Exhibit 10.1
INVESTMENT AGREEMENT
dated as of May 1, 1998
between
RECOVERY EQUITY INVESTORS II, L.P.
and
CHADMOORE WIRELESS GROUP, INC.
INVESTMENT AGREEMENT, dated as of May 1, 1998, between Recovery
Equity Investors II, L.P., a Delaware limited partnership ("Investor"), and
Chadmoore Wireless Group, Inc., a Colorado corporation (the "Company").
WHEREAS, Investor desires to purchase from the Company, and the
Company desires to sell to the Investor, (a) 8,854,662 shares of Common Stock
(the "Common Purchased Stock"), (b) 10,119,614 shares of Series C Preferred
Stock (the "Preferred Purchased Stock"), and (c) the Warrants; and
WHEREAS, capitalized terms used and not otherwise defined herein
have the meanings set forth in Section 10.1.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF COMMON PURCHASED STOCK, PREFERRED
PURCHASED STOCK AND WARRNTS; CLOSING
1.1 Purchase. The Company agrees to sell to Investor, and
Investor agrees to purchase from the Company, the Common Purchased Stock, the
Preferred Purchased Stock and the Warrants at the Closing on the terms and
subject to the conditions set forth in this Agreement.
1.2 Purchase Price. The aggregate purchase price for the Common
Purchased Stock being purchased hereunder is $ 3,500,000, for the Preferred
Purchased Stock being purchased hereunder is $3,950,000, and for the Warrants
being purchased hereunder is $50,000 (such sums, collectively, being the
"Purchase Price"), payable in cash in the manner provided in Section 1.3.
1.3 Closing. The Closing will take place at the offices of the
Company, 2875 East Patrick Lane, Suite G, Las Vegas, Nevada 89120, or at such
other place as Investor and the Company shall mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Investor shall pay the Purchase
Price by wire transfer of funds to such account as the Company may reasonably
direct by written notice delivered to Investor by the Company at least three
Business Days before the Closing Date. Simultaneously, the Company shall issue
to Investor the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants, in each case free and clear of all Liens, by delivering to Investor
certificates, registered in the name of Investor or any designee thereof,
evidencing the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants. At the Closing, there shall also be delivered to the Company and
Investor the opinions, certificates and other Contracts, documents and
instruments to be delivered under Article V.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Investor as
follows:
2.1 Organization and Qualification. Except as disclosed in
Section 2.1 of the Disclosure Schedule, the Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Colorado, and has full corporate power and authority to conduct its business as
now conducted and as proposed to be conducted under the Business Plan and to
own, use and lease its Assets and Properties. Except as disclosed in Section 2.1
of the Disclosure Schedule, the Company is duly qualified, licensed or admitted
to do business and is in good standing in each jurisdiction in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary.
2.2 Authority Relative to this Agreement and the Operative
Agreements. The Company has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the Operative Agreements and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action by the Board of Directors of the Company, and
no other action on the part of the Company or its shareholders is necessary to
authorize the execution, delivery and performance of this Agreement and the
Operative Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby. This Agreement and the Operative Agreements
have been duly and validly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
2.3 Capital Stock. As of the date hereof, the authorized capital
stock of the Company consists only of 100,000,000 shares of Common Stock, par
value $0.001 per share (the "Common Stock"), and 40,000,000 shares of Preferred
Stock, par value $0.001 per share (the "Preferred Stock"), of which 25,299,035
shares of Common Stock and 144,981 shares of Series B Preferred Stock are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
have been issued in compliance with all applicable federal, state and foreign
securities Laws. Immediately after giving effect to the Closing and the other
transactions contemplated hereby to occur on the Closing Date, (i) the
authorized capital stock of the Company will consist of 100,000,000 shares of
Common Stock, 40,000,000 shares of Preferred Stock, of which 750,000 shares of
Series A Preferred Stock are authorized, 225,000 shares of Series B Preferred
Stock are authorized and 11,000,000 shares of Series C Preferred Stock are
authorized, each having the terms and conditions specified in the Amended
Charter, and (ii) the outstanding capital stock of the
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Company will consist of 34,153,697 shares of Common Stock, 8,854,662 of which
will be owned by the Investor, 219,000 shares of Series B Preferred Stock, none
of which are owned by the Investor, and 10,119,614 shares of Series C Preferred
Stock, all of which will be owned by the Investor. Except for the Common
Purchased Stock, the Preferred Purchased Stock and the shares of Common Stock
issuable upon exercise of the Warrants or as disclosed in Section 2.3 (a) of the
Disclosure Schedule, no shares of Common Stock or Preferred Stock are held in
treasury or are reserved for issuance. Section 2.3 (b) of the Disclosure
Schedule lists the name of each record holder as of April 1, 1998 of more than
1% of the outstanding shares of Common Stock or Preferred Stock. Except as
disclosed in Section 2.3(c) of the Disclosure Schedule, (i) there are no
outstanding Options or agreements, arrangements or understandings to issue
Options with respect to the Company, (ii) there are no agreements, arrangements
or understandings pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Common Stock or Equity Equivalents (the
securities described in (i) and (ii) being, collectively, the "Identified
Securities") and (iii) there are no preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of the Company's capital stock. With respect to each Identified
Security, Section 2.3 (d) of the Disclosure Schedule sets forth a true, complete
and accurate description of the principal terms thereof, including the holder
thereof, the number and type of securities issuable thereunder, the exercise
price therefor or thereunder and the exercise period or term thereof. There are
no Identified Securities issued or outstanding other than as are listed in
Section 2.3 (e) of the Disclosure Schedule. There are no agreements,
arrangements or understandings (i) to pay any dividend or make any distribution
to the holders of any of the Identified Securities, (ii) to pay any dividend or
make any distribution on the capital stock of the Company which adjusts, in any
way, any of the Identified Securities, (iii) to grant, issue or sell any Options
or rights to purchase stock, warrants, securities or other property to the
holders of any of the Identified Securities or (iv) to grant, issue or sell any
Options or rights to purchase stock, warrants, securities or other property
which adjusts, in any manner, any of the Identified Securities. On the Closing
Date, the delivery of the certificate or certificates evidencing the Common
Purchased Stock, the Preferred Purchased Stock and the Warrants purchased
hereunder to the Investor will transfer to Investor good and valid title to the
Common Purchased Stock, the Preferred Purchased Stock and the Warrants, in each
case free and clear of all Liens, and the Common Purchased Stock and the
Preferred Purchased Stock will have been duly authorized, validly issued, fully
paid and nonassessable. The Company has taken all necessary corporate actions to
reserve the full number of shares of Common Stock issuable upon exercise of the
Warrants. The shares of Common Stock issuable upon exercise of the Warrants,
when issued upon such exercise, will be duly authorized, validly issued, fully
paid and nonassessable. The shares of New Preferred Stock, when issued, will be
duly authorized, validly issued and fully paid and nonassessable. Neither the
execution, delivery or performance by the Company of this Agreement or the
Operative Agreements, the issuance of the Common Purchased Stock, the Preferred
Purchased Stock, the New Preferred Stock and the Warrants as contemplated
hereby, nor the issuance of shares of Common Stock upon exercise of the
Warrants, the performance by the Company of its obligations under its
certificate of incorporation, its by-laws, the Amended Charter, the By-Laws
Amendment, hereunder or under the Operative Agreements, will give rise to or
result in (with or without notice, lapse of time or both) any antidilution
adjustment, acceleration of vesting or other change under or to any Option or
Identified Securities. Except for the Shareholders Agreement, the Company is not
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a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between or among any Persons
which affects or relates to the voting, or giving of written consents or
nominating directors, with respect to the Company, any of its Subsidiaries or
any of their respective securities. Except as set forth in Section 2.3 (f) of
the Disclosure Schedule, to the Company's knowledge, no holder of Common Stock
or Options of the Company are or have been, the subject of any investigation by
any Governmental or Regulatory Authority.
2.4 Subsidiaries; Company; Business. (a) Section 2.4 (a) of the
Disclosure Schedule lists the name of each Subsidiary and all lines of business
in which each Subsidiary is participating or engaged or has previously
participated or engaged. Except as set forth in Section 2.4(b) of the Disclosure
Schedule, each Subsidiary is a corporation or limited liability company, as the
case may be, duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation and has full power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. Except as set forth in Section 2.4(b) of the
Disclosure Schedule, each Subsidiary is duly qualified, licensed or admitted to
do business and is in good standing in those jurisdictions in which the
ownership, use or leasing of such Subsidiary's Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. Section 2.4(a) of the Disclosure Schedule lists for each
Subsidiary the amount of its authorized and outstanding equity interests. All of
the outstanding equity interests of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and, except for the
minority interests indicated on Section 2.4(a) of the Disclosure Schedule, are
owned, beneficially and of record, by the Company or by Subsidiaries wholly
owned, directly or indirectly, by the Company, in each case free and clear of
all Liens, except for Permitted Liens. Except as set forth on Section 2.4(a) of
the Disclosure Schedule, there are no outstanding Options with respect to any
Subsidiary or agreements, arrangements or understandings to issue Options with
respect to any Subsidiary and there are no preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of any Subsidiary's equity interests.
(b) The name of each director and officer of the Company and each
Subsidiary on the date hereof, and the position with the Company and such
Subsidiary held by each, are listed in Section 2.4(a) of the Disclosure
Schedule. The Company has prior to the execution of this Agreement delivered to
Investor true and complete copies of the certificate or articles of
incorporation and by-laws (or other comparable constitutive documents) of the
Company and each of its Subsidiaries. Except as set forth in Section 2.4 of the
Disclosure Schedule, the Company holds no equity, membership, partnership, joint
venture or other interest in any Person.
2.5 No Conflicts. The execution and delivery by the Company of
this Agreement do not, and the execution and delivery by the Company of the
Operative Agreements, the performance by the Company of its obligations under
this Agreement and the Operative Agreements and the consummation of the
transactions contemplated hereby and thereby (including the issuance of the
Common Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock
and the
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Warrants and the issuance of shares of Common Stock upon exercise of the
Warrants) do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation
(including the Amended Charter) or by-laws (including the By-Law Amendment) (or
other comparable constitutive documents) of the Company or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.6 of the
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to the Company, any of its
Subsidiaries or any of their respective Assets and Properties; or
(c) except as disclosed in Section 2.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or (vi) result
in the creation or imposition of any Lien upon the Company or any Subsidiary or
any of their respective Assets and Properties under, any Contract or License to
which the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound, except to the extent that the
occurrence of any of the events described in (i) through (vi) would either
individually or taken together with any or all of such other occurrences not be
deemed to have or could not reasonably be expected to have a material adverse
effect on the Business or Condition of the Company.
2.6 Governmental Approvals and Filings. Except as disclosed in
Section 2.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
the Company or any Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements or
the consummation of the transactions contemplated hereby or thereby.
2.7 Books and Records. The minute books, stock record books and
other similar records of the Company and its Subsidiaries have been provided to
Investor prior to the execution of this Agreement, are complete and correct in
all material respects and have been maintained in accordance with sound business
practices. Such minute books contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the directors, stockholders, managers, members and
committees of the boards of director (or similar governing bodies) of the
Company and the Subsidiaries.
2.8 SEC Documents; Financial Statements. Each SEC Document
required to be filed by the Company or any of its Subsidiaries with the SEC has
been filed and, as of its filing date,
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each such SEC Document, and any SEC Document that will be filed with the SEC
prior to or after the Closing, complied or will comply in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
none of the SEC Documents, except to the extent that information contained in
any SEC Document has been revised or superseded by a later-filed or later
declared effective, as the case may be, SEC Document, contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
material fact (x) necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or (y) required to
be stated therein or necessary to make the statements therein not misleading.
The financial statements of the Company included in the SEC Documents comply
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
2.9 Absence of Changes. Since the Audited Financial Statement
Date, except as set forth in Section 2.9 of the Disclosure Schedule or as
disclosed in the SEC Documents filed prior to the date hereof, there has not
been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected to
result in a material adverse change, in the Business or Condition of the
Company. None of the other representations or warranties set forth in this
Agreement shall be deemed to limit the foregoing. In addition, without limiting
the foregoing, except as expressly contemplated hereby and by the Operative
Agreements and except as disclosed in Section 2.9 of the Disclosure Schedule,
there has not occurred since the Audited Financial Statement Date:
(a) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock (or equity interests) of the
Company or any of its Subsidiaries, or any direct or indirect redemption,
purchase or other acquisition by the Company or any of its Subsidiaries of any
such capital stock (or equity interests) of or any Option with respect to the
Company or any of its Subsidiaries;
(b) except for the execution, delivery and performance by the
Company of this Agreement and the Operative Agreements, and the transactions
contemplated hereby or thereby, any authorization, issuance, sale or other
disposition by the Company or any Subsidiary of any shares of capital stock of,
or Option with respect to, the Company or any Subsidiary, or any modification or
amendment of any right of any holder of any outstanding shares of capital stock
of, or Option with respect to, the Company or any Subsidiary;
(c) (i) any increase in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, shareholder, manager, member, employee or consultant of the Company or
any Subsidiary; (ii) any payment of consideration of any nature whatsoever
(other than salary, commissions or consulting fees paid to any current or former
officer, director, shareholder, manager, member, employee or consultant of the
Company or any
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Subsidiary) to any current or former officer, director, stockholder, manager,
member, employee or consultant of the Company or any Subsidiary; (iii) any
establishment or modification of (A) targets, goals, pools or similar provisions
under any Benefit Plan, employment Contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan, employment Contract or other employee compensation
arrangement; or (iv) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Benefit Plan;
(d) (i) any incurrence by the Company or any Subsidiary of
Indebtedness in an amount exceeding $25,000 individually and $100,000 in the
aggregate or (ii) any voluntary purchase, cancellation, prepayment or complete
or partial discharge in advance of a scheduled payment date with respect to, or
waiver of any right of the Company or any Subsidiary under, any Indebtedness of
or owing to the Company or any Subsidiary;
(e) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or personal
property or equipment of the Company or any Subsidiary in an aggregate amount
exceeding $10,000;
(f) any write-off or write-down of or any determination to write
off or write-down any of the Assets and Properties of the Company or any
Subsidiary in an aggregate amount exceeding $50,000;
(g) any purchase of any Assets and Properties of any Person or
disposition of, or incurrence of a Lien (other than a Permitted Lien) on, any
Assets and Properties of the Company or any Subsidiary, other than acquisitions
or dispositions of inventory in the ordinary course of business of the Company
or any such Subsidiary consistent with past practice and other than acquisitions
of dispositions of Assets and Properties not exceeding $20,000 in any single
transaction and $100,000 in the aggregate;
(h) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been in effect on the
date hereof would have been required) to be disclosed in the Disclosure Schedule
pursuant to Section 2.15(a) or 2.18(a), (ii) any License held by the Company or
any Subsidiary or (iii) any Intellectual Property;
(i) any capital expenditures or commitments for additions to
property, plant or equipment of the Company or any of its Subsidiaries (x) with
respect to any SMR System or (y) constituting capital assets in an aggregate
amount exceeding $25,000;
(j) any commencement, termination or change by the Company or any
Subsidiary of any line of business;
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(k) any transaction by the Company or any Subsidiary with any
officer, director, stockholder, manager, member, Affiliate or Associate of the
Company or any Subsidiary, other than pursuant to any Contract in effect on the
Audited Financial Statement Date and disclosed to Investor pursuant to Section
2.18(a)(viii) or other than pursuant to any contract of employment and listed
pursuant to Section 2.18(a)(i) of the Disclosure Schedule;
(l) any change in the accounting or Tax methods or procedures of
the Company or any Subsidiary or any other transaction involving or development
affecting the Company or any Subsidiary outside the ordinary course of business
consistent with past practice; or
(m) any entering into of an agreement to do or engage in any of
the foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the Audited Financial Statements or in the notes thereto or as
disclosed in Section 2.10 of the Disclosure Schedule, there are no Liabilities
of, relating to or affecting the Company or any Subsidiary or any of their
respective Assets and Properties, other than Liabilities incurred in the
ordinary course of business consistent with past practice since the Audited
Financial Statement Date and in accordance with the provisions of this Agreement
and the Operative Agreements which, in the aggregate, are not material to the
Business or Condition of the Company and are not for tort or for breach of
contract.
2.11 Taxes. Except as disclosed in Section 2.11 of the Disclosure
Schedule:
(a) All Tax Returns required to have been filed by or with
respect to the Company or any Subsidiary or any affiliated, consolidated,
combined, unitary or similar group of which the Company or any Subsidiary is or
was a member (a "Relevant Group") have been duly and timely filed or properly
extended, and each such Tax Return is correct and complete in all material
respects and correctly and completely reflects Tax liability and all other
material information required to be reported thereon. All Taxes due and payable
by the Company or any Subsidiary or any member of a Relevant Group, whether or
not shown on any Tax Return, have been paid or adequately reserved for.
(b) The provisions for Taxes dur by the Company or any Subsidiary
in the Audited Financial statements are sufficient for all unpaid Taxes, being
current Taxes not yet due and payable, of the Company or any Subsidiary.
(c) Neither the Company nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by a jurisdiction in which the Company or any Subsidiary does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
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(d) The Company and its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(e) To the knowledge of the Company, it does not expect any
Taxing Authority to assess additional Taxes against or in respect of it or any
Subsidiary for any past period. There is no dispute or claim concerning any Tax
liability of the Company or any Subsidiary either (i) to the knowledge of the
Company, threatened, claimed or raised by any Taxing Authority or (ii) of which
the Company or any Subsidiary is or reasonably should be aware. There are no
Liens for Taxes upon the Assets or Properties of the Company or any Subsidiary
(except for inchoate Liens for Taxes not yet due and payable). Section 2.11 of
the Disclosure Schedule indicates those Tax Returns, if any, of the Company or
any Subsidiary that have been audited, and indicates those Tax Returns of the
Company or any Subsidiary that currently are the subject of audit. The Company
has delivered to Investor complete and correct copies of all federal, state,
local and foreign income Tax Returns filed by, and all Tax examination reports
and statements of deficiencies assessed against or agreed to by, the Company or
any Subsidiary since December 31, 1993.
(f) Neither the Company nor any Subsidiary has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency.
(g) Neither the Company nor any Subsidiary has received any
written ruling related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(h) Neither the Company nor any Subsidiary has any liability for
Taxes of any Person other than the Company or such Subsidiary (i) under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign Law), (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
(i) Neither the Company nor any Subsidiary (i) has agreed to, is
required to, or reasonably expects that it might have to, make any adjustment
under Section 481 of the Code (or any comparable provision of state, local or
foreign Law) by reason of a change in accounting method or (ii) is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code or comparable
provisions of any state statutes, and none of the Assets and Properties of the
Company or any Subsidiary is subject to an election under Section 341(f) of the
Code or comparable provisions of any state, local or foreign Law.
(j) Neither the Company nor any Subsidiary is a party to or is
bound by any obligations under any tax sharing, tax allocation, tax indemnify or
similar agreement or arrangement.
(k) Neither the Company nor any Subsidiary is a party to any
joint venture, partnership or other arrangement that is treated as a partnership
for federal income Tax purposes.
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(l) No Taxing Authority has proposed Tax adjustments with respect
to the Company or any Subsidiary directly or indirectly in respect of an
intercompany transaction or arrangement between or among the Company or any
Subsidiary, or a transaction or arrangement between or among the Company or any
Subsidiary, on the one hand, and any Affiliate of the Company or Affiliate of
such Affiliate, on the other hand, for any period ending on or prior to the
Closing Date, including (i) any Tax arising from an adjustment in respect of
such transaction or arrangement under Section 482 of the Code, the Treasury
regulations thereunder, any related provision or any similar provision of state,
local or foreign Law and (ii) any Tax arising from a failure fully to comply
with applicable documentation, record keeping and filing requirements in respect
of such transaction or arrangement.
(m) Neither the Company nor any Subsidiary has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(n) There is currently no limitation on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or other
similar items of the Company or any Subsidiary under (i) Section 382 of the
Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv) Section
269 of the Code and (v) Section 1502 of the Code and Treasury regulations
promulgated thereunder, except to the extent of any ownership change, equity
structure shift, or ownership shift as defined in Section 382 of the Code as a
result of the transaction contemplated by this Agreement.
