EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and between
SAMSTOCK, L.L.C.
and
DAVEL COMMUNICATIONS GROUP, INC.
Dated May 14, 1998
TABLE OF CONTENTS
Page(s)
ARTICLE I - DEFINITIONS.......................................................................... 1
ARTICLE II - PURCHASE AND SALE OF SHARES......................................................... 5
Section 2.1 Purchase and Sale..................................................... 5
Section 2.2 Consideration......................................................... 5
ARTICLE III - THE CLOSING........................................................................ 5
Section 3.1 Time and Place........................................................ 5
Section 3.2 Deliveries by the Company............................................. 5
Section 3.3 Deliveries by the Purchaser........................................... 6
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 6
Section 4.1 Organization, Standing and Corporate Power............................ 6
Section 4.2 Subsidiaries.......................................................... 7
Section 4.3 Capital Structure..................................................... 7
Section 4.4 Title to Stock and Warrants........................................... 8
Section 4.5 Authority; Noncontravention........................................... 8
Section 4.6 SEC Documents; Undisclosed Liabilities................................ 9
Section 4.7 Absence of Certain Changes or Events.................................. 10
Section 4.8 Litigation............................................................ 10
Section 4.9 Employee Benefit Plans; ERISA......................................... 11
Section 4.10 Taxes................................................................. 12
Section 4.11 Compliance with Laws.................................................. 12
Section 4.12 No Other Agreements to Sell the Company or its Assets................. 13
Section 4.13 Contracts and Commitments............................................. 13
Section 4.14 Insurance............................................................. 14
Section 4.15 Affiliate Transactions................................................ 14
Section 4.16 Proxy Statement....................................................... 14
Section 4.17 Vote Required; Recommendation of Board................................ 15
Section 4.18 Takeover Statutes..................................................... 15
Section 4.19 Rights Agreement...................................................... 15
Section 4.20 Brokers and Finders................................................... 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................... 15
Section 5.1 Organization.......................................................... 16
Section 5.2 Authority; Noncontravention........................................... 16
Section 5.3 Investment Intent..................................................... 16
Section 5.4 Proxy Statement....................................................... 16
Section 5.5 Availability of Funds................................................. 17
Section 5.6 Litigation............................................................ 17
Section 5.7 Brokers and Finders................................................... 17
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made this 14th day of May, 1998 by and
between Samstock, L.L.C., a Delaware limited liability company ("Purchaser"),
and Davel Communications Group, Inc., an Illinois corporation (the "Company").
WITNESSETH:
WHEREAS, the Company wishes to issue and sell to Purchaser, and Purchaser
wishes to purchase from the Company, 1,000,000 newly issued shares (the
"Shares") of common stock, no par value, of the Company ("Company Common Stock")
and warrants to purchase 218,750 shares of Company Common Stock (the "Warrants")
at an exercise price of $32.00 per share (which shall be exercisable through the
fourth anniversary of the Closing Date), upon the terms and subject to the
conditions of this Agreement.
WHEREAS, concurrently herewith, Purchaser and David R. Hill ("Hill") have
entered into a Stock Purchase Agreement pursuant to which Hill has agreed to
sell to Purchaser, and Purchaser has agreed to purchase from Hill, 500,000
shares of Company Common Stock and warrants to purchase 131,250 shares of
Company Common Stock (the "Hill Stock Purchase Agreement"), upon the terms and
subject to the conditions set forth in such Agreement.
WHEREAS, concurrently herewith, Purchaser, on the one hand, and certain
directors and members of management of the Company (the "Management
Shareholders"), on the other, have entered into a Stock Purchase Agreement
pursuant to which the Management Shareholders have agreed to sell to Purchaser,
and Purchaser has agreed to purchase form the Management Shareholders, 123,900
shares of Company Common Stock (such Agreement, together with the Hill Stock
Purchase Agreement, the "Other Stock Purchase Agreements"), upon the terms and
subject to the conditions set forth in the Management Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Affiliate" shall mean, with respect to any person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with such first person. As used
in this definition "control" (including, with correlative meanings, "controlled
by" and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies, whether through the ownership of securities or partnership or other
ownership interests, by contract or otherwise.
Section 1.2 "Agreement" shall mean this Agreement, including the Exhibits
and Schedules attached hereto and incorporated herein by this reference.
Section 1.3 "Closing" shall have the meaning set forth in Section 3.1
hereof.
Section 1.4 "Closing Date" shall have the meaning set forth in Section 3.1
hereof.
Section 1.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.6 "Company" shall mean Davel Communications Group, Inc., an
Illinois corporation.
Section 1.7 "Company Common Stock" shall have the meaning set forth in the
introductory clauses hereto.
Section 1.8 "Company Preferred Stock" shall have the meaning set forth in
Section 4.3 hereto.
Section 1.9 "Company Stock Options" shall have the meaning set forth in
Section 4.3 hereof.
Section 1.10 "Contracts" shall have the meaning set forth in Section 4.13
hereof.
Section 1.11 "Disclosure Letter" shall have the meaning set forth in the
preface of Article IV hereof.
Section 1.12 "Employee Benefit Plans" shall mean all employee benefit plans
or programs maintained for the benefit of the current or former employees or
directors of the Company or any of its Subsidiaries that are sponsored,
maintained or contributed to by the Company or any of its Subsidiaries, or with
respect to which the Company or any of its Subsidiaries has any liability that
are "employee benefit plans" as defined in Section 3(3) of ERISA.
Section 1.13 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Section 1.15 "Filed SEC Documents" shall have the meaning set forth in
Section 4.7 hereof.
Section 1.16 "GAAP" shall mean generally accepted accounting principles as
in effect in the United States consistently applied.
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Section 1.17 "Governmental Entity" shall mean any federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency.
Section 1.18 "Hill" shall mean David R. Hill.
Section 1.19 "Hill Stock Purchase Agreement" shall have the meaning set
forth in the introductory clauses hereto.
Section 1.20 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Section 1.21 "Investment Agreement" shall mean the Investment Agreement
substantially in the form of Exhibit A hereto.
Section 1.22 "IRS" shall mean the Internal Revenue Service.
Section 1.23 "Liens" shall mean all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever.
Section 1.24 "Losses and Expenses" shall have the meaning set forth in
Section 10.2 hereof.
Section 1.25 "Management Shareholders" shall have the meaning set forth in
the introductory clauses hereto.
