/ TERRY A. KLEIN
-----------------------------------
Terry A Klein, Manager
MEMBERS:
/s/ RICHARD H. STATLER
--------------------------------------
Richard H. Statler
/s/ TERRY A. KLEIN
--------------------------------------
Terry A. Klein
21
<PAGE> 1
EXHIBIT 10.12
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN
CERTAIN OF THE SUBSIDIARIES
OF
ARCH COMMUNICATIONS GROUP, INC.
AS SELLERS
AND
OMNIAMERICA, INC.
AS BUYER
APRIL 10, 1998
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS____________________________________________________________________________________________________1
2. BASIC TRANSACTION______________________________________________________________________________________________9
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS_________________________________________________________________12
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER___________________________________________________________________17
5. PRE-CLOSING COVENANTS_________________________________________________________________________________________18
6. POST-CLOSING COVENANTS________________________________________________________________________________________21
7. CONDITIONS TO OBLIGATION TO CLOSE_____________________________________________________________________________22
8. INDEMNIFICATION_______________________________________________________________________________________________26
9. TERMINATION___________________________________________________________________________________________________29
10. MISCELLANEOUS________________________________________________________________________________________________29
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit A List of Leased Sites
Exhibit B List of Owned Sites
Exhibit C Defects as of the Date of Agreement
Exhibit D Master Tower Space Lease
Exhibit E Site Lease
Exhibit E-1 Sites where the relevant Seller will enter a Site Lease with the Buyer
Exhibit F Site Sublease
Exhibit F-1 Sites where the relevant Seller will enter a Site Sublease with the Buyer
Exhibit G Allocation Schedule
Exhibit H Financial Information
Exhibit I Schedule of Repurchase Options
Exhibit J Form of Opinion of Counsel to the Sellers
Exhibit K Form of Noncompetition Agreement
Exhibit L Form of Opinion of Counsel to the Buyer
Disclosure Schedule
</TABLE>
<PAGE> 3
ASSET PURCHASE AND SALE AGREEMENT
Agreement entered into as of April 10, 1998, by and between
OmniAmerica, Inc., a Delaware corporation (the "Buyer"), and certain
wholly-owned subsidiaries of Arch Communications Group, Inc., a Delaware
corporation ("ACG") which own or lease or manage the communications facility
sites included in the Acquired Assets, which subsidiaries are identified on the
signature pages of this Agreement. Such subsidiaries are referred to
collectively herein as the "Sellers", and each individually as a "Seller". The
Buyer and the Sellers are referred to collectively herein as the "Parties".
R E C I T A L S
A. The Sellers operate communications facilities consisting of
communications towers or roof-mounted antenna mounts and tower supporting
systems, electric power facilities, equipment shelter buildings and related
equipment and facilities.
B. The Sellers (i) utilize their communications facilities to operate
transmitters/antennas in connection with their wireless messaging businesses and
(ii) lease space on the communications facilities to third parties which have a
need for transmitters/antenna locations.
C. The Sellers are willing to sell and assign their interests in the
communications facilities identified in this Agreement to the Buyer, and the
Buyer is willing to pay for, and acquire such facilities, upon the terms and
conditions herein set forth.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACG" has the meaning set forth in the preamble above.
"Acquired Assets" means all of the right, title, and interest that the
Sellers possess in and to the following assets:
(i) the communications Sites leased by the Sellers pursuant to
ground or rooftop leases, held by Sellers pursuant to easements or (with respect
to three Sites) which will be leased by a Seller to the Buyer, all of which are
listed on Exhibit A; except for Sites identified in Exhibit A as Managed Sites,
at each Site on Exhibit A, the relevant Seller leases the land (or rooftop
space), or holds an easement for the land and owns the communications tower and
equipment necessary to operate the tower, or (with respect to three Sites) the
relevant Seller owns the fee interest. At "Managed Sites" the relevant Sellers
lease the land and/or lease or manage the communications tower and related
equipment. All Sites listed on Exhibit A are referred to herein as the "Leased
Sites".
(ii) the communications Sites listed on Exhibit B, which are
owned by the Sellers; such Sites are referred to herein as the "Owned Sites".
<PAGE> 4
For each Site "Acquired Assets" includes:
(i) all communications towers, equipment shelter buildings,
guy wires and other support structures related to a tower located at the Site,
electrical wiring from the local utility connection point to such Site, electric
meters owned by the Seller at the Site which measure electricity either to the
tower only or jointly to the tower, and other equipment, fixtures and fittings
owned by a Seller related to the operation of a Site; provided that at Managed
Sites, such equipment is leased and not owned;
(ii) emergency generators owned by the Sellers and located at
a Site if (and only if) such generators are presently wired so as to provide
back-up power to the tower structure at such Site (as contrasted with generators
used to provide back-up power only to the Sellers' transmitters and antennas),
except that the emergency generator at the 10860 Hickman Road, Des Moines, Iowa
Site is excluded from the Acquired Assets;
(iii) with respect to each of the Owned Sites, fee simple
title to the real property at such Site, together with any buildings and
improvements located at such Site that are deemed real property and together
with the right to the use of any easement, right-of-way and other rights
appurtenant to each Owned Site for purposes of access to the Site and any other
purposes;
(iv) with respect to each of the Leased Sites, all of the
tenant's rights and interest under the lease, easement or management agreement
pursuant to which the Seller holds the Leased Site (including, with respect to
each of the Managed Sites, the Seller's interest in any equipment leased in
connection therewith);
(v) fences, gates, locks and keys and similar items related to
each Site to the extent owned by a Seller;
(vi) all permits, licenses, registrations and approvals owned
by or granted to the Sellers by any federal, state or local governmental entity
or other jurisdiction or instrumentality and related to (or necessary for) the
ownership and operation of a Site (other than FCC authorizations for operation
of specific equipment on specified frequencies at a Site, which will be retained
by each Seller), including, without limitation, the antenna structure
registration required by 47 C.F.R. Part 17.4 (1996); and any pending
applications for any new or modified registrations, approvals, licenses or
permits pending on the Closing Date, including, without limitation, those items
identified in Section 3(k) of the Disclosure Schedule;
(vii) each Seller's respective rights and interest under tower
space leases or license agreements pursuant to which third parties (other than
Sellers or affiliates of Sellers) lease antenna space at any Site for the
operation of a communications facility at such Site;
(viii) any security or similar deposits or unearned prepaid
rent held by Sellers pursuant to tower space leases or license agreements with
third parties at any Site;
(ix) all rights and interest of Sellers in and to all
contracts, agreements, understandings, options, commitments, personal property
leases, product warranty agreements and service agreements relating to the Owned
Sites and the Leased Sites and the towers (collectively the "Contracts")
including, without limitation, those of the foregoing listed on
2
<PAGE> 5
Section 3(r) of the Disclosure Schedule, but in each case only to the extent
such Contracts are chosen to be included in the Acquired Assets by the Buyer;
(x) all records relating to the Owned Sites, the Leased Sites
and the towers and the maintenance thereof, including, but not limited to, all
engineering data, logs, consultants' reports and correspondence used or held for
use in the operation of the Owned Sites, the Leased Sites and the towers or
necessary or desirable to show compliance with any law or regulation applicable
to the Owned Sites, the Leased Sites, the towers or the operation of the towers
or relating to the ownership, use, maintenance or repair of any of the Acquired
Assets and not pertaining solely to Sellers' internal corporate affairs or their
other interests (including their wireless messaging businesses), it being
understood that Sellers shall have the right to retain copies of any such
records necessary for the operation of their business and filing of tax papers
after the Closing Date; and
(xi) all of the other tangible and intangible property and
rights that are owned by Sellers and used principally in connection with the
Owned Sites, the Leased Sites and the towers.
The Acquired Assets shall not include the following ("Excluded
Assets"):
(i) any FCC authorizations for the operation of specific
equipment on specified frequencies at any Leased Site or Owned Site;
(ii) any transmitter, antenna, cabling, wiring, accessions,
devices or equipment related to the operation of transmitters and antennas which
is used to operate a broadcast facility at a Site;
(iii) any Cash, accounts receivable or deposits made by
Sellers with any third parties related to any Site; provided that there shall be
included in the Acquired Assets any accounts receivable or cash received by
Sellers related to occupancy by third parties of space on any Site during
periods after the Closing Date;
(iv) any generator located at a Site which is wired to provide
back-up power only to the transmitters and antennas at such Site, and the
emergency generation at 10860 Hickman Road, Des Moines, Iowa; and
(v) any electric meters owned by a Seller at a Site where the
meter exclusively measures electric power provided to Seller's antennas and
transmitters.
"Adjusted Purchase Price" has the meaning set forth in Section 2(d)
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
3
<PAGE> 6
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504 or any similar group defined under a similar provision of
state, local, or foreign law.
"Annualized Operating Cash Flow" means the annualized Arch Rent
Revenues and Third-Party Rent Revenues derived from tenants for which the
Sellers have written or oral leases or licenses for the Sites as set forth in
Exhibit H1, minus annualized land lease expense, utilities, maintenance and
managed site expenses of the Sites as set forth on Exhibit H1.
"Arch Towers Business" means Sellers' operation of the Sites as
communications facilities for the leasing of tower space to third parties for
such third parties' operation of communications facilities, or the use of tower
space by the Sellers for operation of their wireless messaging Business.
"Assumed Liabilities" means all liabilities and obligations of the
Sellers related to the Acquired Assets under the agreements, contracts, leases,
licenses, and other arrangements referred to in the definition of Acquired
Assets and included in the Disclosure Schedule (including leases pursuant to
which the Sellers hold Leased Sites), to the extent such liabilities and
obligations relate to or arise during periods after the Effective Time;
provided, however, that the Assumed Liabilities shall not include:
(i) any liability or obligation of the Sellers under this
Agreement (or under any side agreement between the Sellers on the one hand and
the Buyer on the other hand entered into on or after the date of this
Agreement);
(ii) any claims, liabilities, losses, damages or expenses
relating to Sellers' operation of their wireless messaging business;
(iii) any claims, liabilities, losses, damages or expenses
relating to any litigation, proceeding or investigation of any nature arising
out of the Owned Sites, the Leased Sites or the operation of the towers by
Sellers, including, without limitation, any claims against or any liabilities
for injury to or death of persons or damage to or destruction of property, any
workers' compensation claims, and any warranty claims;
(iv) tax liabilities of any and all kinds (federal, state,
local and foreign) of Sellers or their Affiliates or their Affiliated Group,
including, without limitation, taxes with respect to the Acquired Assets, any
liabilities for taxes on or measured by income, liabilities for withheld federal
and state income and employee F.I.C.A. (Federal Insurance Contribution Act) or
employer F.I.C.A. and liabilities for income taxes arising as a result of the
transfer of the transferred assets or otherwise by virtue of the consummation of
the transactions contemplated hereby except for taxes for the period after the
Closing Date to be prorated as specifically set forth in Section 2(d)(ii) of
this Agreement, and except that sales taxes arising by reason of the
transactions contemplated by this Agreement shall be payable as provided in
Section 10(l);
(v) any liabilities of Sellers or their Affiliates or members
of their Affiliated Group as an employer, including, without limitation,
liabilities for wages, supplemental unemployment benefits, vacation benefits,
severance benefits, retirement benefits, COBRA benefits, FAMLA benefits, WARN
obligations and liabilities, or any other employee benefits, withholding tax
liabilities, workers' compensation, or unemployment compensation benefits or
4
<PAGE> 7
premiums, hospitalization or medical claims, occupational disease or disability
claims or other claims attributable in whole or in part to employment by Sellers
or arising out of any labor matter;
(vi) any accounts payable or other indebtedness of Sellers or
their Affiliates or obligations to any persons who have lent money to Sellers;
(vii) any liabilities or obligations resulting from the
failure to comply with any environmental protection, health or safety laws or
regulations or resulting from the generation, storage, treatment,
transportation, handling, disposal, release of hazardous substances, solid
wastes, and liquid and gaseous matters by Sellers or their Affiliates and by any
other person in relation to Sellers or their Affiliates, including, without
limitation, any liability or obligation for cleaning up waste disposal sites
(provided that the exclusion of liabilities described in this clause (vii) from
the definition of "Assumed Liabilities" shall not relieve the Buyer from such
liabilities arising from such activities at the Sites after the Closing); or
(viii) any fees and expenses incurred by Sellers in connection
with negotiating, preparing, closing and carrying out this Agreement and the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of Sellers' attorneys, accountants and consultants.