(o) Neither the Company nor any Subsidiary has been a United
States real property holding corporation within the meaning of Section
897(c)(1)(A)(ii) of the Code.
2.12 Legal Proceedings. (a) . Except as set forth in SEC
Documents filed with the SEC prior to the date of this Agreement and Section
2.12(b) of the Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to the
knowledge of the Company and the Subsidiaries, threatened against, relating
to or affecting the Company or any Subsidiary or any of their respective
Assets and Properties;
(ii) there are no facts or circumstances known to the
Company or any Subsidiary that could reasonably be expected to give rise to
any Action or Proceeding against, relating to or affecting the Company or
any Subsidiary;
(iii) neither the Company nor any Subsidiary has received
notice or knows of any Orders outstanding against the Company or any
Subsidiary; and
(iv) neither the Company nor any Subsidiary has received
notice or knows of any defects, dangerous or substandard conditions in the
products or materials sold, distributed, or to be sold or distributed by
the Company or any Subsidiary that could cause bodily injury, sickness,
disease, death, or damage to property, or result in loss of use
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of property, or any claim, suit, demand for arbitration or notice seeking
damages for bodily injury, sickness, disease, death, or damage to property,
or loss of use of property.
(b) Prior to the execution of this Agreement, the Company has
delivered to Investor all responses of counsel for the Company and the
Subsidiaries to auditor's requests for information for the preceding five years
(together with any updates provided by such counsel) regarding Actions or
Proceedings pending or threatened against, relating to or affecting the Company
or any Subsidiary. Except as set forth in SEC Documents filed with the SEC prior
to the date of this Agreement, Section 2.12(b) of the Disclosure Schedule sets
forth all material Actions or Proceedings relating to or affecting the Company,
any Subsidiary, or any of their respective Assets and Properties during the
five-year period prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in
Section 2.13 of the Disclosure Schedule, neither the Company nor any Subsidiary
is or has been at any time in violation of or in default under, any Law or Order
applicable to the Company or any Subsidiary or any of their respective Assets
and Properties, the violation of which or default under either individually or
taken together with any or all such violations or defaults would be deemed to
have or could reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. In furtherance of the foregoing:
(a) Neither the Company nor any Subsidiary has violated any
federal, state or, to the knowledge of the Company and any Subsidiary foreign
securities Law in connection with the offer, sale or purchase of any securities;
(b) None of the processes followed, results obtained, services
provided or products made, modified or installed by the Company or any
Subsidiary, or by any managers, to the knowledge of the Company and any
Subsidiary, with respect to SMR Licenses held by the Company or any Subsidiary
(pursuant to Third Party Management Agreements or otherwise) or by the Company
or any Subsidiary in the management or operation of SMR Licenses managed by any
of them (pursuant to Company Management Agreements or otherwise), violate any
material Law or Order applicable thereto; and
(c) the Company, its Subsidiaries, each of the managers with
respect to SMR Licenses held by the Company or a Subsidiary, and the Company and
its Subsidiaries in their capacities as managers under Company Management
Agreements, has each timely obtained all licenses and permits and timely filed
all reports required to be filed under any applicable Laws.
2.14 BenefiT Plans; ERISA. All Benefit Plans of the Company and
each Subsidiary are listed in Section 2.14 of the Disclosure Schedule, and
copies of all documentation relating to such Benefit Plans (including all plan
documents, written descriptions of plans, actuarial reports and governmental
filings and determinations with respect to such Benefit Plans) have been
delivered or made available to Investor. None of the Benefit Plans are Defined
Benefit Plans. Except as disclosed in Section 2.14 of the Disclosure Schedule:
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(a) each Benefit Plan has at all times been maintained and
administered in accordance with its terms in all material respects, and each
such Benefit Plan and the administration thereof complies, and has at all times
complied, in all material respects with the requirements of all applicable Law,
including ERISA and the Code;
(b) each Benefit Plan intended to qualify under Section 401(a) of
the Code has at all times since its adoption been so qualified, and each trust
which forms a part of any such plan has at all times since its adoption been tax
exempt under Section 501(a) of the Code;
(c) neither the Company nor any Subsidiary is now, nor at any
time has been, a member of a controlled group, as defined in Section
412(n)(6)(B) of the Code, with any other company, entity or enterprise;
(d) neither the Company nor any Subsidiary presently maintains or
contributes to, nor any time has maintained or contributed to, any
single-employer plan (within the meaning of Section 3(41) of ERISA) subject to
Title IV of ERISA, and neither the Company nor any Subsidiary is aware of any
circumstances pursuant to which the Company or any Subsidiary could have a
material liability to any party under Title IV of ERISA;
(e) no Benefit Plan is a "multiemployer" plan within the meaning
of Section 3(37) of ERISA;
(f) neither the Company nor any Subsidiary has incurred, or
reasonably expects to incur, any liability for any tax imposed under Sections
4971 through 4980B of the Code or civil liability under Section 502(I) or (l) of
ERISA;
(g) no benefit under any Benefit Plan, including any severance or
parachute payment plan or agreement, will be established or become accelerated,
vested or payable by reason of any transaction contemplated under this
Agreement;
(h) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or Section 4980B of the Code;
(i) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or, to the knowledge of the Company and Subsidiaries, threatened against or with
respect to any Benefit Plan and there are no facts or circumstances known to the
Company or any Subsidiary that could reasonably be expected to give rise to any
such suit, action or other litigation;
(j) no tax has been incurred under Section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto); and
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(k) all contributions to Benefit Plans that were required to be
made under such Benefit Plans have been made; and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP, and each of the Company and each Subsidiary has
performed all material obligations required to be performed as of such date
under all Benefit Plans.
2.15 Real Property. (a) Section 2.15(a) of the Disclosure
Schedule contains a true and correct list of (i) each parcel of real property
owned (the "Owned Real Property") by the Company or any Subsidiary, (ii) each
parcel of real property leased by the Company or any Subsidiary (as lessor or
lessee) (the "Leased Real Property") and (iii) all Liens (other than Permitted
Liens) relating to or affecting any parcel of real property referred to in
clauses (i) and (ii).
(b) Each of the Company and the Subsidiaries has good and
marketable title to the Owned Real Property, free and clear of all Liens, other
than as specifically referred to in the Audited Financial Statements or in
Section 2.15(b) of the Disclosure Schedule.
(c) Subject to the terms of their respective leases, the Company
or a Subsidiary has a valid and subsisting leasehold estate in and the right to
quiet enjoyment of the Leased Real Properties for the full term of the lease
thereof. Each lease referred to in clause (ii) of paragraph (a) above is a
legal, valid and binding agreement, enforceable in accordance with its terms, of
the Company or a Subsidiary and of each other Person that is a party thereto,
and except as set forth in Section 2.15(c) of the Disclosure Schedule, there is
no, and neither the Company nor any Subsidiary has received notice of any,
default (or any condition or event which, after notice or lapse of time or both,
would constitute a default) thereunder. Neither the Company nor any Subsidiary
owes brokerage commissions or finders fees with respect to any such Leased Real
Property, except to the extent that the Company or any Subsidiary may renew the
term of any such lease, in which case, any such commissions and fees would be in
amounts that are reasonable and customary for the spaces so leased, given their
intended use and terms.
(d) Except as disclosed in Section 2.15(d) of the Disclosure
Schedule, the improvements on the Owned Real Property and the Leased Real
Property are in good operating condition and in a state of good maintenance and
repair, ordinary wear and tear excepted, are adequate and suitable for the
purposes for which they are presently being used and, to the knowledge of the
Company and the Subsidiaries, there are no condemnation or appropriation
proceedings pending or threatened against any of such real property or the
improvements thereon.
(e) Neither the Company nor any of its Subsidiaries has any
knowledge, nor has the Company or any of its Subsidiaries received any notice,
of any claim, action or proceeding, actual or threatened, against the Company,
any of its Subsidiaries, or the Owned Real Property or the Leased Real Property
by any Person which would materially affect the future use, occupancy or value
of the Owned Real Property or the Leased Real Property or any part thereof.
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2.16 Tangible Personal Property. The Company or a Subsidiary is
in possession of and has good and marketable title to, or has valid leasehold
interests in or valid rights under Contract to use, all tangible personal
property used in the conduct of its business as currently conducted, including
all tangible personal property reflected on the Audited Financial Statements and
tangible personal property acquired since the Audited Financial Statement Date,
other than property disposed of since such date in the ordinary course of
business consistent with past practice and the terms of this Agreement and the
Operative Agreements. All such tangible personal property is free and clear of
all Liens, other than Permitted Liens, and is adequate and suitable for the
conduct by the Company and its Subsidiaries of the business presently conducted
by them, and is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
2.17 Intellectual Property Rights. The only Intellectual Property
owned or licensed for use by the Company or the Subsidiaries is disclosed in
Section 2.17(i) of the Disclosure Schedule. The Company and the Subsidiaries
have all right, title and interest in each item of Intellectual Property
disclosed in Section 2.17(i) of the Disclosure Schedule, and except as disclosed
in Section 2.17(ii) of the Disclosure Schedule, such Intellectual Property is
free and clear of all Liens, other than Permitted Liens. No other Intellectual
Property is used or necessary in the conduct of the business of the Company and
the Subsidiaries as currently conducted. Except as disclosed in Section
2.17(iii) of the Disclosure Schedule, (a) the Company and the Subsidiaries have
all necessary rights to use the Intellectual Property disclosed therein, (b) all
registrations, on behalf of the Company and the Subsidiaries, with and
applications to Governmental or Regulatory Authorities in respect of such
Intellectual Property are valid and in full force and effect and are not subject
to the payment of any Taxes or maintenance fees or the taking of any other
actions by the Company and the Subsidiaries to maintain their validity or
effectiveness, (c) there are no restrictions on the direct or indirect transfer
of any such Intellectual Property, (d) the Company has delivered to Investor
prior to the execution of this Agreement documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in such Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such invention, process, design, computer program or other know-how
or trade secret, (e) the Company and the Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
trade secrets, (f) neither the Company nor any Subsidiary has granted any
license, agreement or other permission to use such Intellectual Property and (g)
neither the Company nor any Subsidiary has any knowledge that such Intellectual
Property is being infringed by any other Person. To the knowledge of the Company
and any Subsidiary, neither the Company nor any Subsidiary is infringing any
Intellectual Property of any other Person. No claim is pending or, to the
knowledge of the Company and any Subsidiary, has been threatened alleging any
such infringement or with respect to the ownership, validity, license or use of,
or any infringement resulting from, either the Company's or any Subsidiary's
Intellectual Property or the sale of any products or services by the Company or
any Subsidiary.
2.18 Contracts. (a) Section 2.18(a) of the Disclosure Schedule
(with paragraph references corresponding to those set forth below) contains a
true and complete list of each of the
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following Contracts or other arrangements (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto and all waivers of any terms thereof,
have been delivered to Investor prior to the execution of this Agreement), to
which the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing
for a commitment of employment or consultant services for a specified or
unspecified term, the name, position and rate of compensation of each
Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of
the Company or any Subsidiary to make payments (with or without notice,
passage of time or both) to any Person in connection with, or as a
consequence of, the transactions contemplated hereby (including the
exercise of the Warrants) or by the Operative Agreements or to any employee
who is disclosed in Section 2.22(a) of the Disclosure Schedule, other than
with respect to salary or incentive compensation payments in the ordinary
course of business consistent with past practice;
(ii) all Contracts with any Person containing any provision
or covenant prohibiting or limiting the ability of the Company or any
Subsidiary to engage in any business activity or compete with any Person or
prohibiting or limiting the ability of any Person to compete with the
Company or any Subsidiary or prohibiting or limiting disclosure of
confidential or proprietary information;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company
or any Subsidiary;
(v) all Contracts (A) with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees, (B) with aggregators, manufacturers and equipment vendors, and
(C) with respect to the sale of services, products or both, to customers;
(vi) all guarantees of any Indebtedness or other obligations
of the Company, any Subsidiary or any third Person;
(vii) all Contracts relating to (A) the future disposition
or acquisition of any Assets and Properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice and the provisions of this Agreement and the Operative Agreements,
and (B) any Business Combination;
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(viii) all executory Contracts between or among the Company
or any Subsidiary, on the one hand, and any current or former officer,
director, stockholder, manager, member, Affiliate or Associate of the
Company or any Subsidiary or any Associate of any such officer, director,
stockholder or Affiliate (other than the Company or any Subsidiary), on the
other hand, other than contracts disclosed pursuant to Section 2.18(a)(i);
(ix) all collective bargaining or similar labor Contracts;
(x) all Contracts that (A) limit or contain restrictions on
the ability of the Company or any Subsidiary to declare or pay dividends
on, to make any other distribution in respect of or to issue or purchase,
redeem or otherwise acquire its capital stock, to incur Indebtedness, to
incur or suffer to exist any Lien, to purchase or sell any Assets and
Properties, to change the lines of business in which it participates or
engages or to engage in any Business Combination, (B) require the Company
or any Subsidiary to maintain specified financial ratios or levels of net
worth or other indicia of financial condition or (C) require the Company or
any Subsidiary to maintain insurance in certain amounts or with certain
coverages;
(xi) all powers of attorney and comparable delegations of
authority;
(xii) all Company Management Agreements and Third Party
Management Agreements; and
(xiii) all other Contracts not otherwise required to be
disclosed in Section 2.18(a) of the Disclosure Schedule which are material
to the Business or Condition of the Company.
(b) Each Contract required to be disclosed in Section 2.18(a) of
the Disclosure Schedule, including each Company Management Agreement and each
Third Party Management Agreement is in full force and effect (except for
breaches and defaults of which neither the Company nor any Subsidiary has any
knowledge) and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto; and, except as disclosed in
Section 2.18(b) of the Disclosure Schedule, neither the Company, any Subsidiary
nor, to the knowledge of the Company and the Subsidiaries, any other party to
such Contract is, nor has received notice that it is, in violation or breach of
or default under any such Contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such Contract).
(c) Neither the Company nor any Subsidiary has knowledge of any
Contract to which either is a party that could give rise to a material Loss to
the Company or any Subsidiary by reason of the pricing terms or any other terms
contained therein.
2.19 Licenses. Section 2.19 of the Disclosure Schedule contains a
true and complete list of all Licenses used in and material to the business or
operations of the Company or any
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Subsidiary, setting forth the owner, the function and the expiration and renewal
date of each. Except as disclosed in Section 2.19 of the Disclosure Schedule:
(a) the Company and its Subsidiaries own or validly hold all
Licenses that are material to their respective business or operations;
(b) each License listed in Section 2.19 of the Disclosure
Schedule is valid, binding and in full force and effect; and
(c) neither the Company nor any Subsidiary is, or has received
any notice that it is, in default (or with the giving of notice or lapse of time
or both, would be in default) under any such License.
2.20 Insurance. Section 2.20 of the Disclosure Schedule contains
a true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business, operations or employees of the Company and its Subsidiaries or
affect or relate to the ownership, use or operation of any of the Assets and
Properties of the Company or any Subsidiary and that (a) have been issued to the
Company or any Subsidiary or (b) have been issued to any Person (other than the
Company or any Subsidiary) for the benefit of the Company or any Subsidiary. The
insurance coverage provided by the policies described in clause (a) above will
not terminate or lapse by reason of any of the transactions contemplated by this
Agreement or the Operative Agreements. Each policy listed in Section 2.20 of the
Disclosure Schedule is valid and binding and in full force and effect, all
premiums due thereunder have been paid when due and neither the Company, any
Subsidiary nor the Person to whom such policy has been issued has received any
notice of cancellation or termination in respect of any such policy or is in
default thereunder, and neither the Company nor any Subsidiary knows of any
reason or state of facts that could lead to the cancellation of such policies.
The insurance policies listed in Section 2.20 of the Disclosure Schedule, (i) in
light of the business, operations and Assets and Properties of the Company and
the Subsidiaries are in amounts and have coverages that are reasonable and
customary for Persons engaged in such businesses and operations and having such
Assets and Properties and (ii) are in amounts and types of coverage as required
by any Contract to which the Company or any Subsidiary is a party or by which
any of its Assets and Properties is bound. Section 2.20 of the Disclosure
Schedule contains a list of all claims made under any insurance policies
covering the Company and its Subsidiaries. Neither the Company nor any
Subsidiary has received notice that any insurer under any policy referred to in
this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. The Company and the Subsidiaries
have, in light of their business, location, operations, Assets and Properties,
maintained, at all times, without interruption, insurance in scope and types of
coverage that the failure to maintain such amount or types of coverage would not
have a material adverse effect on either any of the Assets and Properties or the
Business or Condition of the Company, in either case either individually or
taken together with any or all of such failures.
-17-
2.21 Affiliates Transactions. (a) Except as disclosed in Section
2.21(a) of the Disclosure Schedule, (i) there are no Liabilities between the
Company or any Subsidiary, on the one hand, and any current or former officer,
director, stockholder, manager, member, Affiliate (other than the Company and
its Subsidiaries) or Associate of the Company or any Subsidiary or any Associate
of any such officer, director, stockholder or Affiliate, on the other hand, (ii)
neither the Company nor any Subsidiary provides or causes to be provided any
assets, services or facilities to any such current or former officer, director,
stockholder, manager, member, Affiliate or Associate, (iii) neither the Company,
any Subsidiary nor any such current or former officer, director, stockholder,
manager, member, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company or any Subsidiary, and (iv)
neither the Company nor any Subsidiary beneficially owns, directly or
indirectly, any Investment Assets of any such current or former officer,
director, stockholder, manager, member, Affiliate or Associate.
(b) Except as disclosed in Section 2.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 2.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on terms
no less favorable to the Company than if such Liability or transaction was
incurred on an arm's-length basis on competitive terms.
2.22 Employees: Labor Relations. (a) Section 2.22(a) of the
Disclosure Schedule contains a list of the name of each officer, manager,
employee and consultant of the Company and its Subsidiaries, together with such
person's position or function, annual base salary or wages and any incentives or
bonus arrangement with respect to such person. Neither the Company nor any
Subsidiary has received any information that would lead it to believe that any
such person will or may cease to be engaged by the Company or any Subsidiary, or
will refuse offers of engagement by the Company, for any reason, including
because of the consummation of the transactions contemplated by this Agreement
and the Operative Agreements.
(b) Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, (i) there are no material controversies between the Company or any
Subsidiary, on the one hand, and any employee or consultant of the Company or
any Subsidiary, on the other hand, (ii) no employee of the Company or any
Subsidiary is presently a member of a collective bargaining unit and, to the
knowledge of the Company or any Subsidiary, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
employees of the Company or any Subsidiary and (iii) no unfair labor practice
complaint or sex or age discrimination claim has been brought against the
Company or any Subsidiary before the National Labor Relations Board or any other
Governmental or Regulatory Authority and there are no facts or circumstances
known to the Company or any Subsidiary that could reasonably be expected to give
rise to such complaint or claim. There has been no work stoppage, strike or
other concerted action by employees of the Company or any Subsidiary. The
Company and its Subsidiaries have complied in all material respects with all
applicable Laws relating to the employment of labor, including, those relating
to wages, hours and collective bargaining.
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2.23 Environmental Matters.
(a) Except as set forth in Section 2.23(a) of the Disclosure
Schedule, the Company and its Subsidiaries have obtained all necessary
Environmental Permits required for the operation of their respective Assets and
Properties.
(b) Except as set forth in Section 2.23(b) of the Disclosure
Schedule, the Company and the Subsidiaries are in compliance in all material
respects with all terms, conditions and provisions of all applicable (i)
Environmental Permits and (ii) Environmental Laws required for the operation of
their respective Assets and Properties.
(c) Except as set forth in Section 2.23(c) of the Disclosure
Schedule, there are no past, pending or, to the knowledge of the Company or any
Subsidiary, threatened Environmental Claims against the Company or any
Subsidiary, and neither the Company nor any Subsidiary knows of any facts or
circumstances which could reasonably be expected to form the basis for any
Environmental Claim against the Company or any Subsidiary.
(d) Except as set forth in Section 2.23(d) of the Disclosure
Schedule, no Releases of Hazardous Materials have occurred at, from, in, to, on,
or under any Site and no Hazardous Materials are present in, on, about or
migrating to or from any Site that are reasonably likely to give rise to an
Environmental Claim against the Company or any Subsidiary.