Section 1.26 "Material Adverse Effect" shall mean a material adverse
effect (or any development which, insofar as reasonably can be foreseen, in the
future is likely to have a material adverse effect) on the business, assets or
financial condition of the Company and its Subsidiaries, taken as a whole,
except for the impact of any order or determination by the Federal
Communications Commission or Federal appellate court concerning compensation
paid by interexchange carriers and local exchange carriers to payphone service
providers in the Federal Communications Commission CC Docket No. 96-128,
Implementation of the Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996.
Section 1.27 "Material Company Subsidiary" shall mean a Subsidiary of the
Company that constitutes a significant subsidiary within the meaning of Rule 1-
02 of Regulation S-X of the SEC.
Section 1.28 "Other Stock Purchase Agreements" shall have the meaning set
forth in the introductory clauses hereto.
Section 1.29 "Permitted Liens" shall mean (i) Liens for Taxes that are not
yet due or delinquent or are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with GAAP, (ii) mechanics' and other
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similar Liens arising in the ordinary course of business with respect to amounts
not yet overdue for a period of 45 days or amounts being contested in good faith
by appropriate proceedings if a reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made therefor, and (iii) Liens
which do not materially interfere with the use of any property or asset of the
Company or any of its Subsidiaries for its current use or which, individually or
in the aggregate, do not materially interfere with the ordinary conduct of
business of the Company and its Subsidiaries.
Section 1.30 "person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, Governmental Entity or other entity.
Section 1.31 "Proxy Statement" shall have the meaning set forth in Section
4.5 hereof.
Section 1.32 "Purchase Price shall have the meaning set forth in Section
2.2 hereof.
Section 1.33 "Purchaser" shall mean Samstock, L.L.C., a Delaware limited
liability company.
Section 1.34 "Rights Agreement" shall have the meaning set forth in
Section 4.3 hereof.
Section 1.35 "SEC" shall mean the Securities and Exchange Commission.
Section 1.36 "SEC Documents" shall have the meaning set forth in Section
4.6 hereto.
Section 1.37 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.38 "Shareholder Approval" shall have the meaning set forth in
Section 4.5 hereof.
Section 1.39 "Shareholders Agreement" shall mean the Shareholders
Agreement substantially in the form of Exhibit B hereto.
Section 1.40 "Shares" shall have the meaning set forth in the introductory
clauses hereto.
Section 1.41 "Subsidiary" of any person shall mean another person, an
amount of the voting securities or other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person.
Section 1.42 "Surviving Provisions" shall have the meaning set forth in
Section 9.2 hereof.
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Section 1.43 "takeover proposal" shall have the meaning set forth in
Section 6.2 hereof.
Section 1.44 "Taxes" shall mean all federal, state, local and foreign
taxes, and other assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax or penalties
applicable thereto.
Section 1.45 "Tax Returns" shall mean all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended tax return relating to Taxes.
Section 1.46 "Warrant Agreement" shall mean an agreement to be entered
into by the Company and Purchaser pursuant to which the Company shall issue to
Purchaser the Warrants, which agreement, in form and substance, shall be
reasonably acceptable to Purchaser.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale. Upon the terms and subject to the
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conditions set forth in this Agreement, at the Closing, the Company shall issue
and sell, and Purchaser shall purchase from the Company, the Shares and the
Warrants.
Section 2.2 Consideration. Upon the terms and subject to the conditions
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set forth in this Agreement, at the Closing, Buyer shall pay to the Company
$28,000,000.00 (the "Purchase Price").
ARTICLE III
THE CLOSING
Section 3.1 Time and Place. Upon the terms and subject to the conditions
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set forth in this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Rosenberg &
Liebentritt, P.C., Two N. Riverside Plaza, Chicago, Illinois at 10:00 a.m.
(local time) on the fifth business day following the date on which all of the
conditions to each party's obligations hereunder have been satisfied or waived
or at such other place or time as Purchaser and the Company may agree. The date
and time at which the Closing actually occurs is hereinafter referred to as the
"Closing Date."
Section 3.2 Deliveries by the Company. At the Closing, the Company shall
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deliver the following to Purchaser:
(a)(i) one or more stock certificates representing the Shares issued
in the name of Purchaser; and (ii) any other documents that are necessary to
transfer to Purchaser good and marketable title to the Shares free and clear of
any Lien;
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(b) a duly executed counterpart of the Investment Agreement;
(c) a duly executed counterpart of the Shareholders Agreement;
(d) a duly executed counterpart of the Warrant Agreement and any
other documents that are necessary to transfer to Purchaser good and marketable
title to the Warrants; and
(e) all other documents, instruments and writings required to be
delivered by the Company at or prior to the Closing Date pursuant to this
Agreement.
Section 3.3 Deliveries by the Purchaser. At the Closing, Purchaser shall
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deliver the following to the Company:
(a) the Purchase Price by interbank transfer of immediately available
funds to an account designated by the Company or by such other means as may be
agreed upon in writing by the Company and Purchaser;
(b) a duly executed counterpart of the Investment Agreement;
(c) a duly executed counterpart of the Shareholders Agreement;
(d) a duly executed counterpart of the Warrant Agreement; and
(e) all other documents, instruments and writings required to be
delivered by Purchaser at or prior to the Closing Date pursuant to this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser, except as set forth in
the Disclosure Letter delivered by the Company to Purchaser concurrently with
the execution of this Agreement (the "Disclosure Letter") by specific reference
to the relevant representation and warranty, as follows:
Section 4.1 Organization, Standing and Corporate Power. Each of the
------------------------------------------
Company and each of the Material Company Subsidiaries is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite power
and authority to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have
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a Material Adverse Effect. The Company has delivered to Purchaser complete and
correct copies of its Articles of Incorporation and By-laws and the articles of
incorporation and by-laws or comparable organizational documents of each of the
Material Company Subsidiaries. The Company is not in violation of any provision
of its Articles of Incorporation or By-laws and no Material Company Subsidiary
is in violation of any provision of its articles of incorporation, by-laws or
comparable organizational documents, except to the extent that such violations
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 4.2 Subsidiaries. Section 4.2 of the Disclosure Letter sets
------------
forth each Material Company Subsidiary and the ownership or interest therein of
the Company. All the outstanding shares of capital stock of each Material
Company Subsidiary have been validly issued and are fully paid and nonassessable
and are owned by the Company, by another Subsidiary of the Company or by the
Company and another Subsidiary of the Company, free and clear of all Liens.