"Base Purchase Price" has the meaning set forth in Section 2(d) below.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2(e) below.
"Closing Date" has the meaning set forth in Section 2(e) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Arch Towers Business or the Sellers that is not
already generally available to the public.
"Defects" means any of the following, unless any such item is a
Permitted Encumbrance:
(i) defects in title to any Sites;
(ii) with respect to Leased Sites, a lease, management
agreement or easement which has expired prior to the Closing Date or will expire
prior to December 31, 1998 and has not been renewed or extended (unless prior to
the Closing such lease, management agreement or easement shall have been renewed
or extended in a manner reasonably acceptable to the Buyer);
5
<PAGE> 8
(iii) with respect to Leased Sites, a lease, management
agreement or easement wherein the term has expired and the relevant Seller does
not have written evidence of exercise (or confirmation of exercise) of an
extension or renewal right contained in the Lease (unless prior to the Closing
the Seller provides to the Buyer written evidence of renewal or extension of
such lease, management agreement or easement reasonably acceptable to the
Buyer);
(iv) with respect to Leased Sites, a lease, management
agreement or easement pursuant to which a Seller holds the Site which is oral or
invalid (unless prior to the Closing the Seller provides written evidence of
such agreement signed by the lessor or grantor, reasonably acceptable to the
Buyer);
(v) with respect to Leased Sites, leases, management
agreements or easements in which the description of the premises is missing or
so ambiguous as to make it extremely difficult to tell whether the premises
consist of land, a rooftop or a tower (unless prior to the Closing the Sellers
provide written clarification of such ambiguity signed by the lessor or grantor,
reasonably acceptable to the Buyer);
(vi) encroachments of any portion of the improvements
(including guy wires and anchors) on any Site beyond the boundaries of such Site
or similar problems revealed by a survey of a Site meeting the minimum standard
detail requirements for ALTA/ACSM Land Title Surveys (unless prior to the
Closing the Sellers provide written evidence of correction of such encroachment
reasonably acceptable to the Buyer);
(vii) violations of zoning or other Laws or failure to
receive, prior to the Closing, a zoning compliance letter in respect of any Site
for which such a letter has been requested within twenty days after the date
hereof;
(viii) Sites which are subject to the threat or expectation of
condemnation or taking by eminent domain;
(ix) restrictions on the use of any Site which prevent the use
of such Site as a communications facility with a tower in its present or a
substantially similar configuration (unless prior to the Closing such
restrictions are modified or amended so as to permit the use of the affected
Site as a communications facility in its present or a substantially similar
configuration); and
(x) Sites requiring easements that are unrecorded;
(xi) Managed Sites where the Buyer's rights would be unclear
with respect to successors to the underlying property;
(xii) Sites which are in material violation of Environmental,
Health and Safety Requirements;
(xiii) Sites identified on Exhibit C as having specific
miscellaneous problems until the specified issue is resolved (e.g. pending
litigation, missing documentation, etc.); and
6
<PAGE> 9
(xiv) Leased Sites (other than those which the Sellers hold
pursuant to recorded easements) for which the applicable landlord fails or
refuses to provide a consent (if required) or an estoppel certificate to the
Buyer prior to the Closing; provided that if the Buyer has received estoppel
certificates (including estoppels which are part of consents) from landlords of
Leased Sites representing 90% of the Adjusted Operating Cash Flow of all Leased
Sites, the Buyer shall waive any Defect arising from the failure to obtain
estoppel certificates from the remaining 10% of such Leased Site landlords.
Exhibit C identifies Sites which have Defects of which the Buyer is
aware as of the date of this Agreement, based on the Buyer's review of
documentation related to the Sites. The listing on Exhibit C does not preclude
the Buyer from identifying additional Defects during the course of obtaining
title commitments, surveys, consents, estoppel certificates and environmental
assessments in respect of Sites.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Effective Time" means 12:01 a.m. on the Closing Date.
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, as such requirements are enacted and in effect
on or prior to the Closing Date.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Initial Closing Date" has the meaning set forth in Section 2(e) below.
"Knowledge" means actual knowledge. When used in reference to Sellers,
Knowledge means the actual knowledge of Paul H. Kuzia and/or Robert B. Alperin
after such persons have made inquiry of those management personnel in the
Sellers' organization responsible for administration and management of the Arch
Towers Business as a whole.
7
<PAGE> 10
"Laws" means statutes, laws, rules, regulations, codes, judgments,
orders, decrees and rulings thereunder of federal, state and local governments
and agencies thereof.
"Master Tower Space Lease" means the tower space lease substantially in
the form annexed hereto as Exhibit D.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Permitted Encumbrances" means (i) taxes and assessments, both general
and special, which are a lien but not yet due and payable; (ii) the existence of
tower space leases or license agreements pursuant to which space for
transmitting facilities is leased or licensed to third-party tenants that are
identified in Section 3(l) of the Disclosure Schedule; (iii) matters described
in clauses (i), (v), (vi), (vii), (viii), (x), (xi) and (xiii) of the definition
of "Defects", that could not reasonably be expected to impair materially the use
or operation of any Site or any tower as a communications facility in its
present configuration or in a substantially similar configuration.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Second Closing Date" has the meaning set forth in Section 2(e) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar inchoate liens arising between the date of performance of services
and the date when payment is due, provided such payments are made in full at or
prior to the Closing by the party which requested the service, (b) liens for
taxes not yet due and payable or for taxes that the taxpayer is contesting in
good faith through appropriate proceedings, and (c) purchase money and similar
liens arising between the date of acquisition of assets and the date of payment,
provided such payments are made in full at or prior to the Closing by the party
which acquired the goods.
"Seller" or "Sellers" has the meaning set forth in the preface above.
"Site" means either a Leased Site or an Owned Site.
"Site Lease" means a lease substantially in the form of Exhibit E,
which will be entered by the relevant Seller and the Buyer for each Site listed
on Exhibit E-1.
"Site Sublease" means a sublease substantially in the form of Exhibit
F, which will be entered by the relevant Seller and the Buyer for each Site
listed on Exhibit F-1.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
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<PAGE> 11
"Third Party Claim" has the meaning set forth in Section 8(d) below.
"Tower Space Lease" has the meaning set forth in Section 3(l) below.
2. BASIC TRANSACTION.
(a) Purchase and Sale of Assets. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to purchase from the Sellers,
and the Sellers agree to sell, transfer, convey, and deliver to the Buyer, all
of the Acquired Assets at the Closing for the consideration specified below in
this Section 2, free and clear of any Security Interest or Defect other than
Defects which the Buyer elects to accept as herein provided. As provided in
Section 2(d)(iii), in the event that on the date which is five business days
prior to the Initial Closing Date there are Sites for which the Buyer has
identified Defects which the Buyer is unwilling to accept and which Sellers have
not cured (each a "Defect Site"), the Buyer shall not buy, and the Sellers shall
not sell, such Sites, but as to Defect Sites a Second Closing will occur which
is sixty days after the Initial Closing. References herein to the "Closing" or
the "Closing Date" shall mean the closing which occurs on the Initial Closing
Date or the Second Closing Date, as the context requires.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
liability of the Sellers not included within the definition of Assumed
Liabilities.
(c) Related Agreements. At the Closing the Buyer and the
Sellers will enter (i) the Master Tower Site Lease, (ii) Site Subleases for each
of the Sites indicated on Exhibit E-1 (unless the Buyer is able to negotiate a
direct lease with the master lessor for the space required for the
communications facility at such Site) and (iii) Site Leases for Sites owned by
the Sellers which will be leased to the Buyer as indicated in Exhibit F-1.
(d) Purchase Price.
(i) The Buyer agrees to pay to the Sellers at the
Closing Thirty-eight Million Dollars ($38,000,000) (the "Base Purchase Price")
adjusted as provided herein (as adjusted, the "Adjusted Purchase Price") by
delivery of cash payable by wire transfer or other delivery of immediately
available funds. In the event there are Defect Sites as of the date which is
five business days prior to the Initial Closing Date, the portion of the Base
Purchase Price payable on the Initial Closing Date shall be adjusted as provided
in Section 2(d)(iii).
(ii) All income and expenses arising from the conduct
of the business and operations of the Arch Tower Business shall be prorated
between the Buyer and the Sellers in accordance with generally accepted
accounting principles as of the Effective Time and shall, except as otherwise
expressly provided in this Agreement, be for the account of the Sellers up to
the Effective Time and from and after the Effective Time shall be for the
account of the Buyer. Such prorations shall include, without limitation, all ad
valorem, real estate, tangible and intangible personal property and other
property taxes (but excluding taxes arising by reason of the transfer of the
Acquired Assets as contemplated hereby, which shall be paid as set forth in
Section 10(l) of this Agreement), business and license fees, other license fees
(including any retroactive adjustments
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thereof), utility expenses, rents and similar prepaid and deferred items, and
all other income and expenses attributable to the Sellers' operation of the
business of leasing space to install and operate communications equipment at the
Sites. In the case of the deposits or prepaid expenses of the Sellers held by
third parties, the Sellers shall be entitled to an adjustment equal to the sum
of all such deposits or prepaid expenses the benefit of which shall accrue to
the Buyer following the Closing.