(e) Except as set forth in Section 2.23(e) of the Disclosure
Schedule, neither the Company, nor any Subsidiary, nor any predecessor of the
Company or any Subsidiary, nor any entity previously owned by the Company or any
Subsidiary, has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Material to any off-Site location
which could result in an Environmental Claim against the Company or any
Subsidiary.
(f) Except as set forth in Section 2.23(f) of the Disclosure
Schedule, the Company has no knowledge and has not received any notification
that any Site is a current or proposed Environmental Clean-up Site.
(g) Except as set forth in Section 2.23(g) of the Disclosure
Schedule, there are no Liens, other than Permitted Liens, arising under or
pursuant to any Environmental Law on any Site and there are no facts,
circumstances, or conditions that could reasonably be expected to restrict,
encumber, or result in the imposition of special conditions under any
Environmental Law with respect to the ownership, occupancy, development, use, or
transferability of any Site.
(h) Except as set forth in Section 2.23(h) of the Disclosure
Schedule, there are no (i) underground storage tanks, active or abandoned, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos containing
material at any Site.
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(i) There have been no written environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of, or
which are in the possession of the Company or any Subsidiary with respect to any
Site which have not been delivered to or identified and made available to
Investor prior to execution of this Agreement.
2.24 Substantial Custmoers and Suppliers. Section 2.24(a) of the
Disclosure Schedule lists the ten largest customers of the Company and the
Subsidiaries, collectively, on the basis of revenues for goods sold or services
provided for the most recent fiscal year. Section 2.24(b) of the Disclosure
Schedule lists the ten largest suppliers of the Company and the Subsidiaries on
the basis of cost of goods and services purchased for the most recent fiscal
year. Except as disclosed in Section 2.24(c) of the Disclosure Schedule, no such
customer or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company or any Subsidiary since the
Audited Financial Statement Date or, to the knowledge of the Company or any
Subsidiary, has threatened to cease or materially reduce such purchases or sales
or provision of services after the date hereof. Except as disclosed in Section
2.24(d) of the Disclosure Schedule, to the knowledge of the Company or any
Subsidiary, no such customer or supplier is threatened with bankruptcy or
insolvency.
2.25 Accounts Receivable. Except as set forth in Section 2.25 of
the Disclosure Schedule, the accounts and notes receivable of the Company and
the Subsidiaries reflected on the Audited Financial Statements, and all accounts
and notes receivable arising subsequent to the Audited Financial Statement Date,
(a) arose from bona fide sales transactions in the ordinary course of business,
consistent with past practice, and are payable on ordinary trade terms, (b) are
legal, valid and binding obligations of the respective debtors enforceable in
accordance with their respective terms, (c) are not subject to any valid set-off
or counterclaim and (d) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement.
2.26 Inventory. All inventory of the Company and the Subsidiaries
reflected on the balance sheet included in the Audited Financial Statements
consisted, and all such inventory acquired since December 31, 1997 consists, of
a quality and quantity usable and salable in the ordinary course of business.
Except as disclosed in the notes to the Audited Financial Statements, all items
included in the inventory of the Company or any Subsidiary are the property of
the Company or such Subsidiary, as the case may be, free and clear of any Lien
other than Permitted Liens, have not been pledged as collateral, are not held by
the Company or any Subsidiary on consignment from others and conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by Governmental or Regulatory Authorities.
2.27 Other Negotiations; Brokers. Neither the Company nor any
Subsidiary nor any of their respective Affiliates (nor any investment banker,
financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of the Company, any Subsidiary, or any such Affiliate) (a) has
entered into any agreement that conflicts with any of the transactions
contemplated by this Agreement or any of the Operative Agreements or the Charter
Amendment or the By-Laws
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Amendment or (b) has entered into any agreement or had any discussions with any
third party regarding any transaction involving the Company or any Subsidiary
which could result in Investor, the Company, any Subsidiary or any general
partner, limited partner, manager, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said third
party as a result of entering into this Agreement or the Operative Agreements or
consummating the transactions contemplated hereby or thereby. Except for Private
Equity Partners LLC, whose fees will be paid solely by the Company, no agent,
broker, finder, investment banker, financial advisor or other similar Person
will be entitled to any fee, commission or other compensation in connection with
the transactions contemplated by this Agreement or the Operative Agreements on
the basis of any act or statement made or alleged to have been made by the
Company, any Subsidiary, any of their respective Affiliates, or any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of the Company, any Subsidiary or any such Affiliate.
2.28 Registration Rights. Except as disclosed in Section 2.28 of
the Disclosure Schedule and other than the Registration Rights Agreement, the
Company has not granted registration rights to any holder of any of the
securities of the Company or any Subsidiary. Except as disclosed in Section 2.28
of the Disclosure Schedule, none of the rights granted to Investor under the
Registration Rights Agreement conflict with, violate or breach, constitute (with
or without notice or lapse of time or both) a default under, or result in or
give to any Person any right of acceleration or modification under any Contract
to which the Company or any Subsidiary is a party.
2.29 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities. Assuming the representations and warranties of
Investor set forth in Section 3.3 are true and correct in all material respects,
the offer and sale of the Common Purchased Stock, the Preferred Purchased Stock,
the New Preferred Stock, the Warrants and the Common Stock issuable upon
exercise of the Warrants made pursuant to this Agreement is exempt from the
registration requirements of the Securities Act. Neither the Company nor any
Person authorized to act on its behalf has, in connection with the offering of
the Common Purchased Stock or the Preferred Purchased Stock, engaged in (a) any
form of general solicitation or general advertising (as those terms are used
within the meaning of Rule 502(c) under the Securities Act), (b) any action
involving a public offering within the meaning of Section 4(2) of the Securities
Act and the judicial interpretations of such section, or (c) any action that
would require the registration under the Securities Act of the offering and sale
of the Common Purchased Stock, the Preferred Purchased Stock and the Warrants
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" Laws. The Company has not made and will not prior to the Closing
make, directly or indirectly, any offer or sale of Common Purchased Stock, the
Preferred Purchased Stock, the Warrants or securities of the same or a similar
class as the Common Purchased Stock or the Preferred Purchased Stock if as a
result the offer and sale of the Common Purchased Stock, the Preferred Purchased
Stock and the Warrants contemplated hereby could fail to be entitled to
exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Securities Act.
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2.30 Restrictions on conduct of Business. Except as provided in
this Agreement or as set forth in Section 2.18(a)(ii) of the Disclosure Schedule
or Section 2.30 of the Disclosure Schedule, neither the Company nor any of the
Subsidiaries is prohibited or otherwise restricted from conducting its business
as presently conducted or intended to be conducted by any Contract, any
Governmental or Regulatory Authority or any Law.
2.31 Banks and Brokerage Accounts. Section 2.31 of the Disclosure
Schedule sets forth (a) a true and complete list of the names and locations of
all banks, trust companies, securities brokers and other financial institutions
at which the Company or any Subsidiary has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company or any Subsidiary having signatory power with respect thereto, and (c) a
list of each Investment Asset, the name of the record and beneficial owner
thereof, the location of the certificates, if any, therefor, the maturity date,
if any, and any stock or bond powers or other authority for transfer granted
with respect thereto.
2.32 Warranty Obligations. Section 2.32 of the Disclosure
Schedule sets forth (a) a list of all written warranties, guarantees and written
warranty policies of the Company and the Subsidiaries in respect of the Assets
and Properties of the Company and the Subsidiaries, which are currently in
effect or may hereinafter become effective (the "Warranty Obligations"), and the
duration of each such Warranty Obligation, (b) each of the Warranty Obligations
which is subject to any dispute or, to the knowledge of the Company and any
Subsidiary, after due inquiry, threatened dispute and (c) the experience of the
Company and the Subsidiaries during the past five years with respect to
warranties, guarantees and warranty policies of or relating to the Assets and
Properties of the Company and its Subsidiaries. True and correct copies of the
Warranty Obligations have been delivered to Investor prior to the execution of
this Agreement. Except as disclosed in Section 2.32 of the Disclosure Schedule,
(i) there have not been any material deviations from the Warranty Obligations,
and salesmen, employees and agents of the Company and the Subsidiaries are not
authorized to undertake obligations to any customer or other third parties in
excess of such Warranty Obligations and (ii) the consolidated balance sheet
included in the Audited Financial Statements reflects all adequate reserves for
Warranty Obligations. All products manufactured, designed, licensed, leased,
rented or sold by the Company and its Subsidiaries or any respective predecessor
(x) are and were free from defects in construction and design and (y) satisfy
any and all contract or other specifications related thereto, in each case, in
all material respects.
2.33 Foreign Corrupt Practices Act. Neither the Company, nor any
Subsidiary, nor any Affiliate, nor any director or officer, nor, to the
knowledge of the Company or any Subsidiary, any agent, employee or other Person
associated with or acting on behalf of the Company or any Subsidiary has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
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1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
2.34 NASD Matters. The Common Stock is quoted on the NASD
automatic quotation system. No filing with or consent or waiver of the NASD is
necessary for the consummation of the transactions contemplated hereby or
pursuant to the Operative Agreements.
2.35 Additional Regulatory Matters. (a) Section 2.35(a) of the
Disclosure Schedule sets forth a true and complete list of the following
information for each FCC License issued to (all of which are operated by the
Company) or operated by the Company or its Subsidiaries (including all FCC
Licenses subject to a Company Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses), the
name of the licensee, the name of the seller or sellers, the call sign, the
transmitter location (by latitude and longitude), the category of service
(indicated by GX or YX) and the frequency or frequencies authorized;
(ii) in the case of SMR Licenses, the number of channels
authorized, the number of channels constructed and whether the SMR License
is for a conventional (as indicated by GX) or trunked (as indicated by YX)
SMR System;
(iii) each holder of any such FCC License that is neither
wholly owned by the Company nor owned entirely by unaffiliated Persons and
managed by the Company; and
(iv) for all FCC Licenses (including SMR Licenses), whether
such FCC Licenses are subject to rights of first refusal, options and other
rights or obligations, including entitlements to acquire additional
ownership interests, which may affect the ownership interests of the
Company of any of its Subsidiaries therein.
(b) All of the FCC Licenses and properties, equipment and systems
owned and/or operated by the Company and any of its Subsidiaries related to the
FCC Licenses disclosed on Section 2.35(a) of the Disclosure Schedule are, and,
to the knowledge of the Company and the Subsidiaries, any such properties,
equipment and systems added in connection with any contemplated system expansion
or construction prior to or after the Closing will be, in compliance in all
material respects with all standards or rules imposed by any Governmental or
Regulatory Authority (including the FCC, the Federal Aviation Administration and
(if applicable) any public utilities commission or other state or local
governments or instrumentalities) applicable to the Company, the Subsidiaries
and their respective operation of the properties, equipment and systems or as
imposed under any agreements with suppliers or customers. To the knowledge of
the Company and its Subsidiaries, all of the equipment and systems owned and/or
operated by the Company are in good repair and working order, ordinary wear and
tear excepted.
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(c) Each of the Company and its Subsidiaries has paid all
franchise, regulatory, license or other fees and charges which have become due
in respect of its business and has made appropriate provision as is required by
GAAP, consistently applied, for any such fees and charges which have accrued. No
SMR License is subject to a finders preference as set forth in the rules and
regulations of the FCC or is operated under a Special Temporary Operating
Authority ("STA"). Except as disclosed in Section 2.35(c) of the Disclosure
Schedule, the FCC Licenses set forth in Section 2.35(a) of the Disclosure
Schedules constitute all of the licenses, permits and authorizations from the
FCC that are required for the operation of, and each of the Company and its
Subsidiaries has filed all required registrations, applications, reports and
other documents with, the FCC and, if applicable, any public utilities
commission and other Governmental or Regulatory Authority exercising
jurisdiction over, the SMR System businesses, radio paging businesses and other
radio communications businesses of the Company and its Subsidiaries, as such
businesses are currently conducted or as are proposed to be conducted in the
Business Plan. The Company and its Subsidiaries hold or have the contractual
right to obtain the FCC Licenses disclosed on Section 2.35(a) of the Disclosure
Schedule and all such FCC Licenses are valid and in full force and effect
without conditions except for such conditions as are stated on the FCC License
or as are generally applicable to holders of similarly situated FCC Licenses.
The Company and its Subsidiaries have filed with the FCC prior to any applicable
deadline a complete and accurate application for rejustification of any
unconstructed or deconstructed FCC License related to previously granted or
requested wide area Enhanced Specialized Mobile Radio ("ESMR") licenses. Except
as set forth on Section 2.35(c) of the Disclosure Schedule, with regard to FCC
Licenses related to wide area ESMR frequencies, neither the Company nor any
Subsidiary is subject to a short space agreement or any other agreement, FCC
waiver or otherwise applicable regulations encumbering or limiting the use of
such FCC License. All applicable loading requirements with respect to any SMR
Licenses disclosed on Section 2.35(a) of the Disclosure Schedule have been met
and the Company and its Subsidiaries have taken every reasonable action to cause
the same to be loaded in compliance with FCC regulations. Except as set forth on
Section 2.35(c) of the Disclosure Schedule, (i) no application, action or
proceeding is pending for the renewal or modification of any of the FCC Licenses
set forth in Schedule 2.35(a) of the Disclosure Schedules; and (ii) no
applications, complaints, actions or proceedings are pending or, to the
knowledge of the Company and its Subsidiaries, threatened and, to the knowledge
of the Company and its Subsidiaries, no event has occurred and is continuing
which could (a) result in the revocation, termination or adverse modification of
any FCC License disclosed on Section 2.35(a) of the Disclosure Schedule or (b)
adversely affect any rights of the Company thereunder. Except as set forth on
Section 2.35(c) of the Disclosure Schedule, the Company and its Subsidiaries
have no reason to believe and no knowledge that all of the FCC Licenses
disclosed on Section 2.35(a) of the Disclosure Schedule will not be renewed in
the ordinary course. Except as set forth in Section 2.35(c) of the Disclosure
Schedule, all applications for renewal of the FCC Licenses set forth in Section
2.35(a) of the Disclosure Schedules have been filed on a timely basis and the
Company has sufficient time, materials, equipment, contract rights and other
required resources to complete, in a timely fashion and in full, construction of
all the SMR Systems, radio paging and other radio communications systems
associated with the FCC Licenses disclosed on Section 2.35(a) of the Disclosure
Schedule in compliance with all applicable technical standards and construction
requirements and deadlines. Except as set forth on Section 2.35(c) of the
Disclosure Schedule, the
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current ownership and operation by the Company and its Subsidiaries of such SMR
Systems, radio paging and other radio communications systems comply with the
Communications Act of 1934, as amended (the "Communications Act"), and all
applicable rules, regulations and policies of the FCC.
(d) Section 2.35(d) of the Disclosure Schedule lists a complete
and correct list of all Company Management Agreements (and associated option
agreements, if any) and Third-Party Management Agreements to which the Company
or any of its Subsidiaries is a party and the holder of the SMR Licenses which
are the subject of such agreements, the transmitter locations (by address), and
number of channels covered by such SMR Licenses, the term of such agreements,
any options or calls (and the respective option or call prices as well as the
time period in which any option or call must be exercised or made) in favor of
any party to such agreements to purchase or sell any interest in such SMR
Licenses and the respective fees or revenues payable or receivable under any
such agreements. Except as set forth on Section 2.35(d) of the Disclosure
Schedule to the knowledge of the Company and its Subsidiaries, the terms of all
such Company Management Agreements and Third-Party Management Agreements and the
operation of each SMR System pursuant thereto comply with the Communications Act
and all applicable rules, regulations and policies of the FCC. Except as set
forth on Section 2.35(d) of the Disclosure Schedule, none of the channels
licensed to the Company or its Subsidiaries are subject to a Third Party
Management Agreement. Each Company Management Agreement includes an option
allowing the Company or a Subsidiary to purchase the channels that are subject
to that agreement and no such option will be adversely affected by this
Agreement, the Operative Agreements or the transactions contemplated hereby or
thereby.
2.36 Holdings Company Act and Investment Company Act Status.
Neither the Company nor any Subsidiary is a "holding company" or a "public
utility company" as such terms are defined in the Public Utility Company Act of
1935, as amended. Neither the Company nor any Subsidiary is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
2.37 State Takeover Statutes. No state takeover statute or
similar statute or regulation applies to the issuance and purchase of the Common
Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock, the
Warrants, the Common Stock issuable upon exercise of the Warrants and the other
transactions contemplated by this Agreement and the Operative Agreements.
2.38 Due Diligence Memoranda. No statement contained in the Due
Diligence Memoranda contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstance under which they were made, not misleading.
2.39 Disclosure. All material facts regarding the Business or
Condition of the Company or any Subsidiary have been disclosed to Investor in or
in connection with this Agreement. No representation or warranty contained in
this Agreement, and no statement contained in the
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Disclosure Schedule or in any certificate, list or other writing furnished to
Investor pursuant to any provision of this Agreement (including the Audited
Financial Statements) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
2.40 Projections. The projections attached hereto as Section 2.40
of the Disclosure Schedule (the "Projections") are on the whole and in all
material respects mathematically accurate, are based on reasonable assumptions
as of the date thereof, and such Projections have been prepared in good faith
and represent the good faith estimate of the Company at the date hereof and at
the Closing of the most probable course of business of the Company (after giving
effect to the transactions contemplated by this Agreement).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to the Company as follows:
3.1 Organization; Power and Authority. Investor is a partnership
duly organized, validly existing and in good standing under the Laws of the
State of Delaware. Investor has full partnership power and authority to execute
and deliver this Agreement and the Operative Agreements and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Investor of this
Agreement and the Operative Agreements to which it is a party and the
performance by Investor of its obligations hereunder and thereunder, have been
duly and validly authorized by the general partner of Investor, no other
partnership action on the part of Investor being necessary. This Agreement has
been duly and validly executed and delivered by Investor and constitutes, and
upon the execution and delivery by Investor of the Operative Agreements to which
it is a party will constitute, legal, valid and binding obligations of Investor
enforceable against Investor in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
3.2 No Conflicts. The execution, delivery and performance of this
Agreement and the Operative Agreements to which it is a party and the
consummation by Investor of the transactions contemplated hereby and thereby
will not conflict with, or constitute a default under, any agreement, indenture
or instrument to which Investor is a party, or result in a violation of the
Investor's agreement of limited partnership or any order, judgment or decree of
any court or Governmental or Regulatory Authority having jurisdiction over
Investor or any of its properties and, except for such filings as may be
required by the Exchange Act, no consent, authorization or order of, or filing
or registration with, any Governmental or Regulatory Authority is required by
the Investor for the execution, delivery and performance of this Agreement.
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3.3 Purchase for Investment. The Common Purchased Stock, the
Preferred Purchased Stock, the New Preferred Stock, the Warrants and the shares
of Common Stock issuable upon exercise of the Warrants will be acquired by
Investor for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Common Purchased Stock,
the Preferred Purchased Stock, the New Preferred Stock, the Warrants or the
shares of Common Stock issuable upon exercise of the Warrants in violation of
the Securities Act, it being understood that the right to dispose of such Common
Purchased Stock, Preferred Purchased Stock, the New Preferred Stock, Warrants
and shares of Common Stock issuable upon exercise of the Warrants shall be
entirely within the discretion of Investor. Investor represents and warrants
that it is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the Securities Act. Investor understands that the shares of the
Common Purchased Stock, the Preferred Purchased Stock, the New Preferred Stock,
the Warrants and the shares of Common Stock issuable upon exercise of the
Warrants to be issued to it have not been registered under the Securities Act in
reliance on an exemption therefrom under Section 4(2) of the Securities Act and
Regulation D thereunder and that the certificates for such shares of Company
Purchased Stock, Preferred Purchased Stock, New Preferred Stock, Warrants and
shares of Common Stock issuable upon exercise of the Warrants shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER AND AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED."
The Company shall remove such legend upon receipt of an opinion from counsel to
the Investor, reasonably satisfactory in form and substance to counsel to the
Company, that the requirements for such legend have terminated.
3.4 Brokers. No agent, broker, finder, investment banker,
financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with any of the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Investor.