Except for the capital stock of the Company's Subsidiaries, the Company does not
own, directly or indirectly, any capital stock or other ownership interest in
any corporation, partnership, limited liability company, joint venture or other
entity.
Section 4.3 Capital Structure. (a) The authorized capital stock of the
-----------------
Company consists of 10,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $.01 per share ("Company Preferred Stock").
At the close of business on May 12, 1998, (i)(A) 4,647,809 shares of Company
Common Stock were outstanding, all of which were validly issued, fully paid and
nonassessable and (B) no shares of Junior Participating Preferred Stock were
outstanding, all of which were validly issued, fully paid and nonassessable and
(ii)(A) 58,000 shares of Company Common Stock were reserved for issuance upon
the exercise of warrants and (B) 500,350 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding stock options ("Company
Stock Options") granted pursuant to the Davel Communications Group, Inc.
Director Stock Option Plan and the Davel Communications Group, Inc. Stock Option
Plan. Except as set forth above, at the close of business on May 14, 1998, and
except pursuant to the Rights Agreement, dated April 22, 1998, by and between
the Company and ChaseMellon Shareholder Services, L.L.C. (the "Rights
Agreement"), no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding, and, since such date,
no shares of capital stock or other voting securities or options in respect
thereof have been issued except upon the exercise of any Company Stock Options.
Except as set forth in this Section 4.3 and except for Company Stock Options
granted in the ordinary course of business to employees and directors of the
Company or its Subsidiaries and covering not in excess of an aggregate of
350,000 shares of Company Common Stock for all such grants during the period
from the date of this Agreement through the Closing Date, there are not now, and
at the Closing Date there will not be, any options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
relating to the issued or unissued capital stock of the Company or any of its
Subsidiaries, or obligating the Company or any of its Subsidiaries to issue,
transfer, grant or sell any shares of capital stock or
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other equity interests in, the Company or any of its Subsidiaries or obligating
the Company or any of its Subsidiaries to issue, grant, extend or enter into any
such option, warrant, call, right, commitment, agreement, arrangement or
understanding. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in the Rights
Agreement, there are not any outstanding contractual obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its Subsidiaries, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any of
the Company's Subsidiaries or any other person.
Section 4.4 Title to Stock and Warrants. The Shares and the Warrants,
---------------------------
upon issuance on the terms and conditions set forth in this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable. At the Closing,
Purchaser will acquire good and marketable title to the Shares and the Warrants,
free and clear of all Liens. Upon issuance of shares of Company Common Stock
pursuant to the Warrants, such shares will be duly authorized, validly issued,
fully paid and nonassessable, and Purchaser will acquire good and marketable
title to such shares.
Section 4.5 Authority; Noncontravention. The Company has the requisite
---------------------------
corporate power and authority to enter into this Agreement and, subject to the
approval of the issuance of the Shares by the holders of Company Common Stock
("Shareholder Approval"), to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, subject to Shareholder Approval. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to general principles of equity and as may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally.
The execution and delivery of this Agreement by the Company do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under (i) the Articles of Incorporation or By-laws of the Company
or the comparable organizational documents of any of the Company's Subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license applicable
to the Company or any of the Material Company Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
the Material Company
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Subsidiaries or their respective properties or assets of which the Company is
aware, other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or Liens, that individually or in the aggregate,
would not (x) have a Material Adverse Effect, (y) prevent the Company from
performing its obligations under this Agreement in any material respect or (z)
prevent or delay in any material respect the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to the Company or any of the Material Company
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
by this Agreement, except (i) the filing of a notification and report form by
Hill as the ultimate parent entity of the Company under the HSR Act, (ii) the
filing with the SEC of a proxy statement relating to the meeting of the
Company's shareholders to be held in connection with the transactions
contemplated by this Agreement (together with any amendments or supplements
thereto, the "Proxy Statement") and such reports under Section 13(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement and (iii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect or have, individually or in the aggregate, a
Material Adverse Effect.
Section 4.6 SEC Documents; Undisclosed Liabilities. To its knowledge,
--------------------------------------
the Company has filed all required reports, schedules, forms, statements and
other documents with the SEC since December 31, 1994 (as such documents have
been amended prior to the date hereof, the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by a later Filed SEC Document.
The consolidated financial statements of the Company included in the SEC
Documents have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and the consolidated Subsidiaries of the Company as of the dates thereof
and the consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and the absence of footnotes). Except as set forth in the Filed SEC
Documents and for liabilities incurred in the ordinary course of business after
the date hereof or incurred as permitted by this Agreement, neither the Company
nor any of the Company's Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a
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consolidated balance sheet of the Company and its consolidated Subsidiaries or
in the notes thereto and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Section 4.7 Absence of Certain Changes or Events. Except as disclosed in
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the SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed SEC Documents") or as specifically permitted by this
Agreement, since the date of the most recent audited financial statements
included in the Filed SEC Documents, the Company has conducted its business only
in the ordinary course, and there has not been:
(a) any change or effect (or any development that, insofar as can
reasonably be foreseen, is likely to result in a change or effect) which,
individually or in the aggregate, has had or would reasonably be expected to
have, a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock;
(c) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in exchange or in substitution for shares of the Company's
capital stock;
(d) (i) any granting by the Company or any of its Subsidiaries to any
executive officer of the Company or any such Subsidiary of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
hereof, (ii) any granting by the Company or any of its Subsidiaries to any such
executive officer of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in effect as
of the date hereof or (iii) any entry by the Company or any of its Subsidiaries
into any employment, severance or termination agreement with any such executive
officer;
(e) any damage destruction or loss, not covered by insurance, that
has had or would reasonably be expected to have a Material Adverse Effect; or
(f) any change in accounting methods, principles or practices by the
Company or any Material Company Subsidiary materially and adversely affecting
its assets, liabilities or business, except insofar as may have been required by
a change in GAAP.
Section 4.8 Litigation. Except as disclosed in the Filed SEC Documents,
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there is no suit, action or proceeding pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that, individually or in the aggregate, would reasonably be expected to (i) have
a Material Adverse Effect, (ii) prevent the Company from performing its
obligations under this Agreement in any material respect or (iii) prevent or
delay in any material respect the consummation of the transactions contemplated
by this Agreement,
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and there is not any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries that has had or would reasonably be expected to have, a Material
Adverse Effect.