Any adjustments or prorations will, insofar as
feasible, be determined and paid on the Closing Date. Within sixty (60) days
after the Closing Date, the Buyer shall deliver to the Sellers a certificate
(the "Closing Certificate"), signed by a senior officer of the Buyer, providing
a compilation of the adjustments and prorations to be made pursuant to this
Section 2(d)(ii), including any adjustments and prorations made at Closing,
together with a copy of any working papers relating to such Closing Certificate
and such other supporting evidence as the Sellers may reasonably request. If the
Sellers conclude that the Closing Certificate does not accurately reflect the
adjustments and prorations to be made pursuant to this Section 2(d)(ii), the
Sellers shall, within thirty (30) days after receipt thereof, provide to the
Buyer their written statement of any discrepancies believed to exist. The
Sellers and the Buyer shall attempt jointly to resolve the discrepancies within
fifteen (15) days after receipt of the Sellers' discrepancy statement, which
resolution, if achieved, shall be binding upon all parties to this Agreement and
not subject to dispute or review. If the Sellers and the Buyer cannot resolve
the discrepancies within such fifteen (15) day period, the Buyer and Sellers
shall jointly designate a nationally known independent public accounting firm to
be retained to review the Closing Certificate together with the Sellers'
discrepancy statement and any other relevant documents. The cost of retaining
such accounting firm shall be borne by the party found to be more in error. Such
firm shall report its conclusions as to adjustments pursuant to this Section
2(d)(ii), which shall be conclusive and not subject to dispute or review. Once
the Closing Certificate has been approved by both parties, if the Buyer shall
have been determined to owe an amount to the Sellers, the Buyer shall within
five (5) days of the date the Closing Certificate shall have been approved by
both the Buyer and the Sellers pay such amount thereof to the Sellers, or if the
Sellers shall have been determined to owe an amount to the Buyer, the Sellers
shall within five (5) days of the date the Closing Certificate shall have been
approved by both the Buyer and the Sellers pay such amount thereof to the Buyer.
(iii) In addition to the adjustments to the Base
Purchase Price made pursuant to Section 2(d)(ii) above, if any particular Site
is, on the date which is five business days prior to the Closing Date, subject
to any Security Interest or Defect, then, at the Buyer's election, such Site
shall be dealt with as described in this clause (iii):
(A) the Buyer may notify the Sellers that it
wishes to postpone the purchase of any such Site until the Second Closing Date,
in which event the Base Purchase Price payable at the Initial Closing shall be
reduced for each such Defect Site by an amount equal to the greater of (i) the
product of 11.8 multiplied by the Annualized Operating Cash Flow for each Defect
Site which the Buyer elects not to purchase at the Initial Closing or (ii)
$100,000; or
(B) the Buyer may notify the Sellers that it
wishes to include such Defect Site in the Acquired Assets on the Initial Closing
Date, subject to the Sellers' indemnification for the Security Interest or
Defect as provided in Section 8(g). If the Buyer elects to have such Defect
Sites included in the Acquired Assets, the Buyer shall notify the Sellers not
less than eight business days prior to the Initial Closing Date, and the Sellers
shall thereupon
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indemnify the Buyer in respect of the identified Defects as provided in Section
8(g) unless the Sellers notify the Buyer in writing prior to the date which is
five business days before the Initial Closing Date that they will not so
indemnify the Buyer. If the Sellers elect not to indemnify the Buyer, the Buyer
may then elect either to accept the Defect Sites without the Sellers'
indemnification under Section 8(g) or postpone the purchase of such Defect Sites
until the Second Closing, in which case the Base Purchase Price at the Initial
Closing Date shall be reduced as provided in clause (a) of this subsection.
(iv) On the Second Closing Date, the Buyer shall
purchase any Sites which were Defect Sites as of the Initial Closing Date if the
Defects attributable to such Sites have been cured to the Buyer's reasonable
satisfaction not later than the five business days prior to the Second Closing
Date. Notwithstanding any other provision contained in this Agreement, the Buyer
shall not be obligated to acquire any Sites at the Initial Closing or the Second
Closing unless any Defects for such Site have been cured to the Buyer's
reasonable satisfaction. The purchase price in respect of each Site purchased at
the Second Closing will be equal to the Base Purchase Price reduction made in
respect of such Site at the Initial Closing.
(v) If on the date which is five business days prior
to the Second Closing Date any Defect Site continues to be subject to a Security
Interest or an uncured Defect, then, at the Buyer's election:
(A) the Buyer may notify the Sellers that it
wishes to exclude such Site from the Acquired Assets, in which event such Site
shall not be transferred to the Buyer; or
(B) the Buyer may notify the Sellers that it
wishes to include such Defect Site in the Acquired Assets on the Second Closing
Date, subject to the Sellers' indemnifications for the Security Interest or
Defect as provided in Section 8(g). If the Buyer elects to have such Defect
Sites included in the Acquired Assets, the Buyer shall notify the Sellers not
less than eight business days prior to the Second Closing Date, and the Sellers
shall thereupon indemnify the Buyer in respect of the identified Defects as
provided in Section 8(g) unless the Sellers notify the Buyer in writing prior to
the date which is five business days prior to the Second Closing Date that they
will not so indemnify the Buyer. If the Sellers elect not to indemnify the
Buyer, the Buyer may then elect either to accept the Defect Sites without the
Sellers' indemnification under Section 8(g) or not to acquire such Defect Sites.
The Parties shall have no further obligations to each
other in respect of Defect Sites which the Buyer elects not to acquire on the
Second Closing Date. No further adjustment to the Base Purchase Price (in
addition to the adjustment to the Base Purchase Price effected at the Initial
Closing) shall be made in respect of Defect Sites which the Buyer elects not to
acquire at the Second Closing.
(e) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place on June 30, 1998 (the
"Initial Closing Date") at the offices of Thompson, Hine & Flory, 3900 Key
Center, Cleveland, Ohio 44114, commencing at 9:00 a.m. local time, provided the
conditions identified in Section 7 below have been satisfied (except for
conditions to be satisfied at the Closing) on or before such date. A second
Closing will be held on the date (the "Second Closing Date") which is sixty days
after the Initial Closing Date in
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respect of Sites which have uncured Defects or Security Interests as of the
Initial Closing Date. The "Initial Closing Date" and the "Second Closing Date"
are collectively referred to herein as the "Closing Date".
(f) Deliveries at the Closing. At the Closing, (i) the Sellers
will deliver to the Buyer the various deeds, assignments, certificates,
instruments and documents referred to in Section 7(a) below; (ii) the Buyer will
deliver to the Sellers the various certificates, instruments, and documents
referred to in Section 7(b) below; (iii) the Sellers will execute, acknowledge
(if appropriate), and deliver to the Buyer such instruments of sale, transfer,
conveyance, and assignment as the Buyer and its counsel reasonably may request
(including a deed for each Owned Site with statutory warranties regarding
encumbrances created by the relevant Seller); (iv) the Buyer and the Sellers
will execute and deliver the Master Tower Space Lease and Site Subleases
substantially in the forms annexed hereto; (v) the Buyer will execute,
acknowledge (if appropriate), and deliver to the Sellers such instruments of
assumption as the Sellers and their counsel reasonably may request; and (vi) the
Buyer will deliver to the Sellers the consideration specified in Section 2(d)
above.
(g) Allocation. The Parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial, accounting and tax purposes) in accordance with
the allocation schedule attached hereto as Exhibit G. The Sellers shall allocate
the Purchase Price among the Sellers as directed by Arch Communications Group,
Inc.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers represent
and warrant to the Buyer that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3. The Sellers make no representations or
warranties concerning the Acquired Assets or the Arch Towers Business except as
set forth in this Section 3.
(a) Organization of the Sellers. Each of the Sellers is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation as indicated on the signature
pages hereof. Each of the Sellers has full power to carry on its business as now
conducted and is qualified to do business as a foreign entity in each
jurisdiction where failure to so qualify would have a material adverse affect on
the Acquired Assets.
(b) Authorization of Transaction. Each of the Sellers has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, the board of directors of each of the
Sellers has duly authorized the execution, delivery, and performance of this
Agreement by the respective Seller. This Agreement constitutes the valid and
legally binding obligation of each of the Sellers, enforceable in accordance
with its terms and conditions, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws from time to
time in effect affecting creditors' rights generally and by legal and equitable
limitations on the availability of specific remedies (the "Enforceability
Exceptions").
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(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Sellers is subject or any
provision of the charter or bylaws of any of the Sellers or (ii) except as to
required notice described in Section 3(c) of the Disclosure Schedule, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any of the Sellers is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation or failure to give notice, would not have a material adverse effect
on any of the Acquired Assets or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in Section 3(c)
of the Disclosure Schedule, none of the Sellers needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or of any private party in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Section 2 above).
(d) Brokers' Fees. The Sellers have no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated. The Sellers have engaged the services of Daniels &
Associates, L. P. as an agent of the Sellers in connection with this Agreement,
and the Sellers will be solely responsible for any fees or commissions payable
to such agent.
(e) Financial Information. The financial information set forth
in Exhibit H is the only financial information provided by the Sellers to the
Buyer in connection with this Agreement. The information in Exhibit H1 under the
items entitled "Third Party Rent Revenue" and "Annual Land Lease Expenses" are
Sellers' estimates for such items for the twelve month period ending March 31,
1998, based on actual rent revenues from third parties and actual land lease
expenses during the month of March, 1998. Exhibit H2 also sets forth actual
Third Party Rent Revenue for the Sites for the months of June, 1997 through
March, 1998. The information in Exhibit H concerning Arch Rent Revenue correctly
reflects the annual rent which Sellers will pay to the Buyer pursuant to the
Master Tower Space Lease during the first twelve months after the Closing Date,
subject to adjustments permitted under the Master Tower Space Lease. The
"Squatters Rent Increase" reflected in Exhibit H1, and expenses of maintenance
and utilities, are the Sellers' estimates; the Sellers do not warrant the
correctness or reasonableness of such estimates.
(f) Events Since March 31, 1998. Since March 31, 1998, there
has not been any material adverse change in the financial condition of the Arch
Towers Business taken as a whole or any material adverse change in the condition
or operation of any tower. Without limiting the generality of the foregoing,
since that date none of the Sellers has engaged in any practice, taken any
action, or entered into any transaction outside the Ordinary Course of Business
with respect to the Arch Towers Business except in connection with the sale of
the Arch Towers Business.
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(g) Legal Compliance. Each of the Sellers has complied with
all applicable Laws, except where the failure to comply would not have a
material adverse effect upon the financial condition of any particular Site. The
Sellers have received no notice to the effect that any Site is not in compliance
with applicable Laws.
(h) Tax Matters. Sellers have filed with the appropriate
governmental agencies all tax returns and tax reports pertaining to excise
taxes, sales and use taxes, payroll taxes, real property taxes and assessments
and tangible and intangible personal property taxes required to be filed by them
relating to the Owned Sites, the Leased Sites and towers and operation thereof
("Applicable Taxes"), and all taxes, interest and penalties shown or claimed to
be due thereon have been paid. Sellers do not have any liability, contingent or
otherwise, for any Applicable Taxes or any interest or penalties thereon except
to the extent disclosed in Section 3(i) of the Disclosure Schedule. To the
Knowledge of the Sellers, the consummation of the transactions contemplated by
this Agreement will not result in any transferee tax liability to Buyer, other
than possible sales taxes on sales of personal property included in the Acquired
Assets. None of the Sellers has waived any statute of limitations in respect of
Applicable Taxes or agreed to any extension of time with respect to an
Applicable Tax assessment or deficiency.
(i) Property.