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ARTICLE IV
COVENANTS OF THE COMPANY
The Company covenants and agrees with Investor that, except to
the extent Investor may otherwise consent in writing:
4.1 Regulatory and Other Approvals. At all times, each of the
Company and the Subsidiaries shall (a) take all necessary or desirable steps and
proceed diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to, Governmental or Regulatory Authorities
or any other Person required of the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements, including
those described in Sections 2.5 and 2.6 of the Disclosure Schedule, (b) provide
such other information and communications to such Governmental or Regulatory
Authorities or other Persons as Investor or such Governmental or Regulatory
Authorities or other Persons may reasonably request and (c) cooperate with
Investor as promptly as practicable in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to, Governmental or
Regulatory Authorities or other Persons required of Investor to consummate the
transactions contemplated hereby and by the Operative Agreements, the By-Laws
Amendment and the Charter Amendment. The Company shall provide prompt
notification to Investor when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Investor of any communications (and, unless
precluded by Law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person regarding any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
4.2 Investigation by Investor. From the date hereof until the
Closing and thereafter so long as an Investor Party holds at least the lesser of
(x) 33 % of Investor's Original Ownership and (y) 10% of the Common Stock
(including any Equity Equivalents held by such Investor Party) of the Company on
a Fully Diluted Basis, the Company shall (a) provide Investor and its Affiliates
and each of their respective officers, employees, agents, counsel, accountants,
financial advisors, consultants and other representatives (together
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of the
Company, the Subsidiaries and their respective Assets and Properties and Books
and Records and (b) furnish Investor and such Representatives with all such
information and data (including copies of Contracts, Benefit Plans and other
Books and Records) concerning the business and operations of the Company and its
Subsidiaries as Investor or any of such other Representatives reasonably may
request in connection with such investigation. Nothing contained in this Section
4.2 or other investigation by or disclosure to Investor shall affect the
survival of or modify, limit or create any exception to the representations,
warranties, covenants, agreements and indemnities of the Company hereunder or
the conditions to the obligations of Investor to close as set forth in Article V
hereof.
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4.3 No Solicitations. From the date hereof until the earlier of
(i) the Closing and (ii) May 31, 1998, neither the Company nor any Affiliate of
the Company will take, nor will the Company permit any such Affiliate to take
(nor will the Company or any such Affiliate authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf the Company or any such Affiliate to take), directly or
indirectly, any action to initiate, assist, solicit, negotiate, encourage or
accept any offer or inquiry from any Person (a) to engage in any Business
Combination with respect to the Company or any Subsidiary, (b) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination with the Company or any Subsidiary or (c)
to furnish or cause to be furnished any information with respect to the Company
or any Subsidiary to any Person (other than as contemplated by Section 4.2) who
the Company, or any such Affiliate (or any such Person acting for or on their
behalf) knows or has reason to believe is in the process of, or may be,
considering any Business Combination with the Company or any Subsidiary. If the
Company or any such Affiliate (or any such Person acting for or on their behalf)
receives from any Person (other than Investor or any other Person referred to in
Section 4.2) any offer, inquiry or informational request referred to above, the
Company will promptly advise such Person, by written notice, of the terms of
this Section 4.3 and will promptly, orally and in writing, advise Investor of
all the terms of such offer, inquiry or request (including the identity of the
Person making such offer, inquiry or request) and deliver a copy of such notice
to Investor.
4.4 Conduct of Business. Except for the transactions contemplated
by this Agreement and the Operative Agreements, from the date hereof through the
Closing Date, the Company and the Subsidiaries shall conduct business only in
the ordinary course consistent with past practice and the terms of this
Agreement. Without limiting the generality of the foregoing, the Company and the
Subsidiaries shall:
(a) use their best efforts to (i) preserve intact the present
business organization and reputation of the Company and the Subsidiaries, (ii)
keep available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
managers, employees and consultants of the Company and the Subsidiaries, (iii)
maintain the Assets and Properties of the Company and the Subsidiaries in good
working order and condition, ordinary wear and tear excepted, (iv) maintain the
good will of customers, suppliers and lenders and other Persons with whom the
Company or any Subsidiary otherwise has significant business relationships and
(v) continue all current sales, marketing and promotional activities relating to
the business and operations of the Company and the Subsidiaries;
(b) except to the extent required by applicable Law, cause the
Books and Records to be maintained in the usual, regular and ordinary manner;
(c) use their best efforts to maintain in full force and effect
substantially the same levels of coverage as the insurance afforded under the
policies listed in Section 2.20 of the Disclosure Schedule;
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(d) comply in all material respects with all Laws and Orders
applicable to the business and operations of the Company and the Subsidiaries,
and promptly following receipt thereof give Investor copies of any notice
received from any Governmental or Regulatory Authority or other Person alleging
any violation of any such Law or Order;
(e) (i) administer each Benefit Plan, or cause the same to be so
administered, in all material respects in accordance with the applicable
provisions of the Code, ERISA and all other applicable Laws; (ii) refrain from
making any representation or promise, oral or written, to any employee
concerning any Benefit Plan, except for statements as to the rights or accrued
benefits of any employee under the terms of any Benefit Plan; and (iii) promptly
notify Investor in writing of each receipt by the Company or any Subsidiary (and
furnish Investor with copies) of any notice of investigation or administrative
proceeding by the IRS, Department of Labor, PBGC or other Person involving any
Benefit Plan.
4.5 Financial Statements and Reports. From the date hereof until
the Closing and thereafter for so long as an Investor Party holds at least the
lesser of (x) 33 % of Investor's Original Ownership and (y) 10% of the Common
Stock (including any Equity Equivalents held by such Investor Party) of the
Company on a Fully Diluted Basis:
(a) The Company shall at all times maintain correct and complete
Books and Records in which full and correct entries shall be made of all its
business transactions pursuant to a system of accounting established and
administered in accordance with GAAP to the extent applicable, and set aside on
its books all such proper accruals and reserves as shall be required under GAAP.
The Company shall retain an accounting firm of nationally recognized standing
for the purpose of auditing its financial statements and reports for each fiscal
year.
(b) As promptly as practicable, and in no event later than the
presentation of the following material to the Company's management or the filing
thereof with the SEC, the Company shall provide to Investor true and complete
copies of all reports filed with the SEC and all such other financial
statements, reports and analyses as may be prepared or received by the Company
or any Subsidiary relating to the business or operations of the Company or any
Subsidiary or as Investor may otherwise reasonably request.
(c) As soon as available after the end of each fiscal month, and
in any event within 30 days of such month, the Company shall provide to Investor
an unaudited consolidated balance sheet of the Company and its Subsidiaries, if
any, as of the end of such month, and unaudited consolidated statements of
income, retained earnings and changes in cash flows of the Company and its
Subsidiaries, if any, for such month and the fiscal year to date, prepared in
accordance with GAAP (subject to normal year-end adjustments and without
footnote disclosure), and certified on behalf of the Company by the chief
financial officer of the Company, setting forth in comparative form (x) the
corresponding figures for the corresponding periods of the preceding year and
(y) the corresponding figures for the corresponding periods in the Budget and
management's discussion and analysis of such
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financials (including the effects and reasons for any deviations between the
Budget and such financials).
(d) At least 30 days prior to the end of each fiscal year of the
Company, the Company shall provide to Investor a budget (each, a "Budget") which
(A) forecasts ahead at least one year the Company's projected costs, revenues,
income, balance sheet and cash flow on a monthly basis, and (B) forecasts ahead
at least one year the capital requirements necessary to reasonably expand the
Company.
(e) Within 15 days after the end of each fiscal month, a report
on the buildout and loading activities of the Company during such month on a
market-by-market basis, setting forth in comparative form the corresponding
figures for the corresponding periods in the Business Plan and management's
discussion and analysis of such activities (including the effects of and reasons
for any deviations between the Business Plan and performance to date).
(f) Promptly, upon any preparation thereof, the Company shall
provide to Investor any other budgets that the Company may prepare and any
revisions of any Budget.
4.6 Certain Restrictions. From the date hereof through to the
Closing, the Company will, and will cause each Subsidiary to, refrain from:
(a) except as contemplated by the Charter Amendment and the
By-Laws Amendment, amending their respective certificates or articles of
incorporation or by-laws (or other comparable corporate charter documents) or
taking any action with respect to any such amendment or any reorganization,
liquidation or dissolution of any such corporation;
(b) changing their respective fiscal years;
(c) taking any of the actions listed in Section 2.9;
(d) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License held or used by the Company
or any Subsidiary or any Contract to which the Company or any Subsidiary is a
party or by which any of its Assets and Properties is bound;
(e) (i) taking or agreeing or committing to take or omitting or
agreeing or committing to omit any action that would make untrue any
representation or warranty of the Company hereunder untrue; or (ii) taking any
action or course of action inconsistent with compliance with the covenants and
agreements of the Company herein or which might adversely affect the interests
of Investor hereunder; and
(f) entering into any agreement to do or engage in any of the
foregoing.
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4.7 Affiliate Transactions. Prior to the Closing, neither the
Company nor any Subsidiary shall enter into any Contract or amend or modify any
existing Contract with any Affiliate or stockholder, in each case except with
the consent of Investor.
4.8 Notice and Cure. The Company shall notify Investor promptly
in writing of, and contemporaneously shall provide Investor with true and
complete copies of any and all information or documents relating to, and will
use its best efforts to cure before the Closing, any event, transaction or
circumstance occurring after the date of this Agreement that causes or will
cause any covenant or agreement of the Company under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
the Company contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. The Company also shall notify
Investor promptly in writing of, and will use its best efforts to cure, before
the Closing, any violation or breach of any representation, warranty, covenant
or agreement made by the Company in this Agreement, whether occurring or arising
before, on or after the date of this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Investor's right to
seek indemnity under Article VIII.
4.9 Fulfillment of Conditions. The Company shall take all
reasonable steps necessary or desirable and use its reasonable best efforts to
satisfy each condition to the obligations of Investor contained in this
Agreement and shall not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
4.10 Rights to Purchase Additional Securities. (a) For so long as
any Investor Party holds any Common Purchased Stock, Preferred Purchased Stock,
New Preferred Stock, Warrants or shares of Common Stock issued upon the exercise
of the Warrants (including, in each case, any securities into which such
securities shall have been changed, any securities resulting from any
reclassification or recapitalization of such securities and all stock dividends
and distributions thereon), prior to issuing any New Common Stock after the
Closing Date to any Person (a "New Common Stock Offer"), the Company shall offer
each of the Investor Parties then owning any Common Purchased Stock, Preferred
Purchased Stock, New Preferred Stock, Warrants or shares of Common Stock issued
upon exercise of the Warrants (including, in each case, any securities into
which such securities shall have been changed, any securities resulting from any
reclassification or recapitalization of such securities and all stock dividends
and distributions thereon) (the "Investor Stockholders") an opportunity to
purchase in cash any or all of its Pro Rata portion (determined as among all the
Investor Stockholders before giving effect to the issuance of such New Common
Stock as of the date of such New Common Stock Offer) of such New Common Stock on
the same terms and conditions as the New Common Stock being offered and, if such
New Common Stock is to be issued as a part of a unit of securities, the Company
shall offer each of the Investor Stockholders an opportunity to purchase any or
all of its Pro Rata portion (determined as provided above) of such unit of
securities (together with the New Common Stock, the "New Common Stock Units") on
the same terms and conditions as the New Common Stock Units being offered. The
Company shall make such
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New Common Stock Offer by providing each of the Investor Stockholders with a
notice (the "New Common Stock Notice") setting forth (i) each of the Investor
Stockholders' Pro Rata portion of such New Common Stock or such New Common Stock
Units, as the case may be, (ii) the cash consideration to be paid for each share
of New Common Stock or each New Common Stock Unit, as the case may be, and (iii)
all other material terms of such New Common Stock Offer.
(b) In order for any of the Investor Stockholders to accept the
New Common Stock Offer, such Investor Stockholder shall give a notice of
acceptance to the Company not later than 20 Business Days after its receipt of
the New Common Stock Notice (the last day of such 20-Business Day period being
referred to herein as the "Acceptance Date").
(c) Within forty (40) Business Days following the Acceptance
Date, the Company (i) shall issue, upon its receipt of the requisite
consideration therefor, New Common Stock or New Common Stock Units, as the case
may be, to each Investor Stockholder which timely accepted such New Common Stock
Offer upon the terms specified therein and (ii) may issue New Common Stock or
New Common Stock Units, as the case may be, to any other Person or Persons in an
amount not to exceed the aggregate amount thereof offered pursuant to the New
Common Stock Offer (less the aggregate amount of shares of New Common Stock or
New Common Stock Units, as the case may be, issued to the Investor Stockholders
pursuant to the foregoing clause (i)) and for a price which equals or exceeds
the price per share of New Common Stock or per unit of New Common Stock Units,
as the case may be, specified in the New Common Stock Offer.
4.11 Significant Transactions. For so long as any Investor Party
holds any Common Purchased Stock, Preferred Purchased Stock, New Preferred
Stock, Warrants or shares of Common Stock issued upon the exercise of the
Warrants (including, in each case, any securities into which such securities
shall have been changed, any securities resulting from any reclassification or
recapitalization of such securities and all stock dividends and distributions
thereon), the Company shall not, and shall cause each Subsidiary not to, enter
into any Significant Transaction without the majority approval of the Company's
Board of Directors (which approval, with respect to the items specified in items
(i), (iii), (v), (vi), (vii), (ix), (x), (xi) and (xii) of the definition of
Significant Transactions, shall include the affirmative vote of a majority of
the REI Directors (as defined in the Shareholders Agreement)).
4.12 Reservation of Shares. The Company shall at all times that
any Warrant is outstanding, keep reserved the full number of shares of Common
Stock issuable upon conversion of the Warrants.
4.13 Videoconferencing Capability. As soon as practicable
following a request therefor by Investor, the Company shall install and maintain
at the Company's cost and expense a videoconferencing system acceptable to
Investor which will enable the REI Directors (as defined in the Shareholders'
Agreement) to participate in all (a) meetings of the Board of Directors of the
Company and each of its Subsidiaries, (b) management reviews of the Company and
each of its Subsidiaries and (c) other meetings of the Company and each of its
Subsidiaries, in each case, whether or not such meetings or reviews are held at
the Company's principal office or at the offices of any
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Subsidiary. The Company shall bear all costs and expenses associated with the
operation of such videoconferencing system in conducting such meetings and
reviews; provided, however, that Investor will bear the costs of purchasing and
installing compatible videoconferencing equipment at Investor's office or at the
offices of Investor's advisors or other portfolio companies. The Company
understands that such videoconferencing system, in order to be acceptable to
Investor, must be compatible with other videoconferencing systems of Investor.
4.14 Venture Capital Operating Company Status. Without limiting
any other right contained herein, for so long as any Investor Party holds any
Common Purchased Stock, Preferred Purchased Stock, New Preferred Stock, Warrants
or shares of Common Stock issued upon exercise of the Warrants (including, in
each case, any securities into which such securities shall have been changed,
any securities resulting from any reclassification or recapitalization of such
securities and all stock dividends and distributions thereon), such Investor
Party shall have the right to consult with and advise the management of the
Company and to receive all materials provided to members of the Board of
Directors of the Company so long as may be required to enable Investor to
qualify as a "venture capital operating company" within the meaning of Section
2510.3-101 of the plan asset regulations promulgated by the United States
Department of Labor ("VCOC"). In addition, in the event that (a) at any time
Investor is not entitled to designate at least one member for election to the
Board of Directors of the Company or (b) the United States Department of Labor
through formal or informal rules, regulations or interpretations provides, or it
is otherwise established through governmental or court action, that such
representation does not constitute the exercise of management rights of the kind
necessary to enable Investor to continue to qualify as a VCOC, then the Company
and Investor shall in good faith negotiate provisions to enable Investor to
exercise the minimum amount of such management rights in order to continue to
qualify as a VCOC.
4.15 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Common Purchased Stock, the Preferred Purchased Stock and the
Warrants for the core lines of business set forth in the Business Plan.
4.16 Amendments to Identified Securities. From and after the date
hereof, the Company will, and will cause each Subsidiary, to refrain from:
(a) amending, changing or modifying in any manner any of the
terms and provisions of the Identified Securities, including, without
limitation, extending the exercise period or term of such Identified Securities,
the exercise price thereof or the manner in which the issuance price thereunder
is calculated;
(b) paying any dividend or making any distribution on the capital
stock of the Company which is either payable to the holders of any Identified
Security or which adjusts in any manner any of the Identified Securities;
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(c) granting, issuing or selling any Option or rights to purchase
stock, warrants or other property which is either payable to the holders of any
Identified Security or which adjusts in any manner any of the Identified
Securities;
(d) satisfying any obligation of the Company with respect to any
Identified Security by the issuance of any capital stock of the Company other
than as provided pursuant to the terms of such Identified Securities as in
existence on the date hereof;
(e) exchanging any of the securities issuable under any
Identified Security for other capital stock of the Company; and
(f) entering into any agreement to do or engage in any of the
foregoing.
4.17 Certain Transactions with Subsidiary. Neither the Company
nor any of its Affiliates shall make any capital contribution to or permit any
Indebtedness by Chadmoore Communications, Inc. to it other than in exchange for
capital stock of Chadmoore Wireless Group, Inc. (which for purposes of this
Section 4.17 shall include its successors (by merger or otherwise).
4.18 Business Plan. The Company shall continue in the core lines
of business contemplated by the Business Plan.
4.19 New Preferred Stock. Upon request by the Investor, the
Company shall cause the New Preferred Stock to be created and authorized under
the terms of its articles of incorporation and provide Investor with evidence
satisfactory to Investor that all documents necessary to create the New
Preferred Stock have been filed with the appropriate Governmental and Regulatory
Authorities. Upon the issuance of any New Preferred Stock to Investor, the
Company will not make, directly or indirectly, any offer or sale of New
Preferred Stock or securities of the same or a similar class as the New
Preferred Stock if as a result the offer and sale of the New Preferred Stock
contemplated by the First Warrant could fail to be entitled to exemption from
the registration requirements of the Securities Act. As used herein, the terms
"offer" and "sale" have the meanings specified in Section 2(3) of the Securities
Act. All issuances of New Preferred Stock by the Company shall comply with all
applicable federal, state and foreign securities Laws.
4.20 Certain Stock Issuances. If and whenever the Company
issues any shares of Common Stock to any of the stockholders of Chadmoore
Communications, Inc., other than the Company, then immediately upon such
issuance and upon payment by Investor of a sum equal to the product of the par
value per share of Common Stock and the number of shares issued to Investor, the
Company shall issue to Investor three shares of Common Stock for each four
shares of Common Stock issued to such stockholders. Upon issuance in accordance
with the foregoing, all such shares shall have been duly authorized, validly
issued, fully paid and nonassessable and shall comply with all applicable Laws
and the rules and regulations of each stock exchange or quotation system on
which the Common Stock is then listed or quoted. The delivery of the certificate
or certificates evidencing such shares, shall transfer to Investor good and
valid title to such shares free and clear of all Liens
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ARTICLE V
CONDITIONS TO OBLIGATIONS OF INVESTOR
The obligations of Investor hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Investor in its sole
discretion):
5.1 Representations and Warranties. Each of the representations
and warranties made by the Company in this Agreement shall be true and correct
in all material respects (if not qualified by materiality) and in all respects
(if qualified by materiality) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such earlier date.
5.2 No Adverse Change. There shall have occurred no material
adverse change in the Business or Condition of the Company since the Audited
Financial Statement Date.
5.3 Performance. The Company shall have performed and complied,
in all material respects, with each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company at or
before the Closing.
5.4 Officers Certificates. The Company shall have delivered to
Investor a certificate, dated the Closing Date and executed by the Chairman of
the Board, the President or any Vice President of the Company, substantially in
the form and to the effect of Exhibit A hereto, and a certificate, dated the
Closing Date and executed by the Secretary or any Assistant Secretary of the
Company, substantially in the form and to the effect of Exhibit B hereto.
5.5 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Investor, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action (a) which could reasonably be
expected to result in the issuance of any such Order or the enactment,
promulgation or deemed applicability to Investor, the Company or any
Subsidiaries, or the transactions contemplated by this Agreement or any of the
Operative Agreements of any such Law, or (b) wherein an unfavorable Order would
prevent the carrying out of this Agreement or any of the Operative Agreements or
any of the transactions or events contemplated hereby or thereby, declare
unlawful any of the transactions or events contemplated by this Agreement or
present a risk of damages to Investor.