Section 4.9 Employee Benefit Plans; ERISA. (a) With respect to each
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Employee Benefit Plan: (i) each Employee Benefit Plan has been administered in
compliance in all material respects with its terms including any provisions
relating to contributions thereunder, and is in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
federal, state and other applicable laws, rules and regulations, as they relate
to such Employee Benefit Plans (including funding, filing, termination,
reporting, disclosure and continuation coverage obligations pursuant to Title V
of the Consolidate Omnibus Budget Reconciliation Act of 1985, as amended; (ii)
no "employee pension benefit plan" (as defined in Section 3(2) of ERISA) has
been the subject of a "reportable event" (as defined in Section 4043 of ERISA)
and there have been no non-exempt "prohibited transactions" (as described in
Section 4975 of the Code or in Part 4 of Subtitle I of ERISA) with respect to
any Employee Benefit Plan; (iii) each Employee Benefit Plan which is intended to
be "qualified" within the meaning of Section 401(a) of the Code is so qualified,
and any trust created pursuant to any such Employee Benefit Plan is exempt from
federal income tax under Section 501(a) of the Code and the IRS has issued each
such Employee Benefit Plan a favorable determination letter which, to the
Company's knowledge, is currently applicable, except to the extent such failure
to be qualified, exempt or applicable, would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect; (iv) the
Company is not aware of any circumstances or event which would be reasonably
likely to jeopardize the tax-qualified status of any such Employee Benefit Plan
or the tax-exempt status of any related trust, or would cause the imposition of
any liability, penalty or tax under ERISA or the Code with respect to any
Employee Benefit Plan; (v) no material unsatisfied liabilities to participants,
the IRS, the United States Department of Labor, the Pension Benefit Guaranty
Corporation or to any other person or entity have been incurred as a result of
the termination of any Employee Benefit Plan; and (vi) there has been no event
with respect to an Employee Benefit Plan which would require disclosure under
Section 4062(c), 4063(a) or 4041(e) of ERISA.
(b) No Employee Benefit Plan would result in the payment to any
employee, officer or director of the Company or any of its Subsidiaries of any
money or other property or rights or accelerate or provide any other rights or
benefits to any such employee, officer or director as a direct result of the
transactions contemplated by this Agreement.
(c) Except as disclosed in the Filed SEC Documents, since the date of
the most recent audited financial statements included in the most recent Filed
SEC Documents, there has not been any adoption or amendment in any material
respect by the Company or any of its Subsidiaries of any Employee Benefit Plan
or collective bargaining agreement providing benefits to any current or former
employee, officer or director of the Company or any of its Subsidiaries.
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(d) The Company has not promised or vested, by plan document or
written or oral communication, the right of any employee, former employee,
retiree, beneficiary or other person to lifetime benefits under any "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA.
(e) No Employee Benefit Plan excludes from participation in such plan
any individual performing services for the Company or an ERISA Affiliate on the
basis of such individual's status as an independent contractor, unless such
individual actually meets the requirements for status as an independent
contractor based on Internal Revenue Service Revenue Ruling 87-41, 1987-1 C.B.
296, except to the extent any such exclusion would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
(f) No "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) is a multi-employer plan within the meaning of Sections 3(37) or
4001(a)(3) of ERISA. The Company has not withdrawn or partially withdrawn from
any multi-employer plan, or has any liability, jointly or otherwise, for any
withdrawal liability demanded or yet to be demanded under Title IV of ERISA by
any multi-employer plan for a complete or partial withdrawal.
Section 4.10 Taxes. (a) The Company and each of its Subsidiaries have
-----
timely filed (or have had timely filed on their behalf) or will file or cause to
be timely filed, all material Tax Returns required by applicable law to be filed
by any of them prior to or as of the Closing Date. All such Tax Returns are, or
will be at the time of filing, true, complete and correct in all material
respects, except where the failure to be true, complete and correct would not be
reasonably likely to have a Material Adverse Effect.
(b) The Company and each of its Subsidiaries have paid (or have had
paid on their behalf), or where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and recourse),
or will establish or cause to be established on or before the Closing Date, an
adequate accrual for the payment of, all material Taxes due with respect to any
period ending prior to or as of the Closing Date. The Company and each of its
Subsidiaries have made all material deposits required by law to be made with
respect to employee withholding and other employment Taxes.
(c) No audit by any Governmental Entity is presently in progress, or,
to the knowledge of the Company, threatened, with respect to any Tax Returns
filed by, or Taxes due from the Company or any of its Subsidiaries. There are
no Tax Liens other than Permitted Liens on any of the assets or properties of
the Company or any of its Subsidiaries.
Section 4.11 Compliance with Laws. Neither the Company nor any of its
--------------------
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity
applicable to its business or operations, except for violations and failures to
comply that could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
12
Section 4.12 No Other Agreements to Sell the Company or its Assets.
-----------------------------------------------------
Other than this Agreement, the Company has no legal obligation, absolute or
contingent, to any other person to sell any material portion of the assets or
properties of the Company or any of its Subsidiaries, to sell any material
portion of the capital stock or other ownership interests of the Company or any
of its Subsidiaries or to effect any merger, consolidation or other
reorganization of the Company or any of its Subsidiaries or to enter into any
agreement with respect thereto.
Section 4.13 Contracts and Commitments. (a) Section 4.13 of the
-------------------------
Disclosure Letter contains a complete and accurate list of all written
contracts, plans or agreements ("Contracts") of the following categories to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound as of the date of this Agreement:
(i) employment Contracts pursuant to which any person receives
annual compensation in excess of $125,000, including contracts to
employ executive officers and other contracts with officers, directors
or shareholders of the Company, and all severance, change in control
or similar arrangements with any executive officers of the Company;
(ii) Contracts with executive officers of the Company or any of
its Subsidiaries pursuant to which any such officer or employee would
be entitled to receive any severance, change in control or similar
payment upon Hill ceasing to own a stated amount or percentage of
outstanding Company Common Stock or other voting securities of the
Company, (whether or not the receipt of such payment by any such
executive officer would also require the termination of employment of
such executive officer);
(iii) promissory notes, loans, agreements, indentures, evidences
of indebtedness or other instruments providing for the lending of
money, whether as borrower, lender or guarantor, in excess of $1
million;
(iv) Contracts for the purchase of inventory or equipment which
are not cancelable (without material penalty, cost or other liability)
within one year and other Contracts, whether or not made in the
ordinary course of business, involving annual expenditures or
liabilities in excess of $2 million which are not cancelable (without
material penalty, cost or other liability) within 90 days;
(v) Contracts pursuant to which the Company or any of its
Subsidiaries receives annual revenues in excess of $1,000,000;
(vi) Contracts containing covenants limiting the freedom of the
Company or any of the Material Company Subsidiaries to engage in any
line of business or compete with any person;
13
(vii) any Contract restricting the ownership or voting of the
capital stock of the Company or any of its Subsidiaries, other than as
contemplated by this Agreement or the exhibits hereto;
(viii) joint venture or partnership agreements; and
(ix) any Contract pending for the acquisition, directly or
indirectly (by merger or otherwise) of material assets or capital
stock of another person.