(i) Sellers do not have any interest in any real
property in connection with the operation of the towers other than as described
on Exhibit A and Exhibit B. Each Seller is, or will be, at the time of Closing,
in possession of each of its Sites. Each Seller has, or will have at the time of
Closing, (A) good, marketable, and fee simple title to its Owned Sites and all
the improvements, (B) good and valid leasehold estates or good and valid
easements as to its Leased Sites, (C) good and valid easement rights providing
all necessary access and utilities to and from the improvements and the Sites to
public roads, and (D) good and marketable legal title to all personal property
included in the Acquired Assets, in each case, free and clear of all (i)
Security Interests except for (i) Security Interests described in the Disclosure
Schedule, which will be released and discharged prior to the Closing, (ii)
Permitted Encumbrances and (iii) Defects which, if the affected Site is conveyed
to the Buyer will be discharged or cured prior to the Closing or will be a
matter for which the Buyer is indemnified pursuant to Section 8(g).
(ii) No Seller has voluntarily granted any, is not a
party to any agreement providing for, and no Seller has any knowledge of,
easements, conditions, reservations, covenants, restrictions, leases, subleases,
rights, options or any other matters that would adversely affect the use of any
of the towers and the Sites for the same purposes and uses as the towers and
Sites have been used by such Seller, except for (i) Security Interests described
in Section 3(i) of the Disclosure Schedule, which will be released and
discharged prior to the Closing, (ii) Permitted Encumbrances and (iii) Defects
which, if the affected Site is conveyed to the Buyer, will be discharged or
cured prior to the Closing or will be a matter for which the Buyer is
indemnified pursuant to Section 8(g).
(iii) To the best of each Seller's knowledge, there
are no improvements planned by any public authority any part of the cost of
which might be assessed against such Seller.
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(iv) To each Seller's knowledge, with respect to its
Sites, there are no (A) applications, ordinances, petitions, resolutions or
other matters pending before any governmental agency having jurisdiction to act
on zoning changes that would prohibit or make nonconforming the use of any of
the Sites for the operation of the towers; or (B) pending or threatened
condemnation or eminent domain proceedings, or proposed sale in lieu thereof.
(v) To each Seller's knowledge (except as reported by
the Buyer), the improvements, including the towers, are in good condition and
repair, ordinary wear and tear excepted, and do not have any structural or
material defects except as described on Section 3(j) of the Disclosure Schedule.
(vi) Exhibit A lists all of the Leased Sites, and
identifies the lease date and the lessor thereunder and the current monthly
rental paid by Sellers. To the extent that written leases, management agreements
or easements exist and are in the Sellers' possession, the Sellers have
delivered to the Buyer correct and complete copies thereof. The Sellers do not
possess written documents for all of Leased Sites, and the leases, management
agreements or easements for some locations have expired, as indicated in Exhibit
A; provided, however, the Sellers will use their commercially reasonable best
efforts to remove these Defects prior to Closing. To the Knowledge of the
Sellers, there are no disputes with the lessor or sublessor of any of the
leases, management agreements or easements listed on Exhibit A except as
described in Section 3(i) of the Disclosure Schedule or where such dispute would
not have a material adverse effect on the financial condition of any particular
tower; provided however, the Sellers will use their commercially reasonable best
efforts to remove these Defects prior to Closing. Each lease or sublease listed
on Exhibit A which is written and has not expired by its terms (as indicated on
Exhibit A) is valid and in full force and effect, unless otherwise noted in
Section 3(i) of the Disclosure Schedule. Any lease or sublease listed on Exhibit
A which is not written and in full force and effect on the Closing Date will be
considered to have a Defect, and may be dealt with as provided in Section
2(d)(iii). Except as described on 3(i) of the Disclosure Schedule, the leases
are freely assignable to the Buyer without the consent of any landlord, tenant
or third party and there are no defaults on the part of Sellers or, to the
Knowledge of the Sellers, their landlords.
(j) Intellectual Property. None of the Sellers owns or has an
interest in any patent or registration or any pending patent application or
application for registration related to the Acquired Assets or the Arch Towers
Business.
(k) Governmental Authorizations. To the knowledge of the
Sellers, there are no licenses or other governmental authorizations required for
the operation of the Acquired Assets which the Sellers do not hold; Sellers are
in compliance therewith; and such licenses and governmental authorizations are
in full force and effect. To the extent required by regulations of the FCC, the
towers owned by the Sellers on the Sites are registered with the FCC. The towers
are in compliance with all applicable FAA and FCC rules and regulations.
(l) Tenant Leases and Other Contracts. Exhibit H3 lists all
tower space leases, tower license agreements and similar agreements (and the
rental and security deposits relating thereto) pursuant to which the Sellers
have leased space on any of the communications towers included in the Acquired
Assets to third parties (each a "Tower Space Lease"). In addition, except as set
forth in Section 3(l) of the Disclosure Schedule, there are no other tower space
leases, licenses or similar occupancy agreements to which any Seller is a party
related to the operation of
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the Arch Towers Business. To the extent that written documents constituting
Tower Space Leases exist and are in the Sellers' possession, the Sellers have
delivered to the Buyer a correct and complete copy of each such document (as
amended to date) listed in Exhibit H3. Each Tower Space Lease listed in Exhibit
H3 which has not expired by its terms is valid and in full force and effect and
there are no material defaults pending caused by the Sellers or their tenants
(other than late payment defaults by such tenants the aggregate amount of which
as of March, 1998 is set forth in Exhibit H3. The Sellers do not possess written
documents for all the Tower Space Leases listed in Exhibit H3, and some of the
written documents so listed have expired. One of the Sellers is the sole owner
of the landlord's or licensor's interest in the Tower Space Leases, and the
Sellers' interest in the Tower Space Leases, are fully assignable to the Buyer
without the consent or approval of any landlord, tenant or other third party. As
of the Closing Date, no rents due under, or other interest in, any of the Tower
Space Leases will have been assigned to any other party other than the Buyer or
otherwise pledged or encumbered in any way. Except as set forth in Exhibit H3,
the Sellers have not received any notice from any tenant or licensee under a
Tower Space Lease of any impending cancellation or breach of its Tower Space
Lease or of any termination of its Tower Space Lease in advance of the scheduled
expiration date. Exhibit H3 and Section 3(l) of the Disclosure Schedule will be
updated as of a date within 15 days prior to the Closing Date.
(m) Litigation. None of the Sellers (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, where the injunction, judgment, order,
decree, ruling, action, suit, proceeding, hearing, or investigation affects the
Arch Towers Business or the Acquired Assets.
(n) Environmental, Health, and Safety Matters.
(i) To the Knowledge of the Sellers, the Sellers are
in compliance with Environmental, Health, and Safety Requirements.
(ii) The Sellers have not received any written
notice, report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to the
Sellers or their facilities included in the Acquired Assets arising under
Environmental, Health, and Safety Requirements.
(iii) The Sellers are not aware of any underground
storage tanks on any of the land included in the Acquired Assets except as
described in Section 3(n) of the Disclosure Schedule. To the extent Sellers own
any underground storage tanks, Sellers are in compliance with all laws, rules
and regulations relating thereto.
(iv) This Section 3(n) contains the sole and
exclusive representations and warranties of the Sellers with respect to any
environmental, health, or safety matters, including without limitation any
arising under any Environmental, Health, and Safety Requirements.
(o) Certain Business Relationships with Sellers. After the
Closing, the sole contractual relationships between the Sellers and the Buyer
with respect to the Acquired Assets will be this Agreement, the Master Tower
Space Lease, the Site Subleases and the Site Leases.
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(p) Sufficiency of Assets. The Acquired Assets include all
Site-related equipment and real property rights used by the Sellers to operate
the Arch Towers Business, except for any generators that are specifically
excluded from the definition of "Acquired Assets" which would be necessary for
the operations of the Arch Towers Business. The Acquired Assets do not,
however, include any personnel, computers, technical expertise, vehicles,
maintenance and repair equipment or other non-Site-specific assets required to
operate the Arch Towers Business.
(q) No Condemnation. To the knowledge of the Sellers none of
the Owned Sites is the subject of any pending or proposed condemnation
proceedings by any public authority. The Sellers have not received any notice
from the owner of any Leased Site to the effect that such Site is the subject of
any pending or proposed condemnation proceedings by any public authority.
(r) Contracts. Section 3(r) of the Disclosure Schedule
constitutes a complete and accurate list of all material contracts (other than
(i) leases or other agreements pursuant to which the Sellers hold real property
included in the Acquired Assets and (ii) Tower Space Leases) (the "Contracts")
relating to the Acquired Assets or the operation of the Sites to which Seller is
a party or by which it is bound. The Contracts are in full force and effect.
Except as set forth in Section 3(r) of the Disclosure Schedule, there has been
no material default by the Sellers or, to the Sellers' knowledge, by the other
party, and no event has occurred or failed to occur which with the giving of
notice, the passage of time, or both, would constitute a material default by the
Sellers, or, to the best of their knowledge, by the other party, under any of
the Contracts. Except as set forth in Section 3(l) of the Disclosure Schedule,
to the Sellers' knowledge, none of the Contracts is subject to any impending
cancellation or breach that will result in a substantial loss or otherwise
materially and adversely affect the Sites or the Acquired Assets.
(s) Disclaimer of other Representations and Warranties. Except
as expressly set forth in this Section 3, the Sellers make no representation or
warranty, express or implied, at law or in equity, in respect of any of their
assets (including, without limitation, the Acquired Assets), liabilities or
operations, including, without limitation, with respect to merchantability or
fitness for any particular purpose, and any such other representations or
warranties are hereby expressly disclaimed. The Buyer hereby acknowledges and
agrees that, except to the extent specifically set forth in this Section 3, the
Buyer is purchasing the Acquired Assets on an "as-is, where-is" basis. Without
limiting the generality of the foregoing, the Sellers make no representation or
warranty regarding any assets other than the Acquired Assets, and none shall be
implied at law or in equity.
(t) Information Concerning the Redding, California Site.
Information provided by the Sellers in respect of the Redding, California Site
is based on information provided to the Sellers by the current owners of the
Site. The Sellers do not represent or warrant the correctness of such
information. The Sellers will represent and warrant such information at the
Closing.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
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(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except as such enforcement may be
limited by the Enforceability Exceptions.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency, except pursuant to the Hart-Scott-Rodino Act, in order for the Parties
to consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
(d) Brokers' Fees. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all actions and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
(b) Notices and Consents.
(i) The Sellers will give any notices to third
parties reasonably requested by the Buyer; without limiting the generality of
the foregoing, the Sellers will use their commercially reasonable best efforts
(including the expenditure of up to $100 per Site) to obtain any third party
consents and estoppel certificates from each lessor of a Leased Site (other than
Leased Sites held pursuant to a recorded easement).
(ii) Each of the Parties will give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(c) and Section 4(c)
above. Without limiting the generality of the foregoing, each of the Parties
will file
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any Notification and Report Forms and related material that it may be required
to file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the Hart-Scott-Rodino Act, will use
its reasonable best efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith. The Buyer and the
Sellers will use their commercially reasonable best efforts to file the
Notification and Report Form within fifteen business days after the date of this
Agreement.
(c) Operation of Business. The Sellers will not engage in
any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business. The Sellers will use their commercially
reasonable efforts, consistent with past practice, to maintain and preserve the
Arch Towers Business.