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5.6 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Investor and the Company to perform their
respective obligations under this Agreement, the Operative Agreements to which
they are a party, the Charter Amendment and the By-Laws Amendment and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to Investor, (c) shall not impose any limitations or restrictions
on Investor, other than limitations under federal and state securities laws, (d)
shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (e) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
5.7 Third Party Consents. The consents (or in lieu thereof
waivers) disclosed in Sections 2.5 and 2.6 of the Disclosure Schedule, and all
other consents (or in lieu thereof waivers) to the performance by Investor and
the Company of their respective obligations under this Agreement and the
Operative Agreements to which they are a party or to the consummation of the
transactions contemplated hereby and thereby as are required under any Contract
to which Investor or the Company or any Subsidiary is a party or by which any of
their respective Assets and Properties are bound and where the failure to obtain
any such consent (or in lieu thereof waiver) could reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect Investor or the Business or Condition of the Company or
otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement and the Operative Agreements to Investor, (a)
shall have been obtained, (b) shall be in form and substance satisfactory to
Investor in its sole discretion, (c) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (d) shall be in full
force and effect.
5.8 Opinions of counsel. Investor shall have received (a) the
opinion of Graham & James LLP, counsel to the Company, dated the Closing Date,
addressed to Investor, in form and substance satisfactory to Investor, (b) the
opinion of Futro & Trauernicht LLC, special counsel to the Company, dated the
Closing Date, addressed to Investor, in form and substance satisfactory to
Investor (c) and the opinion of Irwin, Campbell & Tannenwald, P.C., counsel to
the Company, dated the Closing Date, addressed to Investor, in form and
substance satisfactory to Investor.
5.9 Good Standing Certificates. The Company shall have delivered
to Investor (a) copies of the certificates or articles of incorporation (or
other comparable constitutive documents), including all amendments thereto, of
the Company and each Subsidiary certified by the Secretary of State or other
appropriate official of the jurisdiction of organization, (b) certificates from
the Secretary of State or other appropriate official of the respective
jurisdictions of organization to the effect that each of the Company and the
Subsidiaries is in good standing or subsisting in such jurisdiction, listing all
charter documents of the Company and such Subsidiaries on file and attesting to
its payment of all franchise or similar Taxes, and (c) a certificate from the
Secretary of State or other appropriate official in each jurisdiction in which
the Company and the Subsidiaries are qualified,
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licensed or admitted to do business to the effect that the Company or the
applicable Subsidiary is duly qualified or admitted and in good standing in such
jurisdiction.
5.10 Other Agreements. Each of the Operative Agreements shall
have been duly executed and delivered by the respective parties thereto other
than the Investor and shall be in full force and effect.
5.11 Delivery of Certificates. Duly executed certificates
representing the shares of Common Purchased Stock and Preferred Purchased Stock
and the First Warrant, the Second warrant and the Third Warrant shall have been
delivered to Investor.
5.12 Proceedings. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement, the
Operative Agreements and all documents incident hereto or thereto shall be
reasonably satisfactory in form and substance to Investor, and Investor shall
have received copies of all such documents and other evidence as Investor may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
5.13 Executives and Key Managers. The Chairman of the Board and
the Chief Executive Officer of the Company will be Robert Moore, and the Chief
Operating Officer will be Jan S. Zwaik.
5.14 Business Plan. The Board of Directors of the Company shall
have approved, and there shall have been delivered to Investor, a written plan
satisfactory to Investor in its sole discretion (the "Business Plan").
5.15 By-Law Amendment. The Investor shall have received evidence
satisfactory to it that the by-laws of the Company shall have been amended, in
form and manner satisfactory to Investor in its sole discretion, so as to
effectuate the transactions contemplated by this Agreement and the Operative
Agreements (the "By-Laws Amendment").
5.16 Charter Amendment. The Investor shall have received evidence
satisfactory to it that the Charter Amendment has been filed with all requisite
Governmental and Regulatory Authorities in the State of Colorado and has become
effective in accordance with its terms and the Amended Charter is in effect.
5.17 Board of Directors. The Board of Directors of the Company
shall consist of six persons whose members shall be Robert Moore, Jan Zwaik,
Joseph J. Finn-Egan, Jeffrey A. Lipkin, Mark Sullivan and Janice Pellar.
ARTICLE VI
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CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Company in its sole
discretion):
6.1 Representations and Warranties. Each of the representations
and warranties made by Investor in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date.
6.2 Performance. Investor shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Investor at or before the
Closing.
6.3 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
6.4 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit the Company and Investor to perform their
obligations under this Agreement and the Operative Agreements, the Charter
Amendment and the By-Laws Amendment and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
COVENANTS AND AGREEMENTS
7.1 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Investor (whether or not exercised) to
investigate the affairs of the Company or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement or the waiver of any condition to
Closing, the Company, on the one hand, and Investor, on the other hand, have the
right to rely fully upon the representations, warranties, covenants and
agreements of the other contained in this Agreement. The representations,
warranties, covenants and agreements of the Company and Investor contained in
this Agreement will survive the Closing (a) indefinitely with respect to the
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representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.4, 2.5,
2.21, 2.27, 2.28, 2.29, 2.35, 2.37 and 2.39 (as it relates to the foregoing
Sections), (b) until 60 calendar days after expiration of all applicable
statutes of limitation (including all periods of extension, whether automatic or
permissive) with respect to the representations and warranties in Sections 2.11,
2.14, 2.23 and 2.39 (as it relates to the foregoing Sections), (c) until the
date on which the Company's audited financial statements for the fiscal year
ending December 31, 1999 have been made publicly available with respect to all
other representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing or (d) indefinitely
with respect to each other covenant or agreement contained in this Agreement,
except that any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with clause (b) or (c) above will continue to
survive if a Claim Notice or Indemnity Notice (as applicable) shall have been
timely given under Article VIII on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in Article VIII, but only with respect to matters described in the
Claim Notice or Indemnity Notice.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. Whether or not the transactions contemplated
by this Agreement are consummated, the Company shall indemnify Investor and its
general partner and limited partners and the officers, directors, stockholders,
members, partners, employees, agents and Affiliates of each of them, in respect
of, and hold each of them harmless from and against, on a Grossed-Up Basis, any
and all Losses (whether or not involving a Third Party Claim) suffered, incurred
or sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to (i) any misrepresentation or breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of the Company contained in this Agreement or any of the Operative
Agreements (including any certificates delivered in connection herewith or
therewith), (ii) the assertion by any Person of any claim against an Indemnified
Party in connection with the matters or transactions that are the subject of or
contemplated by this Agreement or any of the Operative Agreements, (iii) the
issuance of the Proposal Letter, dated January 13, 1998, from Investor to the
Company (as amended from time to time), (iv) the status of Investor as a holder
of securities of the Company, (v) any violation by the Company or any Subsidiary
of any federal, state or foreign securities Laws prior to or on the Closing Date
and (vi) (x) the presence, Release or threatened Release, of any Hazardous
Materials existing as of or prior to the Closing Date at, from, in, to, on, or
under any Site; (y) the transportation, treatment, storage, handling or disposal
or arrangement for transportation, treatment, storage, handling or disposal of
any Hazardous Materials generated by the Company, any Subsidiary, at or to any
off-Site location; or (z) any violation of Environmental Law by the Company or
any Subsidiary prior to the Closing. The Company shall reimburse each
Indemnified Party (whether or not such Indemnified Party is a party to this
Agreement) for all expenses (including counsel fees and disbursements) as they
are incurred by such Indemnified Party in connection with investigating and
preparing or defending any Action or
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Proceeding (whether or not such Indemnified Party is a formal party to any such
Action or Proceeding). If and to the extent that the indemnification hereunder
is finally determined by a court of competent jurisdiction to be unenforceable,
the Company shall make the maximum contribution to the payment and satisfaction
of the indemnified Losses as shall be permissible under applicable laws. The
Company shall not be obligated to make payments to the Indemnified Party, unless
and until the Indemnified Party has suffered, incurred, sustained or become
subject to Losses in excess of $250,000 in the aggregate, in which case the
Indemnified Party shall be entitled to seek indemnity for the entire amount of
its Losses.
8.2 Method of Asserting Claim. All claims for indemnification by
any Indemnified Party under Section 8.1 will be asserted and resolved as
follows:
(a) In the case of a claim or demand made by any Person not a
party to this Agreement against the Indemnified Party (a "Third Party Claim"),
the Indemnified Party shall deliver a Claim Notice to the Indemnifying Party
within 20 Business Days after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, however, that failure to give such
Claim Notice shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party Claim with counsel reasonably
satisfactory to the Indemnified Party within five Business Days of any Claim
Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnified Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) if the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party controls the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
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controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damages and such monetary damages are paid in
full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under
Section 8.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 8.1 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by litigation in a court of competent jurisdiction.
(d) The rights accorded to Indemnified Parties hereunder shall be
in addition to any rights that any Indemnified Party may have at law or in
equity, under federal and state securities Laws, by separate agreement
(including under the Operative Agreements) or otherwise.
(e) Except as otherwise required by Law, the parties shall treat
any indemnification payment made pursuant to Section 8.1 as an adjustment to the
Purchase Price.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of the Company and Investor;
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(b) at any time before the Closing, by the Company or Investor,
in the event (i) of a material breach hereof by the non-terminating party if
such non-terminating party fails to cure such breach within five Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party;
(c) at any time after May 31, 1998, by the Company or Investor
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party;
or
(d) by Investor if there shall have occurred prior to the Closing
(i) any general suspension of, or limitation on prices for, trading in
securities on The New York Stock Exchange, (ii) a declaration of a banking,
moratorium or any suspension of payments in respect to banks in the United
States, (iii) a commencement of a war, armed hostilities or other international
or national calamity directly or indirectly involving the United States, (iv)
any limitation by federal or state authorities on the extension or credit by
lending institutions which materially and adversely affects Investor or (v) in
the case of any of the foregoing existing at the date of this Agreement, a
material acceleration or worsening thereof, upon notification of the
non-terminating party by the terminating party.
9.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 9.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Company or Investor, except as provided in the next succeeding sentences and
except that the provisions with respect to expenses in Section 11.3 and
confidentiality in Section 11.5 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 9.1(b), (c) or
(d) the Company will remain liable to Investor for any misrepresentation or
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement of the Company existing at the time of such termination, and Investor
will remain liable to the Company for any misrepresentation or breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement of
Investor existing at the time of such termination. Each of the Company and
Investor may seek such remedies, including damages and reimbursement for fees
and expenses of attorneys, against the other with respect to any such
misrepresentation, breach, nonfulfillment or failure referred to above as
provided under this Agreement, including its remedies under Article VIII with
respect thereto or as are otherwise available at law or in equity.
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ARTICLE X
DEFINITIONS
10.1 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Acceptance Date" has the meaning assigned to it in Section
4.10(b).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Advisory Agreement" means the Advisory Agreement by and between
the Company and Investor, substantially in the form and to the effect of Exhibit
C, as such agreement may be amended, modified or restated from time to time.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 5% or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) any director, partner, officer, manager, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
"Agreement" means this Investment Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Amended Charter" means the Articles of Incorporation of the
Company, as in effect and amended to the date hereof, and as amended by the
Charter Amendment.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods, Intellectual Property and SMR Licenses.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or
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indirectly, of 10% or more of any class of equity securities, any trust or
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Audited Financial Statement Date" means December 31, 1997.
"Audited Financial Statements" means the audited consolidated
balance sheet of the Company as of December 31, 1997 and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
the fiscal year then ended, in each case, including the notes thereto and which
are included in the SEC Documents.
"Benefit Plan" means any Plan maintained, established or to which
contributions have at any time been made, by the Company or any Subsidiary or
any predecessor or Affiliate of any of the foregoing existing at the Closing
Date or prior thereto, to which the Company contributes or has contributed, or
under which any employee, former employee or director of the Company or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including financial statements, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, FCC Licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Budget" has the meaning ascribed to it in Section 4.5(d).
"Business Combination" means, with respect to any Person, any (i)
any merger, consolidation or combination to which such Person is a party, (ii)
any sale, dividend, split or other disposition of any capital stock or other
equity interests of such Person, (iii) any tender offer (including a self
tender), exchange offer, recapitalization, liquidation, dissolution or similar
transaction, (iv) any sale, dividend or other disposition of all or a material
portion of the Assets and Properties of such Person or (v) the entering into of
any agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York or the State of Nevada are
authorized or obligated to close.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, Assets and Properties
of the Company and each of the Subsidiaries, individually or in the aggregate.
"Business Plan" has the meaning ascribed to it in Section 5.14.
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"By-Laws Amendment" has the meaning ascribed to it in Section
5.15.
"Charter Amendment" means the Certificate of Designation of the
Series C Preferred Stock of the Company in the form and to the effect of Exhibit
D.
"Claim Notice" means written notification pursuant to Section
8.2(a) of a Third Party Claim as to which indemnity under Section 8.1 is sought
by an Indemnified Party, enclosing a copy of all papers served, if any, on the
Indemnified Party and for the Indemnified Party's claim against the Indemnifying
Party under Section 8.1.
"Closing" means the closing of the transactions contemplated by
Section 1.3.
"Closing Date" means the date on which the Closing actually
occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Purchased Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Common Stock" has the meaning ascribed thereto in Section 2.3.
"Communications Act" has the meaning ascribed to it in Section
2.35(c).
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Management Agreement" shall mean any management or other
agreement (other than a loading agreement) pursuant to which the Company or any
of its Subsidiaries agrees to manage or to perform other services (other than
loading) with respect to SMR Licenses held by another person in exchange for
either the right to receive a portion of the revenues derived from such SMR
Licenses or the right to purchase such SMR Licenses or any loading agreement
pursuant to which such Subsidiary is loading SMR Licenses held by another person
in exchange for either the right to receive a portion of the revenues derived
from such SMR Licenses in excess of 25% of the aggregate revenues derived from
such SMR Licenses or the right to purchase such SMR Licenses.
"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Defined Benefit Plan" means each Plan which is subject to Part 3
of Title 1 of ERISA, Section 412 of the Code or Title IV of ERISA.
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"Disclosure Schedule" means the schedules delivered to Investor
by or on behalf of the Company, containing all lists, descriptions, exceptions
and other information and materials as are required to be included therein by
the Company pursuant to this Agreement.
"Dispute Period" means the period ending 30 calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Due Diligence Memoranda" means (i) the memorandum from Tony
Welwood of the Company delivered to Marc Schachter of Morgan, Lewis & Bockius
LLP on January 23, 1998 concerning corporate matters of the Company; (ii) the
memorandum dated January 22, 1998, and attachments thereto, from Robert W. Moore
of the Company to Ira White of Morgan, Lewis & Bockius LLP relating to the
resignation of David Chadwick; (iii) the letter dated March 10, 1998, and
attachments thereto, from Kevin J. Leichter of Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP to Jean Sampson of Morgan, Lewis & Bockius
LLP that describes the status of pending litigation to which the Company or any
of its subsidiaries is a party; (iv) the letter dated April 3, 1998, and
attachments thereto, from Michael Minden of Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP to Jean Sampson of Morgan, Lewis & Bockius LLP; (v)
the memorandum dated April 8, 1998 from Graham & James LLP to Recovery Equity
Partners II, L.P. with respect to (A) conflicts under other Contracts with
respect to the transactions contemplated by this Agreement and the Operative
Agreements and (B) material breaches or defaults under other Contracts and (vi)
the memorandum dated April 29, 1998 from Graham & James LLP to Recovery Equity
Partners II, L.P. with respect to issuances of capital stock of the Company.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil (collectively,
"Claims"), pursuant to or relating to any applicable Environmental Law by any
Person (including any Governmental or Regulatory Authority, private person and
citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (i) violation of or liability under any Environmental Law, (ii)
violation of any Environmental Permit or (iii) liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties arising
out of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Materials at any
location, including any off-Site location to which Hazardous Materials or
materials containing Hazardous Materials were sent for handling, storage,
treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed
or proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
-47-
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened or suspected Release of a Hazardous
Material.
"Environmental Law" means all federal, state, local and foreign
environmental, health and safety Laws, common law, orders, decrees, judgments,
codes and ordinances and all rules and regulations promulgated thereunder, civil
or criminal Laws relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, pollutants,
contaminants, chemicals, or industrial, solid, toxic or hazardous substances or
wastes.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consents or authorizations
required by any Governmental or Regulatory Authority under or in connection with
any Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"Equity Equivalents" means securities (including Options and the
Warrants) which, by their terms, are or may be exercisable, convertible or
exchangeable for or into Common Stock at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ESMR" has the meaning ascribed to it in Section 2.35(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"FCC" shall mean the Federal Communications Commission or any
successor thereto.
"FCC License" shall mean any paging, mobile telephone, SMR
License or other license, permit, consent, certificate of compliance, franchise,
approval or authorization of any type granted or issued by the FCC, including
any of the foregoing authorizing the acquisition, construction or operation of
an SMR System (as defined herein), radio paging system or other radio
communications system.
"First Warrant" means the Warrant in the form and to the effect
of Exhibit G-1.
"Fully-Diluted Basis" means, with respect to the calculation of
the number of shares of Common Stock, (a) all shares of Common Stock outstanding
at the time of determination and (b)
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all shares of Common Stock issuable upon the exercise, conversion or exchange of
any Equity Equivalents outstanding at the time of determination.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include the FCC and any stock
exchange, quotation service and the National Association of Securities Dealers.
"Grossed-Up Basis" means, when used to describe the basis on
which the payment of a specified sum is to be made, a basis such that the amount
of such payment, after being reduced by the amount of all Taxes imposed on the
recipient of such payment as a result of the receipt or accrual of such payment,
will equal the specified sum.
"Hazardous Material" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs), (b) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory Authority.
"Identified Securities" has the meaning ascribed to it in Section
2.3.
"Indebtedness" of any Person means all obligations of such Person
(a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article VIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VIII.
"Indemnity Notice" means written notification pursuant to Section
8.2(c) of a claim for indemnity under Article VIII by an Indemnified Party,
specifying the nature of and basis for such
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claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim.
"Intellectual Property" means all trademarks and trademark
rights, trade names and trade name rights, service marks and service mark
rights, service names and service name rights, patents and patent rights, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions,
processes, formulae, industrial models, processes, designs, specifications,
data, technology, methodologies, computer programs (including all source codes),
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks and other media on which any
of the foregoing is stored.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company or
any Subsidiary.
"Investor" has the meaning ascribed to it in the forepart of this
Agreement.
"Investor Party" or "Investor Parties" means Investor, any
partner of Investor or any Affiliate or Associate of Investor or any such
partner.
"Investor Stockholders" has the meaning assigned to it in Section
4.10(a).
"IRS" means the United States Internal Revenue Service.
"Law" or "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Properties" has the meaning ascribed to it in
Section 2.15(a).
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person,
whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due.
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"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority
(including FCC Licenses).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
interest, reasonable expenses of investigation, court costs, reasonable fees and
expenses of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include all fees and expenses, including fees and expenses
of attorneys, incurred in connection with (i) the investigation or defense of
any Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise).
"NASD" means the National Association of Securities Dealers, Inc.
"New Common Stock" means any Common Stock or Equity Equivalent,
other than any (a) Common Stock and Equity Equivalents issued in connection with
any stock split, stock dividend or reclassification of any Common Stock or
Equity Equivalents,(b) Common Stock and Equity Equivalents issuable in a public
offering registered under the Securities Act, (c) Common Stock and Equity
Equivalents issued to financial institution(s) on arm's-length terms in
connection with (and ancillary to) an extension of credit by such financial
institution(s) to the Company or any of its Subsidiaries, (d) Common Stock and
Equity Equivalents issued to an unaffiliated seller or sellers of another
company or business in connection with an arm's-length acquisition by the
Company or one or more of its Subsidiaries of such company or business, (e)
Common Stock and Equity Equivalents issued to management of the Company or any
Subsidiary thereof pursuant to management stock purchase or option plans
approved by the Board of Directors of the Company, (f) Common Stock issued in
satisfaction of any rights granted to any Identified Securities and (g) Common
Stock or Equity Equivalents issued in satisfaction of any rights granted in the
Warrants.
"New Common Stock Notice" has the meaning assigned to it in
Section 4.10(a).
"New Common Stock Offer" has the meaning assigned to it in
Section 4.10(a).
"New Common Stock Units" has the meaning assigned to it in
Section 4.10(a).