True and complete copies of the written Contracts identified in Section 4.13 of
the Disclosure Letter have been delivered or made available to Purchaser or its
representatives.
Section 4.14 Insurance. All material fire and casualty, general
---------
liability, business interruption, product liability, workers' compensation,
vehicular and other insurance policies maintained by the Company or any of its
Subsidiaries are with reputable insurance carriers, provide adequate coverage
for normal risks incident to the businesses of the Company and its Subsidiaries
and their respective properties and assets, and are in character and amount
substantially equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Section 4.15 Affiliate Transactions. Except as set forth in the Filed
----------------------
SEC Documents, from December 31, 1997 through the date of this Agreement there
have been no transactions, agreements, arrangements or understandings between
the Company or any of its Subsidiaries, on the one hand, and Affiliates of the
Company or any of it Subsidiaries or other persons, on the other hand, that
would be required to be disclosed under Item 404 of Regulation S-K under the
Securities Act.
Section 4.16 Proxy Statement. None of the information included or
---------------
incorporated by reference by the Company in the Proxy Statement, will, at the
date it is first mailed to the Company's shareholders and at the time of the
meeting of the Company's shareholders held for the purpose of obtaining
Shareholder Approval, contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied by Purchaser
and its Affiliates for inclusion in the Proxy Statement. The Proxy Statement
will comply in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder, except that no representation is made
by the Company with respect to statements made therein based on information
supplied by Purchaser and its Affiliates for inclusion in the Proxy Statement.
14
Section 4.17 Vote Required; Recommendation of Board. The affirmative
--------------------------------------
vote of a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the issuance of the Shares by the Company to Purchaser as
contemplated by this Agreement. The Board of Directors of the Company, or an
authorized Committee of such Board, at a meeting duly called and held has (i)
unanimously approved this Agreement and the transactions contemplated hereby,
(ii) determined that the transactions contemplated by this Agreement are fair to
the Company and its shareholders and (iii) resolved to recommend to such holders
that they approve the issuance of the Shares by the Company to Purchaser as
contemplated by this Agreement and that such matter be submitted to the
Company's shareholders. The Company hereby agrees to the inclusion in the Proxy
Statement of the recommendations of the Board of Directors of the Company
described in this Section 4.17.
Section 4.18 Takeover Statutes. To the knowledge of the Company, no
-----------------
"fair price," "moratorium," "control share acquisition" or other similar anti-
takeover statute or regulation enacted under state or federal law applicable to
the Company is applicable to the transactions contemplated by this Agreement.
Section 4.19 Rights Agreement. The Company's Board of Directors has
----------------
taken all necessary action to provide that Purchaser will not become an
"Acquiring Person," that no "Triggering Event, "Share Acquisition Date" or
"Distribution Date" (as such terms are defined in the Rights Agreement), will
occur, and that the Rights Agreement will not be applicable to the execution or
delivery of this Agreement or any amendment hereto or the consummation of the
transactions contemplated by this Agreement. The Company has provided to
Purchaser written evidence, reasonably satisfactory to Purchaser, of the
foregoing.
Section 4.20 Brokers and Finders. No broker, investment banker,
-------------------
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The fees incurred and to be incurred by the Company
in connection with this Agreement and the transactions contemplated by this
Agreement for the persons listed in Section 4.20 of the Disclosure Letter are
set forth in Section 4.20 of the Disclosure Letter. The Company has furnished
to Purchaser true and complete copies of all the agreements referred to in
Section 4.20 of the Disclosure Letter and all indemnification and other
agreements related to the engagement of the persons so listed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
15
Section 5.1 Organization. Purchaser is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
Section 5.2 Authority; Noncontravention. Purchaser has the requisite
---------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of Purchaser. This Agreement has been duly executed and delivered
by Purchaser and constitutes a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to general
principles of equity and as may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally. The execution and
delivery of this Agreement by Purchaser do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under (i) the
organizational documents of Purchaser or (ii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment ,
order, decree, statute, law, ordinance, rule or regulation applicable to
Purchaser or its properties or assets, other than, in the case of clause (ii),
any such conflicts, violations or defaults that, individually or in the
aggregate, would not (x) prevent Purchaser from performing its obligations under
this Agreement in any material respect or (y) prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to
Purchaser in connection with the execution and delivery of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated by
this Agreement, except (i) the filing of a notification and report form by
Purchaser under the HSR Act and (ii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not prevent or delay in any material respect the consummation of
the transactions contemplated by this Agreement or otherwise prevent Purchaser
from performing its obligations under this Agreement in any material respect.
Section 5.3 Investment Intent. Purchaser is purchasing the Shares for
-----------------
investment, and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares. Purchaser is an "accredited investor" as defined in Rule 501 of
Regulation D adopted by the SEC under the Securities Act.
Section 5.4 Proxy Statement. None of the information supplied by
---------------
Purchaser for inclusion in the Proxy Statement will, at the date it is first
mailed to the Company's shareholders and at the time of the meeting of the
Company's shareholders held for the purpose of obtaining Shareholder Approval,
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
16
Section 5.5 Availability of Funds. Purchaser has sufficient funds
---------------------
available to pay the Purchase Price on the Closing Date.
Section 5.6 Litigation. There is no suit, action or proceeding pending
----------
or, to the knowledge of Purchaser, threatened against or affecting Purchaser
that, individually or in the aggregate, would reasonably be expected to (i)
prevent Purchaser from performing its obligations under this Agreement in any
material respect or (ii) prevent or delay in any material respect the
consummation of the transactions contemplated by this Agreement.