(d) Full Access. The Sellers will permit representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Sellers, or Sellers'
activities undertaken to perform their obligations under this Agreement, to all
premises, properties, personnel, books, records (including tax records),
contracts, surveys, title reports and environmental and engineering reports, and
documents of or pertaining to that portion of the Arch Towers Business owned by
each of the Sellers. The Buyer will keep confidential and hold as such any
Confidential Information it receives from any of the Sellers in the course of
the reviews contemplated by this Section 5(d) or otherwise, will not use any of
the Confidential Information except in connection with this Agreement, and, if
this Agreement is terminated for any reason whatsoever, will return to the
Sellers all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
(e) Notice of Developments. Each Party will give prompt
written notice to the other Party of any material adverse development, including
a breach of any of its own representations and warranties in Section 3 and
Section 4 above. No disclosure by any Party pursuant to this Section 5(e),
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation or breach of warranty.
(f) Exclusivity. The Sellers will not solicit, initiate,
accept, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any, all or substantially all of the Acquired
Assets (including any acquisition structured as a merger, consolidation, or
share exchange) or disclose any nonpublic information regarding any of the
Acquired Assets.
(g) Title; Surveys; Correction of Defects.
(i) The Buyer shall use its commercially reasonable
best efforts to order all title and surveys within 10 business days of the date
hereof. The Buyer shall use its commercially reasonable best efforts to order
all environmental assessments within 15 business days of the date hereof. The
Buyer will provide to the Sellers copies of all letters requesting titles,
surveys, environmental assessments and zoning compliance letters as such request
letters are issued.
(ii) If the Buyer believes a Site has a Defect which
makes the Site subject to Section 2(d)(iii), it shall notify the Sellers within
five business days after discovering
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the Defect. (The Buyer hereby notifies the Sellers that the items disclosed in
Exhibit A, B and C and Section 3(i) of the Disclosure Schedule which constitute
Defects are subject to Section 2(d)(iii).).
(iii) Sellers shall use their commercially reasonable
best efforts to correct all Defects, whether or not such Defect is shown on
Exhibits A, B and C or the Disclosure Schedule, prior to the Initial Closing
Date or, if unable to do so by the Initial Closing Date, by the Second Closing
Date. The Sellers shall, if the circumstances require, expend up to $5,000 per
Site to cure or correct Defects if it is reasonably expected that such amount
will cure the Defect applicable to such Site to the reasonable satisfaction of
the Buyer. The Sellers may, but shall not be required hereby to, expend more
than $5,000 to cure Defects at any Site.
(iv) The Sellers shall promptly notify the Buyer in
writing of each Defect which the Sellers believe has been cured, and the Buyer
shall promptly notify the Sellers if it agrees that a Defect has been cured to
its satisfaction. The Buyer and the Sellers shall work cooperatively to
coordinate the Defect notification and cure process so that cures sought by the
Sellers will be acceptable to the Buyer if effected.
(v) Not less than five business days prior to the
Initial Closing Date the Buyer and the Sellers shall compile lists of Sites for
which no Defects exist, and Sites for which Defects continue to exist, and shall
identify such Sites with uncured Defects (if any) which the Buyer elects to
accept notwithstanding the Defect, such of those Sites which the Buyer has
elected to accept for which the Sellers will indemnify the Buyer pursuant to
Section 8(g), such of those Sites which the Buyer has elected to accept for
which the Sellers will not indemnify the Buyer pursuant to Section 8(b), and (of
the latter group) any Sites which the Buyer will nonetheless purchase on the
Initial Closing Date.
(vi) Any Defect Sites not acquired by the Buyer on
the Initial Closing Date shall be subject to the same
notification/cure/acceptance/rejection procedures described in clause (v) prior
to the Second Closing Date.
(vii) The Sellers shall use their commercially
reasonable best efforts (but without the requirement of expending in excess of
$100 per Site) to obtain a nondisturbance agreement with each landlord of the
Sites listed on Exhibit F-1 or to obtain a direct lease between the landlord and
the Buyer for the tower and transmitter space at each such Site.
(h) If Sites representing Annualized Operating Cash Flow in
excess of 10% of the Annualized Operating Cash Flow of all the Sites have
uncured Defects and the Buyer has elected not to acquire such Sites (or, if the
Buyer has elected to acquire such Sites, the Sellers have declined to indemnify
the Buyer pursuant to Section 8(g) and the Buyer has therefore elected not to
acquire such Site) as of the date which is five business days prior to the
Initial Closing Date, either Party may terminate this Agreement in accordance
with Section 9.
(i) The Sellers will use their reasonable best efforts, and
cooperate with the Buyer, to obtain extensions or new leases with respect to
Leased Sites for which current leases expire in calendar 1999.
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6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). The Sellers will cooperate with the Buyer, at the Buyer's sole
expense, to the extent the Buyer needs assistance with or access to the Sellers'
accountants and books and records in preparing, verifying, auditing, reviewing
or certifying financial information.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Sellers, the other Party will cooperate
with the contesting or defending Party and its counsel in the contest or
defense, make available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below). This provision shall not require the Buyer's
participation in litigation between the Sellers and any person which had
previously agreed to purchase the Acquired Assets.
(c) Transition. The Sellers will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
lessee, licensee, customer, supplier, or other business associate of any of the
Sellers from maintaining the same business relationships with the Buyer after
the Closing as it maintained with the Sellers prior to the Closing.
(d) Repurchase Options. Sellers shall have the option to
repurchase portions of the Acquired Assets in forty quarterly segments
commencing on June 30, 1998 and continuing on each September 30 1, December 31,
March 31 and June 30 thereafter. The portion of the Acquired Assets which is
subject to such purchase option on each of the forty dates (each an "option
block") is described in Exhibit I. Exhibit I also sets forth the portion of the
Purchase Price allocable to each such portion of the Acquired Assets. The option
price for each option block is equal to the operating cash flow (determined by
multiplying the Sites' cash flow for the month most recently ended as of the
exercise date by 12) for the Sites included in the option block multiplied by
28; provided, that in no event shall the option price be less than $250,000 for
any one Site. This option may not be assigned by the Sellers other than to
persons controlling, controlled by or under common control with the Sellers. The
Sellers may exercise an option by, and only by, delivering written notice of
exercise of such option no later than the exercise date. The Sellers may elect
at any time, or from time to time, to terminate the exercisability of one or
more of the quarterly option segments. If the Sellers fail to exercise a
quarterly option on an exercise date, the option with respect to the next option
group on Exhibit I shall lapse and shall no longer be exercisable. The purchase
price under each option shall be paid in cash. If an option is exercised, the
terms of sale shall include no representations or warranties by the Buyer except
the absence of Security Interests with respect to the assets purchased.
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7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Sellers
set forth in Section 3 above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Sellers shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment,
order, decree or ruling in effect preventing consummation of any of the
transactions contemplated by this Agreement or materially adversely affecting
any Site or Tower (provided, that if any such injunction, judgment, order,
decree or ruling should be in effect, the Site or Sites to which it applies
would not be transferred to the Buyer at the Initial Closing but would be
transferred at the Second Closing (provided the injunction, judgment, order,
decree or ruling had then been vacated) with a net reduction in the Base
Purchase Price as provided in Section 2(d)(iii) at the Initial Closing, and the
Closing would be held as to the remainder of the Acquired Assets);
(iv) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in Section
7(a)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated, and the Sellers and the Buyer shall have received all
other authorizations, consents, and approvals of governments and governmental
agencies and private parties identified in Section 3(c) of the Disclosure
Schedule; provided that with respect to any Leased Site the terms of the lease
for which require the consent of the landlord or other contract party, if such
landlord or other contract party shall not have consented to the transactions
contemplated hereby, if the Buyer so elects, the Buyer may elect not to purchase
such Site at the Initial Closing, and the purchase of such Site shall be
postponed to the Second Closing as provided in Section 2(d)(iii) unless the
Buyer elects to include such Site, subject to the Sellers' agreement to
indemnify the Buyer in respect of any cost, damage or expense arising from the
failure to obtain such consent as provided in Section 8(g); and further provided
that if the Buyer has received estoppel certificates (including estoppels which
are part of consents) from landlords of Leased Sites representing 90% of the
Adjusted Operating Cash Flow of all Leased Sites, the Buyer shall not require
estoppel certificates as a closing condition for the remaining 10% of the Leased
Sites.
(vi) The Buyer shall have received from Lawyer's
Title Insurance Corporation (the "Title Company") (and be reasonably satisfied
with) a commitment to issue an ALTA Owner's Policy of Title Insurance (Form B,
amended 10-17-70) for the Owned Sites and a commitment to issue a Leasehold
Owner's Policy of Title Insurance for certain of the Leased Sites, both in forms
acceptable to the Buyer, dated no earlier than the date of this Agreement,
naming the Buyer as the proposed insured in an amount equal to the fair market
value of each Site and reflecting the results of a special tax search with
respect to each of the Owned Sites. The title commitment(s) shall (i) set forth
a state of title to each of the Sites, together with all
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exceptions or conditions to such title, including, but not limited to, all
easements, restrictions, rights-of-way, covenants, reservations, and other
encumbrances affecting each of the Sites and (ii) contain the express commitment
of the Title Company to issue the Owner's and Leasehold Policies of Title
Insurance without the standard customary printed exceptions of such policies
with respect to survey, parties in possession (except tenants of the Sellers)
and mechanics' liens, specifically stating any condition or requirement to
affect the removal thereof from such policy, if issued, (iii) include any
endorsements or affirmative insurance the Buyer may have reasonably required as
of the date the Title Commitment is issued by the Title Company, and (iv) have
attached true, correct and legible copies of each instrument referred to in the
Title Commitment as conditions or exceptions to title to the Sites;
(vii) The Title Company shall be in the position to
issue an ALTA Owner's Policy of Title Insurance (Form B Amended 10-17-70) as to
the Owned Sites and a Leasehold Owner's Policy of Title Insurance as to the
Leased Sites. The Title Policies shall be issued in the amount of the fair
market value of the Buyer's interest in the covered sites, shall insure
marketable fee simple, indefeasible title to the Owned Sites to be in the Buyer,
subject only to the Permitted Encumbrances, and such Defects as have been
expressly approved by the Buyer and shall insure a good leasehold estate to the
Leased Sites to be in the Buyer, subject only to Permitted Exceptions and such
Defects as have been expressly approved by the Buyer. The Buyer shall have the
right to require such endorsements to the Title Policies for the Owned Sites as
the Buyer reasonably deems necessary or appropriate, including, but not limited
to, zoning, survey, contiguity and access, as well as such affirmative insurance
as the Buyer or the Buyer's counsel may reasonably require;
(viii) The Buyer shall have obtained and approved a
survey of each Site by a registered surveyor reasonably satisfactory to the
Buyer. The Seller shall cooperate with the Buyer and the surveyor in
coordinating such survey. The survey shall be certified as of a date no earlier
than December 1, 1997, and should be prepared in accordance with the "minimum
standard detail requirements for ALTA/ACSM Land Title Surveys" as revised
through 1992 for an Urban survey, including any Table A optional survey items
which the Buyer may select, or in accordance with such lesser standards that the
Buyer may approve. The surveyor's certification shall run to the Buyer, the
Seller and the Title Company, as well as any lender to the Buyer that the Buyer
may designate.