"New Preferred Stock" means the shares of Preferred Stock to be
issued in accordance with the terms of the First Warrant.
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"Operative Agreements" means the Warrants, the Registration
Rights Agreement, the Shareholders Agreement, the Advisory Agreement, and any
support or other agreements to be entered into in connection with the
transactions contemplated by this Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract
(including, without limitation, the issuance of any notes or other debt
instruments convertible or payable in any shares of capital stock or other
equity interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person) that gives the right to (i) purchase or otherwise
receive or be issued any shares of capital stock or other equity interests of
such Person or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock or other equity interests of such
Person or (ii) receive any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock or other equity interests
of such Person, including any rights to participate in the equity, income or
election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Original Ownership" means the number of shares of Common Stock
owned (and (without duplication) which Investor has the right to acquire from
any Person) by Investor and which may be acquired pursuant to the Third Warrant
as of the Closing Date, and any stock into which such Common Stock may
thereafter be converted or changed; provided, however, that in the event of a
stock dividend, split-up, recapitalization, combination, exchange of stock or
the like in respect of such Common Stock, the term "Common Stock" shall be
deemed to refer to and include the stock as well as all stock dividends and
distributions and any stock into which or for which any or all of such stock may
be changed or exchanged.
"Owned Real Property" has the meaning ascribed to it in Section
2.15(a).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permitted Issuance" means (i) the issuance from time to time by
the Company of shares of Common Stock upon exercise of the Warrants, (ii) the
issuance from time to time by the Company of Identified Securities or of shares
of Common Stock upon the exercise of Identified Securities, (iii) the issuance
from time to time by the Company of New Preferred Stock and (iv) the issuance
from time to time by the Company of New Warrants.
"Permitted Lien" means (a) any Lien for Taxes not yet due or
payable with respect to which reserves for the full amount of such Taxes have
been made, (b) the Liens set forth in Section 10.1 of the Disclosure Schedule
and (c) any minor imperfection of title or similar Lien which individually or in
the aggregate with other such Liens does not impair the value or marketability
of
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the property subject to such Lien or interfere with the use of such property in
the conduct of the business of the Company or any Subsidiary and which do not
secure obligations for money borrowed.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Preferred Purchased Stock" has the meaning ascribed to it in the
forepart of this Agreement.
"Preferred Stock" has the meaning ascribed thereto in Section
2.3.
"Pro Rata" means, with respect to one or more Investor
Stockholders, in proportion to the number of shares of Common Stock on a
Fully-Diluted Basis owned by such Investor Stockholder or Investor Stockholders
or which may be acquired by any such Investor Stockholder or Investor
Stockholders upon exercising any rights under any Equity Equivalent owned by
such Stockholder or Investor Stockholders.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Registration Rights Agreement" means the Registration Rights
Agreement by and between the Company and Investor, substantially in the form and
to the effect of Exhibit E, as such agreement may be amended, modified or
restated from time to time.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section
2.11(a).
"Representatives" has the meaning ascribed to it in Section 4.2.
"Resolution Period" means the period ending thirty (30) calendar
days following receipt by an Indemnified Party of a notice from the Indemnifying
Party disputing the claim described in an Indemnity Notice.
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"SEC" means the Securities and Exchange Commission.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person.
"Second Warrant" means the Warrant in the form and to the effect
of Exhibit G-2.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Shareholders Agreement" means the Shareholders Agreement by and
between the Company and the other parties thereto, substantially in the form and
to the effect of Exhibit F, as such agreement may be amended, modified or
restated from time to time.
"Significant Transaction" means: (i) any Business Combination of
the Company or any Subsidiary with or into any Person; (ii) any sale, lease,
exchange or other disposition by the Company or any Subsidiary of a significant
portion of its assets, in a single transaction or a series of related
transactions, to or with any Person; (iii) any amendment to or modification or
repeal of any provision of the certificate or articles of incorporation or the
by-laws (or other organic documents) of the Company or any Subsidiary (except as
required by the transactions contemplated hereby); (iv) any acquisition by the
Company or any Subsidiary of securities or assets, in a single transaction or a
series of related transactions, if such securities or assets will represent a
substantial portion of the total assets of the Company or such Subsidiary; (v)
any increase (other than in connection with a Permitted Issuance) or reduction
in excess of 5% of the amount of capital stock outstanding (on a Fully-Diluted
Basis) on the date hereof of either the Company or any Subsidiary or the
creation of any additional class of capital stock of the Company or any
Subsidiary, or the issuance (or entering into of any agreement, arrangement or
understanding) by the Company or any Subsidiary of capital stock or Options;
(vi) the incurrence after the Closing Date by the Company or any Subsidiary of
any Indebtedness in any single transaction in excess of $125,000 or any series
of transactions that exceed, in the aggregate, $500,000 or any modification or
amendment to any agreement governing the extension thereof; (vii) the
dissolution of the Company or any Subsidiary, the adoption of a plan of
liquidation by the Company or any Subsidiary, any action by the Company or any
Subsidiary to commence any suit, case, proceeding or other action (A) under any
existing or future Law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief entered
with respect to the Company or such Subsidiary, or seeking to adjudicate the
Company or such Subsidiary a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to the Company or such Subsidiary, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for the
Company or such Subsidiary or for all or any substantial part of the Company's
or such Subsidiary's assets, or making a general assignment for the benefit of
the creditors of the Company or such Subsidiary; (viii) any other transaction
not in the ordinary course of business, consistent with past practice, (ix) any
Contract or any amendment or modification of any existing Contract between the
Company or any Subsidiary and (A) any Affiliate or officer or director of the
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Company or (B) any Affiliate of such officer or director, (x) the valuation of
any shares of capital stock issued in a transaction permitted pursuant to
Section 4.17, (xi) any material deviation from the Company's core business as
stated in the Business Plan (regardless of any amendments thereto) and (xii) any
discretionary declaration or payment of any dividend or other distribution on
the shares of capital stock of the Company.
"Site" means any of the real properties currently or previously
owned, leased or operated by the Company, any Subsidiary, any predecessors of
the Company or any Subsidiary, or any entities previously owned by the Company
or any Subsidiary, including all soil, subsoil, surface waters and groundwater.
"SMR License" shall mean an FCC License authorizing the
construction, ownership and operation of an SMR system in the 800 or 900 MHZ
band issued pursuant to 47 CFR Part 90 of the rules and regulations of the FCC.
"SMR System" shall mean an SMR system licensed under 47 CFR Part
90 of the rules and regulations of the FCC.
"STA" has the meaning ascribed to it in Section 2.35(c).
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns at least 50% of
either the equity interest in, or the voting control of, such Person, whether or
not existing on the date hereof.
"Tax" or "Taxes" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
8.2(a).
"Third-Party Management Agreement" shall mean any management or
other agreement (other than a loading agreement) pursuant to which a person
(other than the Company or any of its Subsidiaries) is managing SMR Licenses
held by the Company or a Subsidiary or any
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loading agreement pursuant to which a person (other than the Company or any of
its Subsidiaries) is loading SMR Licenses held by the Company or any of its
Subsidiaries in exchange for the right to receive a portion of the revenues
derived from such SMR Licenses in excess of 25% of the aggregate revenues
derived from such SMR Licenses.
"Third Warrant" means the Warrant in the form and to the effect
of Exhibit G-3.
"VCOC" has the meaning ascribed to it in Section 4.14.
"Warrants" means the First Warrant, the Second Warrant, the Third
Warrant and any warrant issued in accordance with the terms of the First Warrant
("New Warrants"), as each such warrant may be amended, modified or restated from
time to time.
"Warranty Obligations" has the meaning ascribed to it in Section
2.32.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement, (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement, (v) the phrases "ordinary course
of business" and "ordinary course of business consistent with past practice"
refer to the business and practice of the Company or a Subsidiary and (vi) the
words "include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation." All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.
(c) When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person or any
similar phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, (ii) with respect to any other Person, the
actual knowledge of the directors, officers, members, managers, general
partners, and other similar Persons in a similar position or having similar
powers and duties and (iii) in the case of each of (i) and (ii), the knowledge
of facts that such individuals should have after reasonable inquiry.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by prepaid first class certified mail,
return receipt requested, or mailed by overnight courier prepaid, to the parties
at the following addresses or facsimile numbers:
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If to Investor, to:
Recovery Equity Investors II, L.P.
901 Mariner's Island Boulevard
Suite 465
San Mateo, CA 94404
Facsimile No.: (650) 578-9842
Attn: Joseph J. Finn-Egan
Jeffrey A. Lipkin
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
If to the Company to:
Chadmoore Wireless Group, Inc.
2875 East Patrick Lane
Suite G
Las Vegas, Nevada 89120
Facsimile No.: (702) 891-5255
Attn: Robert Moore, President and Chief Executive Officer
with a copy to:
Graham & James LLP
400 Capitol Mall, 24th Floor
Sacramento, California 95814-4411
Facsimile No.: (916) 441-6700
Attn: Gilles S. Attia, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section, be deemed given upon facsimile confirmation, (iii)
if delivered by mail in the manner described above to the address as provided
for in this Section, be deemed given on the earlier of the third Business Day
following mailing or upon receipt and (iv) if delivered by overnight courier to
the address as provided in this Section, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other
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Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
11.2 Entire Agreement. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
11.3 Expenses. Except as otherwise expressly provided in this
Agreement (including as provided in Article VIII and 9.2), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with this Agreement, the Operative
Agreements and the transactions contemplated hereby and thereby; provided,
however, that if the Closing does not occur and on or prior to the last day of
the 12-month period following the date hereof the Company or any Subsidiary
consummates a Business Combination or enters into any agreement, arrangement or
understanding (including a non-binding letter of intent) to consummate a
Business Combination, then promptly upon the earliest of such event to occur the
Company shall reimburse Investor in cash for its documented expenses (whether
incurred prior to, on or after the date hereof) resulting from, arising out of
or relating to the evaluation, negotiation and documentation of the transactions
contemplated hereby (including the fees and expenses of attorneys, accountants
and other consultants).
11.4 Public Announcements. At all times at or before the Closing,
neither the Company nor Investor will issue or make any statements or releases
to the public with respect to this Agreement or the transactions contemplated
hereby without the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public
statement or release from the other party and such statement or release is, in
the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required statement or release and promptly furnish the other party
with a copy thereof. The Company and Investor will also obtain the other party's
prior approval of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
11.5 Confidentiality. Each party hereto will hold in strict
confidence from any Person (other than any Investor Party), unless (i) compelled
to disclose by judicial or administrative process (including in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after
-58-
the furnishing of such documents or information hereunder) through no fault of
such receiving party, (c) later acquired by the receiving party from another
source if the receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and information
confidential or (d) in the case of Investor, disclosed to a transferee of
Investor of securities of the Company, provided such transferee agrees to be
bound by the provisions of this Section 11.5.
11.6 Futher Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing, the Company shall execute and deliver to
Investor such other documents and instruments, provide such materials and
information and take such other actions as Investor may reasonably request to
consummate the transactions contemplated by this Agreement and the Operative
Agreements and otherwise to cause the Company to fulfill its obligations under
this Agreement and the Operative Agreements, including, without limitation, any
filings under the Hart-Scott-Rodino Antitrust Improvements of 1976, as amended,
and the rules and regulations thereunder.
11.7 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
11.8 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.9 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article VIII.
11.10 No Assigment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned (by operation of law
or otherwise) by the Company without the prior written consent of Investor and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
11.11 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.12 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision
-59-
will be fully severable, (b) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
11.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
11.14 Construction. The parties hereto agree that this Agreement
is the product of negotiation between sophisticated parties and individuals, all
of whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
11.15 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.16 Limited Recourse. Notwithstanding anything in this
Agreement, any Operative Agreement or any other document, agreement or
instrument contemplated hereby or thereby to the contrary, the obligations of
Investor hereunder and under any Operative Agreement shall be without recourse
to any partner, Associate or Affiliate of Investor or its partners, or any other
respective officers, directors, employees or agents and shall be limited to the
assets of Investor.
11.17 FCC Compliance. Investor does not intend to control or
attempt to control the Company or any Subsidiary through the rights granted to
it under this Agreement, and agrees that it will seek the prior approval of the
FCC, to the extent required, or a declaratory ruling from the FCC that such
prior consent is not required, before exercising any of the rights granted to it
under the Warrants if, upon the exercise thereof, a transfer of control
requiring the prior consent of the FCC is likely to occur. In the event it is
determined that such prior FCC approval is required, Investor, as the Company
shall reasonably request and at the sole cost and expense of the Company, and
the Company shall cooperate in preparing and filing with the FCC all
applications that are required in order to obtain such approval.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
CHADMOORE WIRELESS GROUP, INC.
By:__________________________________
Name:
Title:
RECOVERY EQUITY INVESTORS II, L.P.
By: RECOVERY EQUITY PARTNERS, II L.P.,
its General Partner
By:_____________________________
Name: Joseph J. Finn-Egan
Title: General Partner
By:_____________________________
Name: Jeffrey A. Lipkin
Title: General Partner
[Investment Agreement]
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This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience only.
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF COMMON PURCHASED STOCK, PREFERRED
PURCHASED STOCK AND WARRANTS; CLOSING ............................1
1.1 Purchase and Sale......................................1
1.2 Purchase Price.........................................1
1.3 Closing................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................2
2.1 Organization and Qualification.........................2
2.2 Authority Relative to this Agreement and
the Operative Agreements...............................2
2.3 Capital Stock..........................................2
2.4 Subsidiaries; Company; Business........................4
2.5 No Conflicts...........................................4
2.6 Governmental Approvals and Filings.....................5
2.7 Books and Records......................................5
2.8 SEC Documents; Financial Statements....................6
2.9 Absence of Changes.....................................6
2.10 No Undisclosed Liabilities.............................8
2.11 Taxes..................................................8
2.12 Legal Proceedings.....................................10
2.13 Compliance With Laws and Orders.......................11
2.14 Benefit Plans; ERISA..................................11
2.15 Real Property.........................................13
2.16 Tangible Personal Property............................14
2.17 Intellectual Property Rights..........................14
2.18 Contracts.............................................14
2.19 Licenses..............................................16
2.20 Insurance.............................................17
2.21 Affiliate Transactions................................18
2.22 Employees; Labor Relations............................18
-i-
2.23 Environmental Matters.................................19
2.24 Substantial Customers and Suppliers...................20
2.25 Accounts Receivable...................................20
2.26 Inventory.............................................20
2.27 Other Negotiations; Brokers...........................20
2.28 Registration Rights...................................21
2.29 Exemption from Registration; Restrictions on
Offer and Sale of Same or Similar Securities..........21
2.30 Restrictions on Conduct of Business...................22
2.31 Banks and Brokerage Accounts..........................22
2.32 Warranty Obligations..................................22
2.33 Foreign Corrupt Practices Act.........................22
2.34 NASD Matters..........................................23
2.35 Additional Regulatory Matters.........................23
2.36 Holdings Company Act and Investment Company
Act Status............................................25
2.37 State Takeover Statutes...............................25
2.38 Due Diligence Memoranda...............................25
2.39 Disclosure............................................25
2.40 Projections...........................................26
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR.......................26
3.1 Organization; Power and Authority.....................26
3.2 No Conflicts..........................................26
3.3 Purchase for Investment...............................27
3.4 Brokers...............................................27
ARTICLE IV
COVENANTS OF THE COMPANY.........................................28
4.1 Regulatory and Other Approvals........................28
4.2 Investigation by Investor.............................28
4.3 No Solicitations......................................29
4.4 Conduct of Business...................................29
4.5 Financial Statements and Reports......................30
4.6 Certain Restrictions..................................31
4.7 Affiliate Transactions................................32
4.8 Notice and Cure.......................................32
4.9 Fulfillment of Conditions.............................32
4.10 Rights to Purchase Additional Securities..............32
4.11 Significant Transactions..............................33
4.12 Reservation of Shares.................................33
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4.13 Videoconferencing Capability..........................33
4.14 Venture Capital Operating Company Status..............34
4.15 Use of Proceeds.......................................34
4.16 Amendments to Identified Securities...................34
4.17 Certain Transactions with Subsidiary..................35
4.18 Business Plan.........................................35
4.19 New Preferred Stock...................................35
4.20 Certain Stock Issuances...............................35
ARTICLE V
CONDITIONS TO OBLIGATIONS OF INVESTOR............................36
5.1 Representations and Warranties........................36
5.2 No Adverse Change.....................................36
5.3 Performance...........................................36
5.4 Officers' Certificates................................36
5.5 Orders and Laws.......................................36
5.6 Regulatory Consents and Approvals.....................37
5.7 Third Party Consents..................................37
5.8 Opinions of Counsel...................................37
5.9 Good Standing Certificates............................37
5.10 Other Agreements......................................38
5.11 Delivery of Certificates..............................38
5.12 Proceedings...........................................38
5.13 Executives and Key Managers...........................38
5.14 Business Plan.........................................38
5.15 By-Law Amendment......................................38
5.16 Charter Amendment.....................................38
5.17 Board of Directors....................................38
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY.........................39
6.1 Representations and Warranties........................39
6.2 Performance...........................................39
6.3 Orders and Laws.......................................39
6.4 Regulatory Consents and Approvals.....................39
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.......................................................39
7.1 Survival of Representations, Warranties,
Covenants and Agreements..............................39
-iii
ARTICLE VIII
INDEMNIFICATION..................................................40
8.1 Indemnification.......................................40
8.2 Method of Asserting Claims............................41
ARTICLE IX
TERMINATION......................................................42
9.1 Termination...........................................42
9.2 Effect of Termination.................................43
ARTICLE X
DEFINITIONS......................................................44
10.1 Definitions...........................................44
ARTICLE XI
MISCELLANEOUS....................................................56
11.1 Notices...............................................56
11.2 Entire Agreement......................................58
11.3 Expenses..............................................58
11.4 Public Announcements..................................58
11.5 Confidentiality.......................................58
11.6 Further Assurances; Post-Closing Cooperation..........59
11.7 Waiver................................................59
11.8 Amendment.............................................59
11.9 Third Party Beneficiaries.............................59
11.10 No Assignment; Binding Effect.........................59
11.11 Headings..............................................59
11.12 Invalid Provisions....................................60
11.13 Governing Law.........................................60
11.14 Construction..........................................60
11.15 Counterparts..........................................60
11.16 Limited Recourse......................................60
11.17 FCC Compliance........................................60
-iv
LIST OF EXHIBITS
Exhibit A Officer's Certificate
Exhibit B Secretary's Certificate
Exhibit C Advisory Agreement
Exhibit D Charter Amendment
Exhibit E Registration Rights Agreement
Exhibit F Shareholders Agreement
Exhibit G-1 Three-Year Warrant
Exhibit G-2 Eleven-Year Warrant
Exhibit G-3 Five and One-Half Year Warrant
Disclosure Schedule
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Exhibit A
CHADMOORE WIRELESS GROUP, INC.
Officer's Certificate
Pursuant to Section 5.4 of the Investment Agreement, dated as of
May 1, 1998 (the "Investment Agreement"; capitalized terms used but not defined
herein shall have the respective meanings ascribed to them in the Investment
Agreement), between Recovery Equity Investors II, L.P., a Delaware limited
partnership, and Chadmoore Wireless Group, Inc., a Colorado corporation (the
"Company"), I, Robert W. Moore, in my capacity as President and Chief Executive
Officer of the Company and on behalf of the Company, DO HEREBY CERTIFY that:
(1) I am the duly elected, qualified and acting President and
Chief Executive Officer of the Company.
(2) Each of the representations and warranties made by the Company
in the Investment Agreement is true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of the date hereof as though made on and as of the date hereof, and each
of the representations and warranties made by the Company in the Investment
Agreement as of a specified date earlier than the date hereof was also true and
correct in all material respects (if not qualified by materiality) or in all
respects (if qualified by materiality) on and as of such earlier date.
(3) Each of the agreements, covenants and obligations required by
the Investment Agreement to be performed or complied with by the Company at or
before the Closing has been duly performed or complied with in all material
respects.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the day of May, 1998.
By:
-----------------------------
Name: Robert W. Moore
Disclosure Schedule
-------------------
This Disclosure Schedule is made and given pursuant to that certain
Investment Agreement, dated as of May 1, 1998, by and between Recovery Equity
Investors II, L.P. and Chadmoore Wireless Group, Inc. (the "Agreement"). The
section and subsections in this Disclosure Schedule correspond to the sections
and subsections set forth in the Agreement. Unless otherwise defined herein, all
capitalized terms shall have the meanings ascribed to them in the Agreement.