Section 5.7 Brokers and Finders. No broker, investment banker, financial
-------------------
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Purchaser.
ARTICLE VI
CONDUCT OF BUSINESS
Section 6.1 Conduct of Business. During the period from the date of this
-------------------
Agreement to the Closing Date, the Company shall, and shall cause each of its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use commercially reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Closing Date, the Company shall not, and shall
not permit any of its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other
than dividends and distributions by a direct or indirect wholly owned
Subsidiary of the Company to its parent, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (z) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or
17
convertible securities (other than the issuance of shares of Company
Common Stock reserved for issuance as described in the second sentence
of Section 4.3);
(iii) amend its articles of incorporation, by-laws or comparable
organizational documents in a manner that would be reasonably likely
to adversely affect Purchaser;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association or
other business organization or division thereof other than
acquisitions not exceeding $50 million in the aggregate or (y) any
assets that are material, individually or in the aggregate, to the
Company and its Subsidiaries taken as a whole;
(v) enter into any agreement with respect to a takeover
proposal;
(vi) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien (other than Permitted Liens) or otherwise dispose
of any of its properties or assets, other than in the ordinary course
of business;
(vii) (y) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except as otherwise permitted by the Company's
existing senior credit facility, or (z) make any loans, advances
(other than advances to employees in the ordinary course of business
consistent with prior practice) or capital contributions to, or
investments in , any other person, other than to the Company or any
direct or indirect wholly owned Subsidiary of the Company;
(viii) make or agree to make any new capital expenditures outside
the ordinary course of business which, in the aggregate, exceed $2.5
million;
(ix) except in the ordinary course of business pursuant to
existing employment agreements or Employee Benefit Plans, as described
in the Disclosure Letter or as required by applicable laws, (A)
increase the compensation payable or to become payable to its
executive officers or employees, (B) grant any severance or
termination pay to, or enter into any employment or severance
agreement with, any director, executive officer or employee of the
Company or
18
any of its Subsidiaries or (C) establish, adopt, enter into or amend
in any material respect or take action to accelerate any rights or
benefits under any collective bargaining agreement or any Employee
Benefit Plan, except as contemplated by this Agreement;
(x) without limiting the generality of clause (ix) above, make
any amendment to any Employee Benefit Plan solely as a result of this
Agreement or in contemplation of the issuance of Shares contemplated
by this Agreement; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 6.2 No Solicitation. (a) The Company shall not, nor shall it
---------------
permit any of its Subsidiaries to, nor shall it authorize any officer, director
or employee of or any investment banker, attorney or other advisor or
representative of, the Company or any of the Company's Subsidiaries to, (i)
solicit, initiate or encourage the submission of any takeover proposal (as
defined below), (ii) enter into any agreement with respect to any takeover
proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any takeover proposal; provided; however,
-------- -------
that the Company or its Board of Directors may comply with Rule 14e-2
promulgated under the Exchange Act with regard to a takeover proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any executive officer of the Company or
any of the Company's Subsidiaries or any investment banker, attorney or other
advisor or representative of the Company or any of the Company's Subsidiaries at
the direction of the Company or acting within the scope of his, her or its
authority, whether or not such person is purporting to act on behalf of the
Company or any of the Company's Subsidiaries or otherwise, shall be deemed to be
a breach of this Section 6.2(a) by the Company. For purposes of this Agreement,
"takeover proposal" means any proposal for a merger, consolidation or other
business combination involving the Company or any of its Subsidiaries or any
proposal or offer to acquire from the Company or Hill in any manner, directly or
indirectly, more than 10% of any class of voting securities of the Company or
any of the Company's Subsidiaries, or assets representing more than 20% of the
total assets of the Company and its Subsidiaries, taken as a whole, as reflected
on the Company's balance sheet as of March 31, 1998, other than the transactions
contemplated by this Agreement. The Company will immediately cease and cause to
be terminated any existing activities, discussions or negotiations by the
Company or any of its officers, investment bankers, attorneys or other advisors
or representatives with any parties conducted heretofore on the Company's behalf
with respect to any of the foregoing.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to
19
Purchaser, the adoption, approval or recommendation by the Company's Board of
Directors or any such committee of this Agreement or (ii) approve or recommend,
or propose to approve or recommend, any takeover proposal.
(c) The Company promptly shall advise Purchaser orally and in writing
of any takeover proposal or any inquiry with respect to or which could lead to
any takeover proposal and the identity of the person making any such takeover
proposal or inquiry. The Company will keep Purchaser promptly and fully
informed in all material respects of the status and details of any such takeover
proposal or inquiry.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement; Shareholder Meeting. (a) As soon as
------------------------------------
practicable following the date of this Agreement, the Company shall prepare and
file with the SEC the Proxy Statement. The Company will use its reasonable best
efforts to cause the Proxy Statement to be mailed to the Company's shareholders
as promptly as practicable thereafter.
(b) The Company will, as soon as practicable following SEC clearance
of the Proxy Statement, duly call, give notice of, convene and hold a meeting of
its shareholders for the purpose of obtaining Shareholder Approval. The Company
will, through its Board of Directors, recommend to its shareholders approval of
the issuance of the Shares by the Company to Purchaser, as contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to the first sentence of this Section 7.1(b) shall
not be altered by the commencement, public proposal, public disclosure or
communication to the Company of any takeover proposal.
Section 7.2 Access to Information. The Company shall, and shall cause
---------------------
each of its Subsidiaries to, afford to Purchaser and to the officers, employees,
accountants, counsel, financial advisors and other representatives of Purchaser,
reasonable access during normal business hours during the period prior to the
Closing Date to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall, and shall
cause each of its Subsidiaries to, furnish promptly to Purchaser (a) a copy of
each report, schedule, registration statement or other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as Purchaser may reasonably request.
Section 7.3 Further Action. Upon the terms and subject to the
--------------
satisfaction of the conditions contained in this Agreement, each of the parties
hereto shall use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and
20
make effective the transactions contemplated by this Agreement. From time to
time after the Closing Date, without further consideration, the Company will, at
its own expense, execute and deliver such documents to Purchaser as Purchaser
may reasonably request in order more effectively to vest in Purchaser good and
marketable title to the Shares.
Section 7.4 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.4 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 7.5 Public Announcements. The Company and Purchaser shall consult
--------------------
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or by the
rules and regulations of the National Association of Securities Dealers, Inc.