(ix) any title examinations and surveys of the Sites
conducted by the Buyer shall not have shown any liens, encumbrances,
encroachments, lack of access or other matters which would have a material
adverse effect on the use of such Site as a communications tower facility
(provided, that if any such title examination or survey reveals a condition
which constitutes a Defect and is unsatisfactory to the Buyer, the Buyer may
elect not to purchase such Site at the Initial Closing and to purchase such Site
at the Second Closing (provided such Defect shall then have been cured) as
provided in Section 2(d)(iii) unless the Buyer elects to include such Site,
subject to the Sellers' agreement to indemnify the Buyer in respect of any cost,
damage or expense arising from such matters as provided in Section 8(g);
(x) Arch Communications Enterprises, Inc. shall have
entered into the Master Tower Space Lease substantially in the form attached
hereto as Exhibit D, and the same shall be in full force and effect and all of
the Sellers shall have guaranteed the obligations of Arch Communications
Enterprises, Inc. thereunder;
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(xi) the relevant Sellers shall have entered Site
Leases for Iota, Louisiana, Forest Avenue, Portland, Maine and Hebron, Maine
substantially in the form of Exhibit E;
(xii) the landlords of the Sites listed in Exhibit
F-1 shall have entered into direct leases with Buyer for the tower and
transmitter space for the Sites listed in Exhibit F-1 or shall have entered
nondisturbance agreements with the Buyer, or shall have entered into the Site
Subleases substantially in the form of Exhibit F hereto, and the same shall be
in full force and effect (provided that if the lessor of any of the Sites
subject to the Site Subleases refuses to enter a direct lease or to enter a
nondisturbance agreement with the Buyer and refuses to consent to the Site
Sublease, the Buyer may elect not to purchase such Site at the Initial Closing
and to purchase such Site at the Second Closing (provided such landlord shall by
that date have entered a direct lease, executed a nondisturbance agreement or
consented to a Site Sublease) as provided in Section 2(d)(iii) unless the Buyer
elects to include such Site, subject to the Sellers' agreement to indemnify the
Buyer in respect of any cost, damage or expenses arising from the failure to
obtain such consent as provided in Section 8(g);
(xiii) the Buyer shall not have determined that any
of the Seller's representations or warranties are untrue or incorrect in any
material respect;
(xiv) there shall have occurred no material adverse
change in the Acquired Assets, taken as a whole, the Sellers' tower leasing
business or the business, prospects or financial results of the Sellers since
March 31, 1998 or in the business, prospects or financial results of Arch
Communications Group, Inc., taken as a whole, since December 31, 1997;
(xv) the Buyer shall not be dissatisfied, in its
reasonable discretion, with the results of environmental assessments which
discover a Defect with respect to any Site for which it has chosen to conduct an
assessment (provided that if the Buyer notifies the Seller that it is
dissatisfied with the results of any such assessment, the Buyer may elect to
exclude such Site from the transaction pursuant to Section 2(d)(iii) or elect to
include the Site in the transaction subject to the Sellers' agreement to
indemnify the Buyer in respect of any cost, damage or expense arising from such
matter as provided in Section 8(g);
(xvi) the Buyer shall have received from counsel to
the Sellers an opinion substantially in the form and substance as set forth in
Exhibit J attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(xvii) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer;
(xviii) Each Seller shall deliver to the Buyer good
standing certificates or certificates of continued existence, dated as of a date
within 30 days of the Closing Date, from the state of incorporation of such
Seller and from each state in which such Seller is qualified to do business;
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(xix) The Sellers and the Buyer shall have executed
and delivered to the Buyer a cooperation and noncompetition agreement (the
"Noncompetition Agreement") substantially in the form of the agreement outline
attached hereto as Exhibit K and made a part hereof.
(xx) The Sellers shall deliver such other customary
closing certificates and documents as the Buyer may reasonably request.
(xxi) The Sellers shall have entered into an
agreement with the Buyer pursuant to which the Seller shall have agreed to
provide paging and similar communications services to the lessor under each
lease, management agreement or easement which requires such services as partial
or full consideration for the remainder of the term of each such agreement and
all extensions thereof provided for in existing agreements, but in no event
longer than ten years after the Closing Date.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a written instrument so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of
the Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above in Section
7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Sellers and the Buyer shall have received all
other authorizations, consents, and approvals of governments and governmental
agencies and private parties identified in Section 4(c) of the Disclosure
Schedule;
(vi) the Buyer shall have entered into the Master
Tower Space Lease, the Sites Leases and the Site Subleases (to the extent
landlords thereunder have not executed direct lease with the Buyer)
substantially in the form of Exhibits D, E and F, respectively, and the same
shall be in full force and effect;
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(vii) the Sellers shall have received from the
Buyer's counsel an opinion substantially in the form as set forth in Exhibit L
attached hereto, addressed to the Sellers, and dated as of the Closing Date; and
(viii) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Sellers.
The Sellers may waive any condition specified in this Section 7(b) if
it executes a written instrument so stating at or prior to the Closing.
8. INDEMNIFICATION.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Sellers and the Buyer contained in
Section 3 and Section 4 of this Agreement shall survive the Closing and continue
in full force and effect for a period of twelve months, except (i) in the case
of representations and warranties pertaining to authority and taxes, and the
Sellers' representation that personal property included in the Acquired Assets
is free of Security Interests, which shall survive indefinitely and (ii) the
Sellers' representations and warranties as to title to the real property at the
Owned Sites, which shall terminate at the Closing.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Sellers breach any of their
representations, warranties, and covenants contained in this Agreement, and,
provided that the Buyer makes a written claim for indemnification against the
Sellers pursuant to Section 10(g) below with respect to Sellers' representations
and warranties within the survival period pursuant to Section 8(a) above, then
the Sellers jointly and severally agree to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer shall suffer through and
after the date of the claim for indemnification caused by the breach; provided,
however, that the Sellers shall not have any obligation to indemnify the Buyer
from and against any Adverse Consequences caused by the breach of any
representation or warranty of the Sellers: (A) until the Buyer has suffered
Adverse Consequences by reason of all such breaches in excess of a deductible in
the amount of $100,000 in the aggregate (after which point the Sellers will be
obligated only to indemnify the Buyer from and against further such Adverse
Consequences) or thereafter (B) to the extent the Adverse Consequences the Buyer
has suffered by reason of all such breaches exceeds $5,000,000 in the aggregate
(after which point the Sellers will have no obligation to indemnify the Buyer
from and against further such Adverse Consequences).
(ii) The Sellers agree jointly and severally to
indemnify the Buyer from and against the entirety of any Adverse Consequences
the Buyer shall suffer caused proximately by any liability of the Sellers which
is not an Assumed Liability (including any liability of the Sellers that becomes
a liability of the Buyer under any bulk transfer law of any jurisdiction, under
any common law doctrine of de facto merger or successor liability, or otherwise
by operation of law) or by Sellers' ownership or operation of any of the
Acquired Assets on or prior to the Closing Date.
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(c) Indemnification Provisions for Benefit of the Sellers.
(i) In the event the Buyer breaches any of its
representations, warranties, and covenants contained in this Agreement, and
provided that, with respect to representations and warranties, the Sellers make
a written claim for indemnification against the Buyer pursuant to 10(g) below
within the survival period set forth in Section 8(a) above, the Buyer agrees to
indemnify the Sellers from and against the entirety of any Adverse Consequences
the Sellers shall suffer through and after the date of the claim for
indemnification (but excluding any Adverse Consequences the Sellers shall suffer
after the end of any applicable statute of limitations).
(ii) The Buyer agrees to indemnify the Sellers from
and against the entirety of any Adverse Consequences the Sellers shall suffer
caused by any liability of the Sellers which is an Assumed Liability.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly (and in any event within ten business days after receiving notice of
the Third Party Claim) notify the Indemnifying Party thereof in writing;
provided, however, that any failure to give timely notice shall limit a party's
right to indemnification only to the extent of any prejudice caused by such
delay.
(ii) The Indemnifying Party will have the right at
any time to assume and thereafter conduct the defense of the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages and does not impose an injunction or other equitable
relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes
the defense of the Third Party Claim as provided in Section 8(d)(ii) above,
however, the Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably).
(e) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax benefits and insurance coverage and take
into account the time cost of money (using 10% as the discount rate) in
determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
(f) Exclusive Remedy. The Buyer and the Sellers acknowledge
and agree that after the Closing Date the foregoing indemnification provisions
in this Section 8 shall be the exclusive
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remedy of the Buyer and the Sellers with respect to the Arch Tower Business, the
Acquired Assets, and the transactions contemplated by this Agreement; provided,
however, that the Buyer has the right as provided in this Agreement to cause the
Sellers to reacquire certain Sites as provided in Section 2(d)(iii) above; and
further provided this clause shall not operate to exclude other rights the Buyer
may have in respect of the Sellers' breach of Section 3(n).
(g) Indemnification with Respect to Certain Matters.
(i) To the extent the Buyer notifies the Seller in
writing prior to the Closing it wishes to avail itself of the provisions of
Section 2(d)(iii)(b) in respect of matters described in clause (ii) hereof, and
the Sellers elect to indemnify the Buyer in respect of such matters and
therefore an affected Site is included in the transaction, the provisions of
this Section 8(g) shall apply.
(ii) Matters covered by this Section 8(g) are
Security Interests and Defects existing as of the Closing Date and conditions to
closing with respect to any Site which have not been satisfied as of the Closing
Date.
(iii) If the Sellers elect not to indemnify the Buyer
as to Defects or Security Interests in respect of a Site, the Base Purchase
Price shall be adjusted as provided in Section 2(d)(iii).
(iv) With respect to any matter for which the Sellers
have elected in writing to indemnify the Buyer pursuant to this Section 8(g),
the Sellers shall jointly and severally indemnify the Buyer and hold the Buyer
harmless from and against any cost, liability, damage or expense related to the
indemnified matter, provided that:
(A) the Buyer promptly notifies the Seller
in respect of any third party claims related to such matter as provided in
Section 8(d),
(B) the Sellers' obligation to indemnify the
Buyer shall be without regard to the $100,000 "deductible" and the $5,000,000
maximum amount set forth in Section 8(b),
(C) the maximum amount of the Sellers'
indemnification obligation with respect to each Site shall be equal to the sum
of:
(i) the greater of (x) the
Annualized Operating Cash Flow of such Site, as set forth on Exhibit H1,
multiplied by 11.8, or (y) $100,000, which amount shall decline by 20% for each
year, or portion thereof (pro rated as to such percentage for any portion of a
partial year), that has passed between the Closing Date and the date of any
claim under this Section 8(g), plus
(ii) the net book value of all of
the Buyer's improvements to such Site, provided that the maximum indemnification
amount under this clause (ii) for any Site shall be $300,000.
28
<PAGE> 31
If the Sellers pay the Buyer as
indemnification under this Section 8(g) in respect of any Site an amount equal
to the greater of (i) the Adjusted Operating Cash Flow of the Site multiplied by
11.8 or (ii) $100,000, plus the net book value of all the Buyer's improvements
to the Site, the Buyer shall reconvey such Site to the Sellers for no additional
consideration.
(D) the Buyer shall have given written
notice to the Sellers of such claim on or before the fifth anniversary of the
Closing Date.
9. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing (A) in the event
the Sellers have breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer has notified the
Sellers of the breach, and the breach has continued without cure for a period of
20 days after the notice of breach, (B) if the Closing shall not have occurred
on or before June 30, 1998, by reason of the failure of any condition precedent
under Section 7(a) hereof (unless the failure results primarily from the Buyer
itself breaching any representation, warranty, or covenant contained in this
Agreement) or (C) in accordance with Section 5(g); and
(iii) the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Sellers have notified
the Buyer of the breach, and the breach has continued without cure for a period
of 20 days after the notice of breach, (B) if the Closing shall not have
occurred on or before June 30, 1998, by reason of the failure of any condition
precedent under Section 7(b) hereof (unless the failure results primarily from
the Sellers themselves breaching any representation, warranty, or covenant
contained in this Agreement), or (C) in accordance with Section 5(g).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to the other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 5(d) above shall survive
termination.
10. MISCELLANEOUS.
(a) Press Releases and Public Announcements. During the term
of this Agreement, no Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the other Party (which shall not
be unreasonably withheld or delayed); provided, however, that any Party may make
any public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Party prior to making the disclosure). The parties
29
<PAGE> 32
will cooperate in developing a description of the transactions contemplated
hereby for purposes of any public announcement related to the signing of this
Agreement or the closing of the transactions contemplated hereby.
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party. Notwithstanding the foregoing, (i) the Buyer may
(a) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (b) designate one or more of its Affiliates to perform its
obligations hereunder, and (ii) the Sellers may assign their rights and
obligations hereunder to any entity or entities into which they are merged or to
which all or substantially all of their assets are transferred, provided that
any such transferee or assignee shall be a wholly-owned direct or indirect
subsidiary of Arch Communications Group, Inc. Notwithstanding any assignment
permitted hereunder, the original parties hereto shall remain responsible for
the performance of all their respective obligations hereunder.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers:
Arch Communications Group, Inc.
1800 West Park Drive, Suite 250
Westborough, Massachusetts 01581
Attn: Robert B. Alperin, Vice President-Corporate Development
Telecopier: (508) 870-6021
30
<PAGE> 33
Copy to:
Garry B. Watzke, Esq.
745 Atlantic Avenue, 10th Floor
Boston, Massachusetts 02111-2735
Telecopier: (617) 350-7881
If to the Buyer:
OmniAmerica, Inc.
Two Summit Park Drive, Suite 105
Cleveland, Ohio 44131
Attn: F. Howard Mandel, Vice President and General Counsel
Telecopier: (216) 447-4450
Copy to:
Diane S. Leung, Esq.
Thompson Hine & Flory
3900 Key Center
Cleveland, Ohio 44114
Telecopier: (216) 556-5800
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Action by Sellers. Any right, action or notice which may
be taken exercised or given by the Sellers hereunder may be taken on behalf of
all the Sellers by Arch Communications Enterprises ("ACE"). Each of the Sellers
hereby appoints ACE as its agent to take any action for and on behalf of such
Seller necessary or appropriate to carry out the transactions contemplated by
this Agreement.
31
<PAGE> 34
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) Expenses. Each of the Sellers and the Buyer will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers shall bear one-half, and the Buyer shall bear one-half, of the expenses
of filing a Notification and Report Form under the Hart-Scott-Rodino Act with
the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice; provided, that if either party shall default in its
obligations hereunder, the other party's damages shall include the portion of
such expenses paid by the non-defaulting party. The Buyer and the Sellers shall
bear equally the costs of recording fees, filing fees, deed stamps, realty
transfer taxes and similar real estate transfer costs. The Buyer shall be
responsible for any sales taxes arising under state law in respect of the
transactions contemplated by this Agreement.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Bulk Transfer Laws. The Buyer acknowledges that the
Sellers will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
(p) Destruction of Assets. In the event of loss or damage to
any Site or tower in an amount greater than $5,000 between the date hereof and
the Closing Date, the Sellers shall promptly notify the Buyer thereof and use
their commercially reasonable best efforts to repair, replace or restore the
lost or damaged property to its former condition as soon as possible. If such
repair, replacement or restoration has not been completed prior to the Closing
Date, the Parties shall consummate the transaction in respect of the damaged
Site at the Initial Closing (unless a Defect shall exist as to such Site) and
the Base Purchase Price shall be decreased by the amount of the loss or damage
less amounts expended by the Sellers prior to the Closing on such repair,
replacement or restoration (or, if the Sellers have not undertaken any repair,
the adjustment to the Base Purchase Price shall be equal to the estimated cost
of repair, as determined by a reasonable third-party estimate obtained by the
Sellers).
(q) Specific Performance. The Parties acknowledge that the
towers and the Acquired Assets are of a unique and extraordinary character and
that money damages would not be a sufficient remedy for a breach by any Party of
its obligations under this Agreement; therefore, in addition to any other rights
or remedies a nondefaulting Party may have, the nondefaulting Party
32
<PAGE> 35
shall be entitled to the remedies of specific performance or injunctive relief
in connection with a breach of a Party's obligations contained in this
Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
BUYER:
OmniAmerica, Inc.
By: /s/ F. HOWARD MANDEL
------------------------------------
F. Howard Mandel, Vice President
and Assistant Secretary
SELLERS:
The Westlink Company, Q Media Company-Paging, Inc.
a Delaware corporation a Kansas corporation
By: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
USA Mobile Communications, Inc. II, Arch Communications Enterprises, Inc.,
a Delaware corporation a Delaware corporation
By: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
Arch Capitol District, Inc., Arch Michigan, Inc.
a New York corporation a Delaware corporation
BBy: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
33
<PAGE> 36
Arch Southeast Communications, Inc., Professional Communications, Inc.
a Delaware corporation a Pennsylvania corporation
By: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
The Beeper Company of America, Inc. Answer Iowa, Inc.
a Colorado corporation an Iowa corporation
By: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
Arch Connecticut Valley, Inc., Q Media Paging-Alabama, Inc.
a Massachusetts corporation a Delaware corporation
By: /s/ ROBERT B. ALPERIN By: /s/ ROBERT B. ALPERIN
--------------------------------- ----------------------------------
Title: V.P BUSINESS DEVELOPMENT Title: V.P. BUSINESS DEVELOPMENT
------------------------------ -------------------------------
The obligations of the Sellers under this Agreement are fully guaranteed by Arch
Communications Group, Inc., including the prompt payment of all amounts that may
be owing pursuant to Section 8.
Arch Communications Group, Inc.
By: /s/ ROBERT B. ALPERIN
----------------------------------
Title: V.P. BUSINESS DEVELOPMENT
---------------------------------
34
<PAGE> 1
EXHIBIT 10.13
AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT
This Amendment to Asset Purchase and Sale Agreement (this "Amendment"),
dated as of June 26, 1998, between OmniAmerica, Inc., a Delaware corporation,
(the "Buyer") and certain wholly-owned subsidiaries of Arch Communications
Group, Inc., a Delaware corporation, ("ACG") which are identified on the
signature page of this Amendment (the "Sellers" and each individually, a
"Seller") amends the Asset Purchase and Sale Agreement, dated as of April 10,
1998, between Buyer and Sellers for the sale of communications facilities (the
"Agreement") to the extent set forth herein. All capitalized terms used but not
defined herein shall have the same meaning as set forth in the Agreement.
1. The first sentence of Section 2(d)(i) of the Agreement is hereby
amended to read as follows:
(i) The Buyer agrees to pay to or for the benefit of the Sellers on
June 30, 1998, Thirty-eight Million Dollars ($38,000,000) (the
"Base Purchase Price") adjusted as provided herein (as adjusted,
the "Adjusted Purchase Price") by delivery of cash payable by
wire transfer or other delivery of immediately available funds;
provided, however, the Buyer may withhold the portion of the
Adjusted Purchase Price allocable to (a) the Frankfort, Kentucky
Site until the Nomura Security Interest is terminated in a manner
reasonably satisfactory to the Buyer, (b) the Taos, New Mexico
Site until the Buyer receives an executed Notice of Lease, and
(c) the Redding, California Site until the Buyer receives all
signatures on the conveyance and Lease Documents. If the Adjusted
Purchase Price is not paid with respect to any such Site by the
Second Closing Date, such Site(s) shall be re-conveyed to the
Sellers at the Second Closing.
2. The first sentence of Section 2(e) of the Agreement is hereby amended
to read as follows:
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on June 26, 1998 (the
"Initial Closing Date") at the offices of Thompson Hine & Flory
LLP, 3900 Key Center, Cleveland, Ohio 44114, commencing at 9:00
a.m. local time, provided the conditions identified in Section 7
below have been satisfied (except for conditions to be satisfied
at the Closing) on or before such date.
3. Section 3(i)(i), page 14, fourth line from the bottom of the paragraph
is hereby amended to read as follows:
<PAGE> 2
(i) Security Interests or (ii) Defects except for....
4. Section 6(e) is hereby added to the Agreement. Section 6(e) will read
as follows:
(e) Tax Liens. Buyer will withhold and retain $55,000 of the Adjusted
Purchase Price (the "Retained Funds") delivered at the Initial
Closing Date until such time as the Sellers deliver sufficient
documentation evidencing the payment of certain state tax liens
(the "Liens"). These Liens are more particularly described as:
(i) a New York lien against Arch Capital District, Inc.; (ii) a
New York lien against Hudson Valley Mobile Telephone, Inc.; and
(iii) a California lien against The Westlink Company d/b/a
Westlink Paging. Upon receipt of sufficient documentation, Buyer
shall release the Retained Funds to an account designated by the
Sellers at such time.
5. Except as provided above, the Agreement remains unchanged and in full
force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
BUYER:
OMNIAMERICA, INC.
By: /s/ F. HOWARD MANDEL
--------------------------------------
F. Howard Mandel, Vice President
and Assistant Secretary
SELLERS:
THE WESTLINK COMPANY, a Delaware corporation
USA MOBILE COMMUNICATIONS, INC., II, a Delaware corporation
ARCH CAPITAL DISTRICT, INC., a New York corporation
Q MEDIA COMPANY-PAGING, INC., a Kansas corporation
ARCH COMMUNICATIONS ENTERPRISES, INC., a Delaware corporation
ARCH MICHIGAN, INC., a Delaware corporation
ARCH SOUTHEAST COMMUNICATIONS, INC., a Delaware corporation
THE BEEPER COMPANY OF AMERICA, INC., a Colorado corporation
ARCH CONNECTICUT VALLEY, INC., a Massachusetts corporation
PROFESSIONAL COMMUNICATIONS, INC., a Pennsylvania corporation
ANSWER IOWA, INC., an Iowa corporation
Q MEDIA PAGING-ALABAMA, INC., a Delaware corporation
By: /s/ ROBERT B. ALPERIN
--------------------------------------
Robert B. Alperin, Vice President -
Business Development
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT
This Second Amendment to Asset Purchase and Sale Agreement (this
"Second Amendment"), dated as of August 12, 1998, between OmniAmerica, Inc., a
Delaware corporation (the "Buyer") and certain wholly-owned subsidiaries of Arch
Communications Group, Inc., a Delaware corporation ("ACG") which are identified
on the signature page of this Amendment (the "Sellers" and each individually, a
"Seller") amends the Asset Purchase and Sale Agreement, dated as of April 10,
1998, between Buyer and Sellers or Sellers' predecessors in interest for the
sale of communications facilities (the "Agreement") to the extent set forth
herein. All capitalized terms used but not defined herein shall have the same
meaning as set forth in the Agreement.