This Disclosure Schedule is, and shall be deemed to be for all purposes, an
integral part of the Agreement.
Organization and Qualification. Chadmoore Wireless Group is not qualified to do
business in Nevada.
[Intentionally left blank].
None.
Capital Stock.
(a) Attached as Annex 2.3(a) hereto is a list of each holder of record
of the Common Stock and Preferred Stock of the Company.
(b) See Attachment A to the Stock Purchase Warrant (Certificate No. 1)
(hereinafter referred to as "Attachment A") which is attached as
Exhibit F-1 to the Investment Agreement which is incorporated herein by
this reference. The Company has reserved a sufficient number of shares
of Common Stock for each convertible security listed on Attachment A.
(c) The Company has the following agreements or understandings with the
Persons indicated in which the Company may satisfy an outstanding
Liability by issuing securities:
1. Agreement with Private Equity Partners ("PEP") to issue 5,000
shares of Common Stock per month for a six-month period as a
consulting fee in consideration for PEP's assistance with
corporate issues and the preparation of the Company's Annual
Report on Form 10-KSB for the fiscal year ending December 31,
1997. The shares of Common Stock are to be issued under the
Company's Employee Benefit and Consulting Services Plan, dated
July 7, 1995 (the "Plan").
2. Verbal agreement with Kelly Perry wherein Mr. Perry has agreed
to develop a budgeting system in exchange for a payment of
$20,000 of which the Company has agreed to pay up to one-third
of such payment in the form of Common Stock at its fair market
value on the date of issuance.
3. The Company is in the process of negotiating an employment
contract with Bobby Davis relating to his employment as
general manager of the Company's direct distribution markets.
As part of the employment contract, it is currently
contemplated that the Company will issue Mr. Davis stock
options as part of his compensation package.
4. Moscato Marsh & Partners, Inc. ("Marsh") Advertising and
Marketing Letter Agreement, dated December 9, 1997, between
the Company and Marsh (the "Letter Agreement"). The term of
the Letter Agreement commenced on December 1, 1997 and
terminates on November 30, 1998. As compensation, consultant
will receive $3,600 of the Company's Common Stock per month
and payment of a portion of expenses and other fees in the
form of Common Stock. The Letter Agreement is proposed to be
substantially amended and its scope increased in accordance
with that certain letter dated March 18, 1998 and the "Revised
Agreement" attached thereto.
5. Financial Consulting Services Agreement, dated March 3, 1998,
by and between M&A West, a Nevada corporation ("M&A") and the
Company (the "M&A Agreement"). The term of the M&A Agreement
commenced on March 3, 1998, and terminates on September 3,
1998; provided, however, the agreement provides that it will
automatically renew for successive six month periods unless a
notice of termination is received thirty days prior to
expiration of the term. As compensation, M&A is entitled to
5,000 shares of Common Stock and at the signing of the
agreement and for each 6 month period thereafter, M&A is
entitled to freely tradeable Common Stock valued at $50,000 on
the date of issuance.
6. The Company has entered into a Restructuring Agreement, dated
September 19, 1997 ("Restructuring Agreement"), with Willora
Company Limited and Cygni S.A. regarding the Company's
outstanding 8% Convertible Debentures (principal amount
$1,750,000). The basic terms of the Restructuring Agreement
are described in the Company's Form 8-K filed via EDGAR on
October 6, 1997, with the Securities and Exchange Commission.
Under the terms of the Restructuring Agreement, the Company
was obligated to issue a new debenture which, among other
things, required the Company to make cash or stock monthly
payments of $162,750, beginning November 30, 1997. The Company
has not issued a new debenture and has not made the required
monthly payment. The Company will likely issue the stock in
lieu of making the cash payment. In addition, under the terms
of the Restructing Agreement, the Company is obligated to
issue an additional 70,000 shares of Common Stock pursuant to
Regulation S. Further, the Company agreed to reprice Willora's
Warrant to purchase 131,250 shares of Common Stock to $1.00
and to reprice the warrants held by Flurina, totaling 150,000
shares to $1.00 per share. The final documentation for the
transactions contemplated by the Restructuring Agreement was
scheduled to have been completed by November 20, 1997 per a
letter agreement, dated November 14, 1997, executed by the
parties to the Restructuring Agreement. To date, definitive
agreements implementing the terms of the Restructuring
Agreement have not been executed by the parties.
(d) See Exhibit A, B, C, D, I, J, K and M of Attachment A to the Stock
Purchase Warrant (Certificate No. 2) (hereinafter referred to as
"Attachment A") which is attached as Exhibit F-1 to the Investment
Agreement.
(e) See Annex 2.3(a).
(f) None.
Subsidiaries; Company; Business.
(a) (A) The entities listed below are Subsidiaries of the Company and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company.
1. PTT Tanner, Inc., a Nevada corporation ("PTT Tanner"). The
authorized capital stock of PTT Tanner consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding, all of which are held by
the Company. The board of directors of PTT Tanner consists of
the following person: Robert W. Moore. The officers of PTT
Tanner are as follows: Robert W. Moore, President and
Secretary.
2. Chadmoore Communications, Inc., a Nevada corporation ("CCI").
The authorized capital stock of CCI consists of 42,000,000
shares, of which 40,000,000 are designated as Common Stock,
$.001 par value, of which 4,700,000 shares of Common Stock are
currently issued and outstanding, 4,000,000 of which are held
by the Company
2
and 700,000 of which are held by Third Mobile, Inc. ("Third
Mobile"), and 2,000,000 shares of Preferred Stock, $.001 par
value, none of which are issued and outstanding. Third Mobile
also holds a warrant to acquire 700,000 shares of Common Stock
of CCI at a purchase price of $2.50 per share expiring on
January 23, 2000, and a warrant to purchase 700,000 shares of
Common Stock of CCI at the purchase price of $4.00 per share
expiring on January 23, 2003. The board of directors of CCI
consists of the following persons: Robert Moore and Jan Zwaik.
The officers of CCI are as follows: Robert W. Moore, Chairman;
Jan Zwaik, Treasurer; and Alyson Sheradin, Secretary.
3. Chadmoore Construction Services, Inc., a Nevada corporation
("CCS"). The authorized capital stock of CCS consists of 2,000
shares of Common Stock, no par value, of which 2,000 shares
are currently issued and outstanding and all of which are held
by the Company. The board of directors of CCS consists of the
following person(s): Robert W. Moore and Jan Zwaik. The
officers of CCS are as follows: Robert W. Moore, Chairman; Jan
Zwaik, Treasurer; and Alyson Sheradin, Secretary.
4. PTT Beacon Hill, Inc., a Nevada corporation ("PTT Beacon").
The authorized capital stock of PTT Beacon consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding, all of which are held by
the Company. The board of directors of PTT Beacon consists of
the following person: Robert W. Moore. The officers of PTT
Beacon are as follows: Robert W. Moore, President and
Secretary.
5. CMRS Systems, Inc., a Delaware corporation ("CMRS"). The
authorized capital stock of CMRS consists of 5,028 shares of
Common Stock, no par value, of which 49,308 shares are
currently issued and outstanding, all of which are held by the
Company. The board of directors of CMRS consists of the
following person(s): Robert W. Moore. The officers of CMRS are
as follows: Robert W. Moore, President.
6. PTT of Nevada, Inc., a Nevada corporation ("PTT Nevada"). The
authorized capital stock of PTT Nevada consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by the Company. The board of directors of PTT Nevada consists
of the following person(s): Robert W. Moore. The officers of
PTT Nevada are as follows: Robert W. Moore, President and
Secretary.
(B) The entities listed below are Subsidiaries of CCI and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company:
1. PTT Tristin, Inc., a Nevada corporation ("PTT Tristin"). The
authorized capital stock of PTT Tristin consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CCI. The board of directors of PTT Tristin consists of the
following person: Robert W. Moore. The officers of PTT Tristin
are as follows: Robert W. Moore, President and Secretary.
2. PTT Burton, Inc., a Nevada corporation ("PTT Burton"). The
authorized capital stock of PTT Burton consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CCI. The board of directors of PTT Burton consists of the
following person: Robert W. Moore. The officers of PTT Burton
are as follows: Robert W. Moore, President and Secretary.
3. PTT Maple, Inc., a Nevada corporation ("PTT Maple"). The
authorized capital stock of PTT Maple consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently issued and outstanding and all of which are held by
CCI.
3
The board of directors of PTT Maple consists of the following
person: Robert W. Moore. The officers of PTT Maple are as
follows: Robert W. Moore, President and Secretary.
4. Chadmoore Communications of Tennessee, Inc., a Tennessee
corporation ("CCT"). The authorized capital stock of CCT
consists of 1,000 shares of Common Stock, no par value, of
which 1,000 shares are currently issued and outstanding, all
of which are held by CCI. The board of directors of CCT
consists of the following persons): Robert W. Moore and Jan
Zwaik. The officers of CCT are as follows: Robert W. Moore,
Chairman; Jan Zwaik, Treasurer; and Alyson Sheridan,
Secretary.
5. PTT Communications of Richmond LLC, a Delaware limited
liability company ("PTT Richmond"). The membership interests
in PTT Richmond are divided as follows: 70% to CCI and 30% to
Comm-Tronnics VA., Inc. The manager of PTT Richmond is CCI.
6. PTT Communications of Virginia Beach LLC, a Delaware limited
liability company ("PTT Virginia Beach"). The membership
interests in PTT Virginia Beach are divided as follows: 65% to
CCI and 35% to the Wireless Company. The manager of PPT
Virginia Beach is CCI.
7. PTT Communications of Austin LLC, a Delaware limited liability
company ("PTT Austin"). The membership interests in PTT Austin
are divided as follows: 70% to CCI and 30% to S&P
Communications. The Company believes that PTT Austin is
required to qualify to do business in Texas, but such
qualification has not yet been obtained although the Company
is currently in the process of obtaining such qualification.
The manager of PTT Austin is CCI.
8. PTT Communications of Ft. Wayne LLC, a Delaware limited
liability company ("PTT Ft. Wayne"). The membership interests
in PTT Ft. Wayne are divided as follows: 70% to CCI and 30% to
Emergency Radio Service, Inc. The manager of PTT Ft. Wayne is
CCI.
9. PTT Communications of Huntsville LLC, a Delaware limited
liability company ("PTT Huntsville"). The membership interests
in PTT Huntsville are divided as follows: 60% to CCI and 40%
to Huntsville Radio Service, Inc. The manager of PTT
Huntsville is CCI.
10.PTT Communications of Jacksonville LLC, a Delaware limited
liability company ("PTT Jacksonville"). The membership
interests in PTT Jacksonville are divided as follows: 70% to
CCI and 30% to Reidy, Rhodes and Taylor. The manager of PTT
Jacksonville is CCI.PTT
11.PTT Communications of Roanoke LLC, a Delaware limited
liability company ("PTT Ronoake"). The membership interests in
PTT Ronoake are divided as follows: 70% to CCI and 30% to
Radio Communications, Inc. The manager of PTT Ronoake is CCI.
(C) The entities listed below are Subsidiaries of CMRS and,
unless otherwise noted, all of the Subsidiaries are currently engaged,
and have always been engaged, in the same general lines of business as
the Company:
1. PTT Roseland, Inc., a Nevada corporation ("PTT Roseland"). The
authorized capital stock of PTT Roseland consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently issued and outstanding and all of which are held
by CMRS. The board of directors of PTT Roseland consists of
only Robert W. Moore. The only officer of PTT Roseland is
Robert W. Moore.
4
2. PTT Franklin, Inc., a Nevada corporation ("PTT Franklin"). The
authorized capital stock of PTT Franklin consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently outstanding and all of which are held by CMRS.
The board of directors of PTT Franklin consists of the
following person: Robert W. Moore. The only officer of PTT
Franklin is Robert W. Moore, President and Secretary.
3. 800 SMR Network, Inc., a Delaware corporation ("800 SMR"). The
authorized capital stock of 800 SMR consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently outstanding and all of which are held by CMRS. The
board of directors of 800 SMR consists of the following
person: Robert W. Moore. The only officer of 800 SMR is Robert
W. Moore, Chairman.
4. PTT Chaco, Inc., a Nevada corporation ("PTT Chaco"). The
authorized capital stock of PTT Chaco consists of 1,000 shares
of Common Stock, $.001 par value, of which 1,000 shares are
currently outstanding and all of which are held by 800 SMR.
The board of directors of PTT Chaco consists of the following
person: Robert W. Moore. The only officer of PTT Chaco is
Robert W. Moore, President and Secretary.
5. PTT Artina, Inc., a Nevada corporation ("PTT Artina"). The
authorized capital stock of PTT Artina consists of 1,000
shares of Common Stock, $.001 par value, of which 1,000 shares
are currently outstanding and all of which are held by 800
SMR. The board of directors of PTT Chaco consists of the
following person: Robert W. Moore. The officers of PTT Chaco
are as follows: Robert W. Moore, President and Secretary.
6. PTT Communications of Rockford LLC, a Delaware limited
liability company ("PTT Rockford"). The membership interests
in PTT Rockford are divided as follows: 60% to 800 SMR and 40%
to Comelec East. The manager of PTT Rockford is 800 SMR.
7. PTT Communications of Baton Rouge, LLC a Nevada limited
liability company ("PTT Baton Rouge"). The membership
interests in PTT Baton Rouge are divided as follows: 80% to
800 SMR and 20% to EMCO. The manager of PTT Baton Rouge is 800
SMR.
8. PTT Communications of Bay City LLC, a Delaware limited
liability company ("PTT Bay City"). The membership interests
in PTT Bay City are divided as follows: 80% to 800 SMR and 20%
to Anderson Radio. The manager of PTT Bay City is 800 SMR.
9. PTT Communications of Lake Charles LLC, a Delaware limited
liability company ("PTT Lake Charles"). The membership
interests in PTT Lake Charles are divided as follows: 93% to
800 SMR and 7% to Telecom Rentals, Inc. The manager of PTT
Lake Charles is 800 SMR.
(D) The Company has a 20% equity ownership interest in JJ&D
L.L.C. ("JJ&D").
(b) Chadmoore Communications, Inc. is not qualified to do business in
the following jurisdictions; however, it is currently in the process of
becoming so qualified or intends to become so qualified as soon as
practicable following the Closing:
1. Alabama
2. Illinois
3. Wisconsin
4. Texas
5. New York
5
6. Florida
7. Mississippi
8. Michigan
9. Virginia
CMRS Systems, Inc. is not qualified to do business in the following
jurisdictions; however, it is currently in the process of becoming so qualified
or intends to become so qualified as soon as practicable following the Closing:
1. Illinois
2. Louisiana
3. Michigan
PTT Communications of Rockford, LLC is not qualified to do business in
Illinois.
PTT Communications of Roanoke, LLC is not qualified to do business in
Virginia.
2.5 No Conflicts.
None.
2.6 Governmental Approvals and Filings.
(a) In connection with the issuance and sale of the Common Purchased
Stock, Preferred Purchased Stock and Warrants to Investor, the Company
intends to file a Form D with the United States Securities and Exchange
Commission within 15 days following the Closing Date pursuant to Rule
506 of the Securities Act in order to qualify for the exemption
contained therein.
(b) The Company will make all state securities filings in connection
with the issuance of the Common Purchased Stock, Preferred Purchased
Stock and Warrants as required by all applicable state securities laws,
including without limitation, the filing of a notice of transaction
under Section 25102(f) under the California Corporate Securities Law of
1968, as amended, with the California Commissioner of Corporations.
2.7 [Intentionally Left Blank]
2.8 [Intentionally Left Blank]
2.9 Absence of Changes.
(a) None.
(b) See Annex 2.9(b) attached hereto for a list of all issuances of the
Company's securities since December 31, 1997.
(c) The Regional Operations Directors' salaries are being adjusted from
60% base salary and 40% bonus to 75% base salary and 25% bonus. This
Company believes that this change is necessary to appropriately
motivate management to build-out existing sites.
(d) The Company has entered into a Services Agreement ("Services
Agreement") and Pledge Agreement ("Pledge Agreement"), each dated March
9, 1998, with HSI GeoTrans Wireless, Inc. ("GeoTrans"). In addition,
the Company has drawn down approximately $1.5 million under the MarCap
Corporation ("MarCap") debt facility during 1998.
(e) None.
6
(f) The Company entered into a Master Purchase Agreement with JJ&D,
dated September 13, 1996 ("JJ&D Agreement") wherein the Company was
granted the right to purchase Scanning Repeater Modules. However, the
Company has negotiated the right to manufacture its own Scanning
Repeater Modules utilizing the JJ&D technology with a third-party
manufacturer. Since the Company has acquired this right, the Company
has written down the value of its investment in JJ&D by approximately
$440,000. The original Master Purchase Agreement has terminated and the
Company is in the process of negotiating a new Master Purchase
Agreement.
(g) The Company has pledged certain assets to GeoTrans under the
Services Agreement and Pledge Agreement. In addition, the Company has
pledged certain assets of CCI and 800 SMR to MarCap pursuant to the
terms of an Assignment and Security Agreements, each dated October 30,
1997.
Further, the Company is in the process of upgrading its SMR
Stations. Each station upgrade costs approximately $71,000 for the
initial 5-channel configuration necessary to commence aggressive
distribution. To date, the Company has incurred approximately
$6,375,000 in relation to the construction of approximately 180 sites.
CCI is obligated to transfer approximately 500 licenses (which
such transfer has already been reflected on the Schedule of Licenses
contained in Annex 2.19 to CELLSMR) pursuant to the Treatch Agreement.
The Treatch Agreement is attached hereto as Annex 2.9(g).
(h) Pursuant to a letter agreement (the "Letter Agreement") dated
February 25, 1997, and as clarified on March 5, 1998, MarCap agreed to
modify certain financial covenants as set forth on Exhibit A to the
Letter Agreement. MarCap also agreed to waive existing covenants
through April 30, 1998, provided that the Company uses its best efforts
to raise at least $5 million of equity financing and $15 million of
aggregate financing by such date.
(i) The Company's business plan requires it to either construct
additional sites or expand sites where capacity hits 90%. The Company
will continue with its business plan and incur these capital
expenditures.
(j) None.
(k) None.
(l) None.
(m) None.
Undisclosed Liabilities.
None
Taxes.
(a) Attached as Annex 2.11(a) is a description of the current status of
the Company's outstanding tax issues.
(b) None.
(c) Attached as Annex 2.11(b) is a Schedule of Extended Income Tax
Returns.
(d) None.
(e) None.
7
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
(k) The Company is a member of the limited liability companies listed
in Section 2.4 and it treats these interests as partnership interests
for purposes of taxation.
(l) None.
(m) None.
(n) See attached hereto as Annex 2.11(n) a memo describing certain
limitations on the Company's ability to utilize its net operating
losses.
(o) None.
Legal Proceedings.
(a) None.
(b) Other than as disclosed in the Company's Form 10-KSB for the fiscal
year ended December 31, 1997, the Company has not had any material
legal proceedings within the last five years.
2.13 Compliance with Laws and Orders.
(a) See Section 2.1 and 2.4(b).
(b) None.
(c) None.
2.14 Benefit Plans; ERISA.
The following is a list of all of the Company's benefit plans:
1. Medical. Medical insurance coverage for employees and
dependants is a primary care plan and is under a policy
issued by Fortris Benefits Insurance. All medical insurance
premiums for its employees are paid by the Company.
2. Dental. Dental insurance coverage for employees and
dependants is a dental plan underwritten by MetLife Preferred
Dentist Program. All dental insurance premiums for its
employees are paid by the Company.
3. Life Insurance. Each employee has a $30,000 life insurance
benefit through the medical coverage provided to each
employee by the Company.
4. Change of Control Agreements. In the event of a change of
control of the Company (defined as the acquisition of more
than 50% of the outstanding Common Stock of the Company or
more than 10% of the outstanding Common Stock of the Company,
in each case without the consent of the board of directors),
each employee that is a party to the Company's standard form
Change of Control Agreement is entitled to 2.9 times their
base annual salary, in accordance with the Company's
Incentive Plan.