Section 7.6 Investment Agreement. The Company and Purchaser shall execute
--------------------
and deliver each of the Investment Agreement and the Shareholders Agreement at
or prior to the Closing.
Section 7.7 Fees and Expenses. All fees and expenses incurred in
-----------------
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not such transactions are
consummated.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation. The respective
-------------------------------------
obligation of each party to effect the transactions contemplated by this
Agreement is subject to the satisfaction or waiver at or prior to the Closing
Date of the following conditions:
(a) Shareholder Approval. The Company shall have obtained
--------------------
Shareholder Approval.
(b) Antitrust. The waiting periods (and any extensions thereof)
---------
applicable to the transactions contemplated by this Agreement under the HSR
Act shall have been terminated or shall have expired.
21
(c) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
executive order, decree, ruling, injunction or other order (whether
temporary, preliminary or permanent) shall have been enacted, promulgated
or enforced by any Governmental Entity of competent jurisdiction which
prohibits, restrains, enjoins or restricts the consummation of the
transactions contemplated by this Agreement; provided, however, that each
of the parties shall have used its reasonable best efforts to cause any
such decree, ruling, injunction or other order to be vacated or lifted.
(d) There shall not be pending any suit, action or proceeding by any
Governmental Entity seeking to impose, and neither the Company nor
Purchaser shall be subject to any order, decree, ruling or injunction
(whether temporary, preliminary or permanent) which would impose,
limitations on the ability of Purchaser to acquire or hold, or exercise
full rights of ownership of, the Shares, including the right to vote the
Shares on all matters properly presented to the shareholders of the
Company.
(e) The closing of the transactions contemplated by the Other Stock
Purchase Agreements shall be occurring concurrently with the Closing.
Section 8.2 Condition to Obligations of the Company. The obligations of
---------------------------------------
the Company to effect the transactions contemplated by this Agreement are
further subject to the satisfaction or waiver at or prior to the Closing Date of
the following additional conditions:
(a) Purchaser shall have performed in all material respects all
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date, and the representations and
warranties of Purchaser contained in this Agreement that are qualified as
to materiality shall be true and correct and the representations and
warranties of Purchaser contained in this Agreement that are not so
qualified shall be true and correct in all material respects (except to the
extent that such failures to be true and correct in the aggregate shall not
have had and shall not be reasonably likely to have a Material Adverse
Effect), in each case as of the date of this Agreement and as of the
Closing Date, except to the extent any such representation or warranty
expressly relates to an earlier date (in which case as of such date), and
Purchaser shall have received a certificate signed on behalf of Purchaser
by an executive officer thereof to such effect.
(b) The Company shall have received an opinion of Rosenberg &
Liebentritt, in form and substance reasonably satisfactory to the Company.
Section 8.3 Conditions to Obligations of Purchaser. The obligations of
--------------------------------------
Purchaser to effect the transactions contemplated by this Agreement are further
subject to the satisfaction or waiver at or prior to the Closing Date of the
following additional conditions:
22
(a) The Company shall have performed in all material respects all
agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date, and the representations and
warranties of the Company contained in this Agreement that are qualified as
to materiality shall be true and correct and the representations and
warranties of the Company contained in this Agreement that are not so
qualified shall be true and correct in all material respects (except to the
extent that such failures to be true and correct in the aggregate shall not
have had and shall not be reasonably likely to have a Material Adverse
Effect), in each case as of the date of this Agreement and as of the
Closing Date, except to the extent any such representation or warranty
expressly relates to an earlier date (in which case as of such date), and
the Company shall have received a certificate signed on behalf of the
Company by an executive officer thereof to such effect.
(b) The modifications to the employment agreements referenced in
Section 4.7(iii) of the Disclosure Letter shall have been made, as
described in such Section of the Disclosure Letter.
(c) Purchaser shall have received an opinion of Kirkland & Ellis, in
form and substance reasonably satisfactory to Purchaser.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date:
(a) by mutual written consent of Purchaser and the Company; or
(b) by either Purchaser or the Company:
(i) if, at a duly held shareholders meeting of the Company or
any adjournment thereof at which Shareholder Approval is voted upon,
Shareholder Approval shall not have been obtained;
(ii) if the transactions contemplated by this Agreement shall
not have been consummated by October 31, 1998 (other than due to the
failure of the party seeking to terminate this Agreement to perform
its obligations under this Agreement required to be performed at or
prior to the Closing Date);
(iii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise
23
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and non-
appealable;
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in
this Agreement which (A) would give rise to the failure of a condition
set forth in Section 8.2(a) or 8.3(a), as applicable, and (B) cannot
be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement that would give rise to a
failure of a condition as described in clause (A) above); or
(v) in the event that (A) all the conditions to the obligation
of such party to effect the transactions contemplated by this
Agreement set forth in Section 8.1 shall have been satisfied and (B)
any condition to the obligation of such party to effect such
transactions set forth in Section 8.2 (in the case of the Company) or
Section 8.3 (in the case of Purchaser) is not capable of being
satisfied prior to the end of the period referred to in subsection
(b)(ii) above.
Section 9.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Purchaser or the Company as provided in Section 9.1 hereof,
this Agreement shall forthwith become void (except as set forth in this Section
9.2, in Section 7.5 and Article XI (other than Section 11.5) hereof, which shall
survive such termination (the "Surviving Provisions")) and there shall be no
liability on the part of Purchaser or the Company except for any breach of any
of its obligations under the Surviving Provisions. Notwithstanding the
foregoing, no party hereto shall be relieved from liability for any material
breach of this Agreement.
ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.1 Survival. The representations and warranties given by the
--------
Company to Purchaser in this Agreement, and the representations and warranties
given by Purchaser to the Company in this Agreement, shall survive the Closing
until the second anniversary of the Closing Date; provided, however, that the
-------- -------
representations and warranties given by the Company to Purchaser in Sections
4.1, 4.4 and 4.5, and by Purchaser to the Company in Sections 5.1, 5.2 and 5.3,
shall survive the Closing indefinitely and shall not terminate.