1. The second sentence of Section 2(c) of the Agreement is hereby
amended to read as follows:
A second Closing will be held on September 17 and 18,
1998 (the "Second Closing Date") in respect of Sites
which have uncured Defects or Security Interests as
of the Initial Closing Date. The parties may, by
mutual agreement, move the Second Closing Date
forward or back, however, in no case may the Second
Closing Date occur after September 30, 1998.
2. Except as provided above and in the Amendment to Asset
Purchase and Sale Agreement between Buyer and Sellers or
Sellers' predecessors in interest dated June 26, 1998, the
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Second
Amendment as of date first above written.
BUYER:
OMNIAMERICA, INC.
By: /s/ F. HOWARD MANDEL
-------------------------------
F. Howard Mandel, Vice President
and Assistant Secretary
<PAGE> 2
SELLERS:
THE WESTLINK COMPANY, a Delaware corporation
ARCH CAPITOL DISTRICT, INC., a New York corporation
ARCH MICHIGAN, INC., a Delaware corporation
(for itself and as successor in interest to ARCH COMMUNICATIONS
ENTERPRISES, INC., a Delaware corporation)
ARCH SOUTHEAST COMMUNICATIONS, INC., a Delaware corporation
THE BEEPER COMPANY OF AMERICA, INC., a Colorado corporation
ARCH CONNECTICUT VALLEY, INC., a Massachusetts corporation
ANSWER IOWA, INC., an Iowa corporation
ARCH PAGING, INC., a Delaware corporation
(formerly USA MOBILE COMMUNICATIONS, INC. III and successor by merger
to Q MEDIA COMPANY-PAGING, INC., a Kansas corporation, Q MEDIA PAGING-
ALABAMA, INC., a Delaware corporation and PROFESSIONAL
COMMUNICATIONS, INC., a Pennsylvania corporation; Q MEDIA COMPANY-
PAGING, INC. and Q MEDIA PAGING-ALABAMA, INC. themselves successors in
Interest to USA MOBILE COMMUNICATIONS, INC. II, a Delaware corporation)
By: /s/ ROBERT B. ALPERIN
-------------------------------------
Robert B. Alperin, Vice President-
Business Development
2
<PAGE> 1
EXHIBIT 10.15
THIRD AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT
This Third Amendment to Asset Purchase and Sale Agreement (this "Third
Amendment"), dated as of September 29, 1998, between OmniAmerica Towers, Inc.
f/k/a OmniAmerica, Inc., a Delaware corporation (the "Buyer"), and certain
wholly-owned subsidiaries of Arch Communications Group, Inc., a Delaware
corporation ("ACG") which are identified on the signature page of this Third
Amendment (the "Sellers" and each individually, a "Seller") amends the Asset
Purchase and Sale Agreement, dated as of April 10, 1998, between the Buyer and
the Sellers or the Sellers' predecessors-in-interest for the sale of
communications facilities, as previously amended by amendments dated June 26,
1998 and August 12, 1998 (the "Agreement"), to the extent set forth herein. All
capitalized terms used but not defined herein shall have the same meaning as set
forth in the Agreement.
1. Section 2(e) of the Agreement is hereby amended by the addition of
the following paragraphs:
"With respect to the following six Sites, the Parties agree that to the
extent not included in the Second Closing Date, such Sites may be
closed at any time, upon mutual agreement of the parties, between the
Second Closing Date and the Third Closing Date (as defined herein). The
Sites may be closed individually or in groups in any number of closings
between the Second and Third Closing Dates all by mutual agreement of
the parties. The relevant sites are:
(i) State Road 32, 2.3 miles west of Douglas, Douglas, GA (0-4)
(ii) 65 Birch Road, W. Springfield, MA (Brush Hill) (0-7)
(iii) S. of Big Hill, Rockcastle County, KY (L-35)
(iv) Grove Street, Lewiston, Androscoggin, ME (L-58)
(v) Rte. 76, Ripley, Chautauqua County, NY (L-77)
(vi) City of St. George, Washington County, UT (L-112)
The parties acknowledge that some or all of the foregoing six Sites may
be included in the second Closing if supplemental documentation or
information satisfactory to Buyer becomes available prior to September
29, 1998. If any such Site is included in the second Closing,
conveyance documents dated as of the Second Closing Date (such as bills
of sale, deeds and leases) will be executed or revised if necessary to
reflect such inclusion. Similarly, exhibits such as Exhibit A to the
Master Tower Space Lease (as amended) will be revised, if necessary, to
reflect Sites actually included in the second Closing.
The parties agree that the Second Closing Date shall be the date on
which Buyer transmits to Sellers the portion of the Purchase Price
allocable to Sites included in the Second Closing (which is anticipated
to be September 29, 1998) and the second Closing shall not be effective
among the Parties until such funds are transmitted.
<PAGE> 2
2
A third Closing will be held on December 31, 1998 or such earlier date as the
parties may agree in respect of the Sites to which Gerard T. Uht, Sr. is the
lessor of either land and a tower or just a tower, which Sites are listed below.
Such third closing date shall be referred to as the "Third Closing Date". All
conditions to the Buyer's and Sellers' obligations to close in respect of the
Second Closing Date as set forth in the Agreement shall apply to the
transactions contemplated for the Third Closing Date.
The Sites related to Gerard T. Uht, Sr. are the following:
(i) Arkwright, Chautauqua County, NY (L-71);
(ii) Werner Road, Attica, Wyoming County, NY (L-72);
(iii) Little Valley, Cattaraugus County, NY (L-75 and L-76);
(iv) Cherry Hill, Albion, Erie County, PA (L-94 and L-95);
(v) New Buffalo Road, Corry, Erie County, PA (L-96 and L-97);
(vi) 1611 Peach Street, Erie, Erie County, PA (L-98);
(vii) Townline Road, Meadville, Crawford County, PA (L-100);
(viii) Lee Road, Mill Village, Erie County, PA (L-101 and L-102);
(ix) Bredinsburg Road, Oil City, Venango County, PA (L-103 and
L-104);
(x) Off U.S. 19, Summit, Erie County, PA (L-105);
(xi) Cherrytree Township, Venango County, PA (L-106 and L-107);
and
(xii) Butchers Mill Road, Warren, Warren County, PA (L-108)."
2. Except as provided above, the Agreement remains unchanged and in
full force and effect.
<PAGE> 3
3
IN WITNESS WHEREOF, the Parties hereto have executed this Third
Amendment as of the date first above written.
BUYER: SELLERS:
OmniAmerica Towers, Inc. The Westlink Company, a Delaware corporation
Arch Capitol District, Inc., a New York
corporation
Arch Michigan, a Delaware corporation (for
itself and as successor in interest to
By: /s/ F. HOWARD MANDEL Arch Communications Enterprises, Inc.,
------------------------- a Delaware corporation)
F. Howard Mandel Arch Southeast Communications, Inc., a Delaware
Vice President and corporation
Assistant Secretary The Beeper Company of America, Inc., a
Colorado corporation
Arch Connecticut Valley, Inc., a
Massachusetts corporation
Answer Iowa, Inc., an Iowa corporation
Arch Paging, Inc., a Delaware corporation
(formerly USA Mobile Communications,
Inc. III and successor by merger to Q
Media Company-Paging, Inc., a Delaware
corporation, and Professional
Communications, Inc., a Pennsylvania
corporation, Q Media Company-Paging,
Inc. and Q Media Paging-Alabama, Inc.
themselves successors in interest to
USA Mobile Communications, Inc. II, a
Delaware corporation)
Arch Communications, Inc., a Delaware
corporation (formerly USA Mobile
Communications, Inc. II, a Delaware
corporation)
By: /s/ ROBERT B. ALPERIN
-------------------------------------------
Robert B. Alperin
Vice President-Business Development
<PAGE> 1
EXHIBIT 21.1
OMNIAMERICA TOWERS, INC. (FKA OMNIAMERICA, INC.)
OMNIAMERICA DEVELOPMENT CORP. (FKA SPECIALTY CAPITAL SERVICES, INC.)
OMNIAMERICA HOLDINGS CORPORATION
SOUTH ATLANTIC TOWER CORPORATION
SPECIALTY CONSTRUCTORS, INC.
SPECIALTY TRAINING CENTERS, INC.
SPECIALTY CONSTRUCTORS COATINGS, INC.
SPECIALTY FORTRESS, INC.
SPECIALTY MANAGEMENT, INC.
SPECIALTY COMBINED RESOURCES, INC.
NOVAK & LACKEY CONSTRUCTION CO., INC.
MICROWAVE TOWER SERVICE, INC.
OMNITOWER LTD.
<PAGE> 1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-18899) pertaining to the Amended and Restated 1994 Stock Option Plan
and the Outside Directors Stock Option Plan of OmniAmerica, Inc. (formerly
Specialty Teleconstructors, Inc) of our report dated September 16, 1998, with
respect to the consolidated financial statements of OmniAmerica, Inc. (formerly
Specialty Teleconstructors, Inc.) included in the Annual Report (Form 10-KSB)
for the year ended June 30, 1998.
/s/ Ernst & Young LLP
Dallas, Texas
September 24, 1998
<PAGE> 1
The Board of Directors
OmniAmerica, Inc. (formerly Specialty Teleconstructors, Inc.):
We consent to incorporation by reference in the registration
statement (No. 333-18899) on Form S-8 of OmniAmerica Inc. (formerly Specialty
Teleconstructors, Inc.) of our report dated August 29, 1997, relating to the
consolidated balance sheet of OmniAmerica Inc. and subsidiaries (formerly
Specialty Teleconstructors, Inc.) as of June 30, 1997, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended, which report appears in the June 30, 1998, annual report
on Form 10-KSB of OmniAmerica Inc. (formerly Specialty Teleconstructors, Inc.).
/s/ KPMG Peat Marwick LLP
Albuquerque, New Mexico
September 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,349,324
<SECURITIES> 0
<RECEIVABLES> 17,740,083
<ALLOWANCES> 390,230
<INVENTORY> 3,430,868
<CURRENT-ASSETS> 30,056,713
<PP&E> 56,293,162
<DEPRECIATION> 5,446,055
<TOTAL-ASSETS> 179,323,425
<CURRENT-LIABILITIES> 12,287,791
<BONDS> 31,631,459
0
0
<COMMON> 150,703
<OTHER-SE> 135,040,094<F1>
<TOTAL-LIABILITY-AND-EQUITY> 179,323,425
<SALES> 62,799,071
<TOTAL-REVENUES> 63,319,089
<CGS> 51,933,764
<TOTAL-COSTS> 60,886,254
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 623,723
<INCOME-PRETAX> 1,809,112
<INCOME-TAX> 832,000
<INCOME-CONTINUING> 977,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 977,112
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
<FN>
<F1>Other equity of $135,040,094 is comprised of Additional paid-in Capital of
$129,131,297, Treasury Stock of $(1,387,500), note receivable from officer
and director of $(600,000), and Retained Earnings of $7,896,297
</FN>
</TABLE>