Section 10.2 Indemnification by Purchaser or the Company. (a) From and
-------------------------------------------
after the Closing Date, Purchaser shall indemnify and hold harmless the Company,
the Company's Affiliates, each of their respective directors, officers,
employees and agents, and each of the heirs, executors, successors and assigns
of any of the foregoing from and against any and all
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damages, claims, losses, expenses, costs, obligations and liabilities including
without limiting the generality of the foregoing, liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement) (collectively, "Losses and
Expenses") suffered or incurred by any such indemnified person arising from,
relating to or otherwise in respect of, (i) any breach of, or inaccuracy in, any
representation or warranty of Purchaser contained in this Agreement or in the
certificate delivered pursuant to Section 8.2(a) of this Agreement; and (ii) any
breach of any covenant of Purchaser contained in this Agreement.
(b) From and after the closing date, the Company shall indemnify and
hold harmless Purchaser, Purchaser's Affiliates, each of their respective
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing from and against any and all
Losses and Expenses suffered or incurred by any such indemnified person arising
from, relating to or otherwise in respect of, (i) any breach of, or inaccuracy
in, any representation or warranty of the Company contained in this Agreement or
in the certificate delivered pursuant to section 8.3(a) of this Agreement, and
(ii) any breach of any covenant of the Company contained in this Agreement.
Section 10.3 Third-Party Claims. If a claim by a third party is made
------------------
against an indemnified person hereunder, and if such indemnified person intends
to seek indemnity with respect thereto under this Article, such indemnified
person shall promptly notify the indemnifying person in writing of such claims
setting forth such claims in reasonable detail, provided that failure of such
indemnified person to give prompt notice as provided herein shall not relieve
the indemnifying person of any of its obligations hereunder, except to the
extent that the indemnifying person is materially prejudiced by such failure.
The indemnifying person shall have twenty (20) days after receipt of such notice
to undertake, through counsel of its own choosing, subject to the reasonable
approval of such indemnified person, and at its own expense, the settlement or
defense thereof, and the indemnified person shall cooperate with it in
connection therewith; provided, however, that the indemnified person may
-------- -------
participate in such settlement or defense through counsel chosen by such
indemnified person, provided that the fees and expenses of such counsel shall be
borne by such indemnified person. If the indemnifying person shall assume the
defense of a claim, it shall not settle such claim without the prior written
consent of the indemnified person, (i) unless such settlement includes as an
unconditional term thereof the giving by the claimant of a release of the
indemnified person from all liability with respect to such claim or (ii) if such
settlement involves the imposition of equitable remedies or the imposition of
any material obligations on such indemnified person other than financial
obligations for which such indemnified party will be indemnified hereunder. If
the indemnifying person shall assume the defense of a claim, the fees of any
separate counsel retained by the indemnified person shall be borne by such
indemnified person unless there exists a conflict between them as to their
respective legal defenses (other than one that is of a monetary nature), in
which case the indemnified person shall be entitled to retain separate counsel,
the reasonable fees and expenses of which shall be reimbursed by the
indemnifying person. If the indemnifying
25
person does not notify the indemnified person within thirty (30) days after the
receipt of the indemnified person's notice of a claim of indemnity hereunder
that it elects to undertake the defense thereof, the indemnified person shall
have the right to contest, settle or compromise the claim but shall not thereby
waive any right to indemnity therefor pursuant to this Agreement.
Section 10.4 Termination of Indemnification. The obligations to
------------------------------
indemnify and hold harmless a party hereto, (a) with respect to any breach of,
or inaccuracy in, any representation or warranty contained in this Agreement
shall terminate when the applicable representation or warranty terminates and
(b) with respect to any breach of covenant or agreement set forth in this
Agreement shall not terminate; provided, however, that as to clause (a) above
-------- -------
such obligation to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
indemnifying party.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 11.2 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Illinois regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 11.3 Entire Agreement. This Agreement (including the documents
----------------
referred to herein) (a) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) is not intended to
confer upon any person other than the parties any rights or remedies.
Section 11.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, to the appropriate address or telecopy number set forth below (or at
such other address or telecopy number for a party as shall be specified by like
notice):
26
(a) If to Purchaser:
Samstock, L.L.C.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: F. Philip Handy
Telecopy Number: 312.454.1671
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Walter S. Lowry
Telecopy Number: 312.454.0335
(b) If to Company, to:
Davel Communications Group, Inc.
1429 Massaro Boulevard
Tampa, Florida 33619
Attention: Theodore C. Rammelkamp, Jr.
Telecopy: 813.626.9610
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: R. Scott Falk
Telecopy Number: 312.861.2200
Section 11.5 Assignment. Neither this Agreement nor any of the rights,
----------
interest or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Purchaser may assign any of or
all of its rights and obligations under this Agreement to any person that is an
Affiliate of Samuel Zell or an Affiliate of any one or more trusts established
for the benefit of Samuel Zell and/or members of his family without the consent
of any other party; provided that such assignment shall not relieve Purchaser of
its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
27
Section 11.6 Interpretation. The table of contents and headings contained
--------------
in this Agreement are inserted for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. All
references to a Section, articles, Schedule or Exhibit contained herein mean
Sections or Articles of this Agreement unless otherwise stated. All capitalized
terms defined herein are equally applicable to both the singular and plural
forms of such terms.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
Section 11.7 Amendments; Waivers. (a) This Agreement may not be modified
-------------------
or amended except by an instrument or instruments in writing signed by each
party hereto.
(b) The failure of any party hereto to comply with any
representation, warranty, covenant or agreement contained in this Agreement may
be waived only by a written instrument signed by the party granting such waiver.
No action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained in this Agreement, and no failure by any party to take any
action with respect to any breach of this Agreement or default by any other
party shall constitute a waiver of such party's right to enforce any provision
hereof or to take any such action. The waiver by any party hereto of a breach of
any provision hereunder shall not operate as a waiver of any prior or subsequent
breach of the same or any other provision hereunder.
Section 11.8 Severability. Any provision hereof which is invalid or
------------
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 11.9 Consent to Jurisdiction. Each party hereto irrevocably
-----------------------
submits to the nonexclusive jurisdiction of (a) the state courts of the State of
Illinois and (b) the federal district courts located in the State of Illinois
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby.
28
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties as of the date first above written.
SAMSTOCK, L.L.C.
by SZ Investments, L.L.C.
by Zell General Partnership, Inc.
By: /s/ Rod Danmeyer
--------------------------------------
Name:
Title:
DAVEL COMMUNICATIONS GROUP, INC.
By: /s/ David Hill
--------------------------------------
Name: David Hill
Title: Chairman
29