8
5. Employee Benefit and Consulting Services Plan. The Company
has adopted an Employee Benefit and Consulting Services Plan
("EBSC Plan") whereby the Company is authorized to issue
Common Stock and Options to purchase Common Stock to eligible
employees, officers, directors and consultants.
6. Employee Stock Option Plan. The Company is in the process of
obtaining the requisite corporate approvals for the 1998
Stock Option Plan and the reservation of 3,000,000 shares of
the Company's Common Stock thereunder.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
(k) None.
Real Property.
(a) 1. The Company acquired an office building as part of its
acquisition of General Communications. The building has approximately
8,000 square feet and is located at 1727 Cherokee Boulevard, Memphis,
Tennessee 38111. The Company has placed a Deed of Trust in escrow in
favor of Motorola pursuant to the terms of the Motorola Financing
Agreement.
2. The Company has entered into an industrial lease for warehouse
and office space for approximately 15,635 square feet, dated as
of October 18, 1997, with Patrick Commerce Center, LLC, as
lessor, for its principal business headquarters located at 2875
East Patrick Lane, Suite G, Las Vegas, NV 89120.
3. The Company has entered into an office lease, dated as of
November 1995, for approximately 1,000 square feet with RPM
Management Company, as lessor, for offices located at 1508 Macon
Drive, Bldg. C, Suite 3, Little Rock, AR 72211.
4. The Company has entered into an office lease, dated April
1997, for approximately 800 square feet with Joe Poppenheimer, as
lessor, for office space located at 7033 Greenbriar Drive, Southaven,
MS 38671.
5. The Company and its Subsidiaries have entered into
approximately 180 antenna site leases for space in buildings and radio
towers to install communications equipment. Attached as Annex 2.15(b)
is a list of all of the Company's and its Subsidiaries' antenna site
leases.
6. Pursuant to the terms of the Motorola Financing Agreement, the
Company has placed into escrow a Deed of Trust in favor of Motorola
9
relating to building and land located Shelby County, Tennessee.
The Company has several standard commercial leases relating to office
equipment such as copiers, faxes and computers. The Company believes
that such leases are not material to the Business or Condition of the
Company.
(b). None.
(c). None.
(d). None.
2.16 Tangible Personal Property.
The Company has pledged certain of its assets under the MarCap Debt
Facility and under the GeoTrans Services Agreement.
2.17 Intellectual Property Rights.
(i)
1. Chadmoore Wireless Group and Logo
2. PTT Communications, Inc. and Logo (an application has been
filed with the U.S. Patent and Trademark Office)
3. Power to Talk(TM) (an application has been filed with the U.S.
Patent and Trademark Office)
4. Teamlink(TM) (an application has been filed with the Patent
and Trademark Office)
5. Fleetlink(TM) (an application has been filed with the U.S.
Patent and Trademark Office)
6. General Communications(TM)
7. Airtel, Inc.
(ii) None.
(iii) The Company has granted a license to use all of the Company's
trademarks and service marks to each dealer and any Person who is a
party to any of the LLC agreements listed in Section 2.4 above.
The Company is not aware of any Person that has alleged that
the Company is infringing on its Intellectual Property. However, the
mark "Team Link" has been registered with the Patent and Trademark
Office by Pivotal Communications, L.L.C. of Atlanta, Georgia
("Pivotal"). Pivotal is utilizing the mark for pre-paid long distance
telephone cards. The Company has neither contacted nor been contacted
by Pivotal.
2.18 Contracts.
(a)(i) (A) The Company has entered into employment agreements with the
following persons:
1. Employment Agreement dated as of January 1, 1997, by and
between the Company and Robert W. Moore. Mr. Moore is a member
of the Company's board of directors and is President and Chief
Executive Officer of the Company. The initial term of
employment under this agreement commenced on January 1, 1995,
and ended on January 1, 1997. Pursuant to Section 1.2, the
term of employment was automatically renewed for an additional
two-year period. The base salary under the agreement is
10
$125,000 and Mr. Moore is entitled to a bonus of up to $40,000
based on certain performance criteria.
2. Employment Agreement dated June 16, 1997, by and between the
Company and Jan S. Zwaik. Mr. Zwaik is a member of the
Company's Board of Directors and Chief Operating Officer of
the Company. The term of employment under this agreement
commenced on February 17, 1997, and ends on February 17, 1999.
The base salary under the agreement is $110,000 and Mr. Zwaik
is entitled to a bonus of up to $40,000 based on certain
performance criteria.
3. Employment Agreement, dated as of September 8, 1997, by and
between the Company and Anthony Welwood. Mr. Welwood is the
Vice President of Operations of the Company. The initial term
of employment under this agreement commenced on March 17,
1997, and ends on March 16, 1999. The agreement is
automatically renewed for successive one-year periods unless
the parties otherwise terminate the agreement in accordance
with its terms. The base salary under the agreement is $80,000
and Mr. Welwood is entitled to a bonus of up to $25,000 based
on certain performance criteria.
4. Employment Agreement, dated as of September 8, 1997, by and
between the Company and Alyson Sheridan. Ms. Sheridan is the
Vice President of Administration of the Company. The initial
term of employment under this agreement commenced on January
1, 1997, and ends on January 1, 1999. The agreement is
automatically renewed for successive one-year periods unless
the parties otherwise terminate the agreement in accordance
with its terms. The base salary under the agreement is $62,000
and Ms. Sheridan is entitled to a bonus of up to $40,000.
5. The Company has entered into Incentive Agreements, in
substantially the same form that has been delivered to
Investor, with the following employees: Riaz Ali, Marcia
Boydston, Stacey Ceragioli, Duane Ellis, Mike Henrey, Greg
Keskey, Julie Hemphill, Walter Lippincott, Rhoda Markoe,
Robert W. Moore, Daniel Schafer, Alyson Sheradin, Toni Welwood
and Jan Zwaik.
6. The Company has extended an employment contract to Bobby
Davis. The employment contract has not been executed by the
employee as of this date.
(a)(i)(B) The Company or its Subsidiaries is a party to the consulting
agreements listed below:
1. Consulting Agreement, dated January 15, 1995, and Addendum No.
1 thereto dated July 12, 1995, between the Company and Neil A.
Cox. The stated term of this agreement expired on July 15,
1996. As compensation, consultant received 35,000 shares of
Common Stock of the Company and an option to purchase 40,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share under the EBCS Plan.
2. Consulting Agreement, dated May 1, 1995, by and between the
Company and Tebsa Holdings Ltd. The term of this agreement
commenced on May 1, 1995, and terminated on November 9, 1995.
If the Company received $500,000 of investment funds as a
result of consultant's efforts, consultant was to receive as
compensation an option to purchase 150,000 shares of the
Common Stock of the Company at an exercise price of $1.50 per
share, and an option to purchase 150,000 shares of the Common
Stock of the Company at an exercise price of $4.00 per share.
For introductions resulting in investments in excess of
11
$500,000, consultant was to receive an option to purchase
100,000 shares of the Common Stock of the Company at an
exercise price of $1.50 per share, and an option to purchase
100,000 shares of the Common Stock of the Company at an
exercise price of $4.00 per share.
3. Consulting Agreement, dated July 6, 1995, and Addendum No.1
thereto dated July 6, 1995, by and between the Company and
Newhouse Consulting Ltd. The term of this agreement commenced
on the date of execution and terminated July 6, 1996. As
compensation, consultant received an option to purchase 20,000
shares of the Common Stock of the Company at an exercise price
of $1.00 per share. Consultant received a warrant to purchase
27,625 shares of Common Stock of the Company at an exercise
price of $5.00 per share. Pursuant to Addendum No. 1,
consultant received an additional option to purchase 20,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share.
4. Consulting Agreement, dated July 12, 1995, between the Company
and Alyson Sheradin. The term of this agreement commenced on
July 12, 1995, and terminated on July 12, 1996. As
compensation, the consultant received 60,000 shares of Common
Stock of the Company under the EBCS Plan.
5. Consulting Agreement, dated July 12, 1995, by and between the
Company and Asian Financial Network, Inc. The term of this
agreement commenced on July 12, 1995, and terminated on July
12, 1996. As compensation, consultant received an option to
purchase 45,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
6. Consulting Agreement, dated July 12, 1995, between the Company
and Charles W. Trench. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase
175,000 shares of the Common Stock of the Company at an
exercise price of $1.00 per share under the EBCS Plan.
7. Consulting Agreement, dated July 12, 1995, between the Company
and Daniel J. Shrader. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received 15,000 shares of the Common
Stock of the Company. Consultant also received an option to
purchase 15,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
8. Consulting Agreement, dated July 12, 1995, between the Company
and David Mowry. The term of this agreement commenced on July
12, 1995 and terminated on July 12, 1996. As compensation,
consultant received 40,000 shares of the Common Stock of the
Company under the Plan. Consultant also received an option to
purchase 90,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
9. Consulting Agreement, dated July 12, 1995, between the Company
and Lawson M. Kerster. The term of this agreement commenced on
July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase 30,000
shares of the Common Stock of the Company at an exercise price
of $1.00 per share under the EBCS Plan.
10.Consulting Agreement, dated July 12, 1995, between the
Company and Leonard Evans. The term of this agreement
commenced on July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received an option to purchase 20,000
12
shares of the Common Stock of the Company at an exercise price
of $1.00 per share under the EBCS Plan.
11.Consulting Agreement, dated July 12, 1995, between the
Company and Thomas D. Krosschell. The term of this agreement
commenced on July 12, 1995 and terminated on July 12, 1996. As
compensation, consultant received 15,000 shares of the Common
Stock of the Company. Consultant also received an option to
purchase 15,000 shares of the Common Stock of the Company at
an exercise price of $1.00 per share under the EBCS Plan.
12.Consulting Agreement, dated September, 1995, and Addendum
No.1 thereto dated January 6, 1996, by and between the Company
and Rolfe Widdowson Limited Partnership. The term of this
agreement expired on July 12, 1996. As compensation,
consultant received two options to purchase 20,000 shares of
the Common Stock of the Company at an exercise price of $1.00
per share under the EBCS Plan. Consultant also received a
Class B warrant to purchase 27,625 shares of Common Stock of
the Company
13.Consulting Agreement, dated November 10, 1995, between the
Company and Fidelity Holdings Limited. The term of this
agreement commenced on November 10, 1995, and terminates on
November 10, 1998. As compensation, consultant received an
option to purchase 87,500 shares of Common Stock of the
Company at an exercise price of $0.50 per share under the EBCS
Plan.
14.Consulting Agreement, dated November 10, 1995, between the
Company and Harris Limited. The term of this agreement
commenced on November 10, 1995, and terminated on May 10,
1997. As compensation, consultant received an option to
purchase 215,000 shares of Common Stock of the Company at an
exercise price of $0.50 per share under the EBCS Plan.
15.Consulting Agreement, dated November 10, 1995, between the
Company and JJ&D, L.L.C. The term of this agreement commenced
on November 10, 1995 and terminates on November 10, 1998. As
compensation, consultant received an option to purchase 30,000
shares of Common Stock of the Company at an exercise price of
$1.00 per share under the EBCS Plan.
16.Consulting Agreement, dated November 10, 1995, by and between
the Company and Orient Group, Ltd. The term of this agreement
commenced on November 10, 1995, and terminates on November 10,
1998. As compensation, consultant was to receive 54,166,
54,167 and 54,167, shares of restricted Common Stock of the
Company on February 12, 1996, April 12, 1996 and June 11,
1996, respectively.
17.Consulting Agreement, dated November 10, 1995, by and between
the Company and Spectrum Engineering, Inc. The term of this
agreement commenced on November 10, 1995, and terminates on
November 10, 1998. As compensation, received an option to
purchase 250,000 shares of Common Stock of the Company at an
exercise price of $0.50 per share under the EBCS Plan.
18.Consulting Agreement, dated January 19, 1996, by and between
the Company and Lybster, Ltd. The term of this agreement
commenced on January 19, 1996, and terminates on January 19,
2001. As compensation, consultant received an option to
purchase 450,000 shares at an exercise price of $0.37 per
share exercisable for a period of 18 months.
13
19.Consulting Agreement, dated April 16, 1996, between the
Company and 707 Corp. The term of this agreement commenced on
April 16, 1996 and terminated on April 16, 1997. As
compensation, consultant received an option to purchase 70,000
shares of restricted Common Stock of the Company at an
exercise price of $2.50 per share.
20.Moscato Marsh & Partners, Inc. ("Marsh") Advertising and
Marketing Letter Agreement, dated December 9, 1997, between
the Company and Marsh. The term of the letter agreement
commenced on December 1, 1997 and terminates on November 30,
1998. As compensation, consultant will receive $3,600 per
month worth of the Company's Common Stock and payment of a
portion of expenses and other fees in the form of Common
Stock. The letter agreement is proposed to be substantially
amended and its scope increased in accordance with that
certain letter dated March 18, 1998 and the "Revised
Agreement" attached thereto.
21. Private Equity Partners ("PEP") Engagement Letter, dated June
5, 1997.
22. PEP Engagement Letter, dated March 7, 1998.
23. Letter Agreement dated January 27, 1998 between the Company
and PEP.
24.Pledge Agreement, dated March 9, 1998, by CMRS in favor of
GeoTrans (related to pledge of capital stock of PTT Franklin).
(a)(i)(C)In connection with the transactions contemplated by this
Agreement, the Company will compensate PEP as follows: PEP is entitled
to receive 6% of the gross proceeds of the offering.
(a)(ii) The Company entered into a Guaranty and Security Agreement,
dated as of December 30, 1996, in favor of Motorola, as amended by the
First Amendment thereto, dated October 30, 1997 ("Company Guaranty and
Security Agreement"). Pursuant to Section 4.4 of the Company Guaranty
and Security Agreement, the Company agreed to continue to serve
primarily as a holding company for companies in the business of
acquiring and operating SMR communications systems.
(a)(iii) The Company and Subsidiaries are a party to the following
limited liability company agreements:
1. PTT Communications of Richmond LLC, Limited Liability Company
Agreement, dated June 12, 1997, between CCI and Comm-Tronnics
VA., Inc.
2. PTT Communications of Austin LLC, Limited Liability Company
Agreement, dated July 3, 1997 and amended August 19, 1997,
between CCI, 800 SMR and S&P Communications.
3. PTT Communications of Ft. Wayne LLC, Limited Liability Company
Agreement, dated June 12, 1997 and amended July 23, 1997 and
August 5, 1997, between CCI and Emergency Radio Service, Inc.
4. PTT Communications of Huntsville LLC, Limited Liability
Company Agreement, effective June 12, 1997 and as amended
August 15, 1997, between CCI and Huntsville Radio Service,
Inc. and related letter, dated September 16, 1997, executed by
the parties.
5. PTT Communications of Jacksonville LLC, Limited Liability
Company Agreement, dated July 24, 1997, between CCI and Reidy,
Rhodes and Taylor.
14
6. PTT Communications of Roanoke LLC, Limited Liability Company
Agreement, dated August 4, 1997, between CCI and Radio
Communications Company, Inc.
7. PTT Communications of Rockford LLC, Limited Liability Company
Agreement, dated August 7, 1997 between 800 SMR and Comelec
East.
8. PTT Communications of Baton Rouge Limited, Limited Liability
Company Agreement, dated June 12, 1997, between 800 SMR and
EMCO.
9. PTT Communications of Bay City LLC, Limited Liability Company
Agreement, dated June 12, 1997, between 800 SMR and Anderson
Radio.
10.PTT Communications of Lake Charles LLC, Limited Liability
Company Agreement, dated July 3, 1997, between 800 SMR and
Telcom Rentals, Inc.
11.PTT Communications of Virginia Beach, LLC, dated August 21,
1997, amended October 17, 1997 and November 5, 1997, between
CCI and The Wireless Company.
(a)(iv) Attached as Annex 2.18(a)(iv) is a Debt Role describing all
debt owed by the Company and its Subsidiaries.
1. Financing and Security Agreement, dated October 29, 1996, by
and between Motorola, Inc. ("Motorola"), and Chadmoore
Communications, Inc., as amended by the First Amendment
thereto dated October 30, 1997, by and among CCI, CMRS and
MarCap.
2. Company Guaranty and Security Agreement.
3. Motorola Purchase Agreement, dated October 26, 1996, by and
between the Company and Motorola.
4. Tennessee Deed of Trust with Security Agreement and
Assignment of Rents and Leases, dated December 20, 1996, by
and among Chadmoore Communications of Tennessee, Inc. ("CCT"),
Chicago Title Insurance Company, and Motorola, as amended by
the Deed of Trust Modification and Extension Agreement, dated
as of October 30, 1997. The mortgaged property is located on
Lot 20 of the Cherokee Commercial Center Subdivision located
in Shelby County, Tennessee.
5. Guaranty and Security Agreement, dated as of December 30,
1996, between CCT and Motorola, as amended by the First
Amendment thereto dated October 30, 1997, by the Company in
favor of MarCap ("Security Agreement").
6. First Amendment to Guaranty and Security Agreement, dated
as of July 21, 1997, between CCT and Motorola.
7. Stock Pledge Agreement, dated as of December 30, 1996, by
and between CCT and Motorola.
8. Assignment and Security Agreement, dated as of October 30,
1997, by CCI in favor of MarCap.
9. Assignment and Security Agreement, dated October 30, 1997,
by 800 SMR in favor of MarCap.
10. First Amendment to Guaranty and Security Agreement, dated
as of October 30, 1997, by Chadmoore Communications of
15
Tennessee, Inc. in favor of MarCap.
11. Stock Pledge Agreement, dated as of October 30, 1997, by
and between CMRS Systems, Inc. and MarCap (with respect to
pledge of stock of PTT Artina, Inc., a Nevada corporation).
12. Stock Pledge Agreement, dated as of October 30, 1997, by
and between CCI and MarCap (with respect to pledge of stock of
PTT Maple, Inc., a Nevada corporation).
13. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 25 Hardy Road, Falmouth, Maine.
14. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 2205 Lamar Avenue, Memphis,
Tennessee.
15. Landlord Waiver and Estoppel Certificate with respect to
the real estate located at 3737 Hillegas Road, Fort Wayne,
Indiana.
16. Letter, dated February 25, 1998 ("MarCap Letter"), from
Mark F. Sullivan to John W. Wellhausen, and countersigned by
Jan S. Zwaik and John W. Wellhausen, with respect to an
agreement to cross-collateralize the Motorola and MarCap
credit facilities, to adjust the collateral ratio, the
Company's agreement to use its diligent efforts to $5 million
in an equity financing and $15 million in aggregate financing
by April 30, 1998, a waiver of existing covenants provided
that the Company continue to use its diligent efforts to
secure such financing and that MarCap would not object to the
Company raising $10 million in new senior debt if the Company
is not in material default under the financing agreements.
17. Services Agreement with GeoTrans.
18. Pledge Agreement with GeoTrans.
19. The Company is in the process of negotiating a restructure
of the $1,627,500 8% Convertible Note due August 31, 1998,
wherein, pursuant to these negotiations, the Company has set
aside the SMR licenses listed on Annex 2.18(a)(iv)(20)
attached hereto.
20. Additional Promissory Note (principal amount $481,440)
dated October 31, 1997, between CCI, CMRS in favor of MarCap.
(v) The Company and its Subsidiaries are a party to the following
dealer agreements:
1. Dealer Agreement, dated August 6, 1997, between CCI and
Comm-Tronnics VA., Inc.
2. Dealer Agreement, dated June 12, 1997, between CCI and
Huntsville Radio Service, Inc.
3. Dealer Agreement, dated August 4, 1997, between CCI and Radio
Communications Company, Inc.
4. Dealer Agreement, dated February 6, 1998, between CCI and
Nashville Communications.
5. Dealer Agreement, dated November 25, 1997, between CCI and
Pyramid Communications.
6. Dealer Agreement, dated February 6, 1998, between CCI and
Electronic Maintenance & Communication.
16
7. Dealer Agreement, dated February 6, 1998, between CCI and
Louisiana Radio Communications.
8. Dealer Agreement, dated February 6, 1998, between CCI and
Tele-Rad (2 markets).
9. Dealer Agreement, dated February 6, 1998, between CCI and
Shanks Communications.
10.Dealer Agreement, dated March 25, 1998, between CCI and
Middle Tennessee 2-Way.
11.Dealer Agreement, dated August 21, 1997, and as amended
October, 17, 1997 November 5, 1997 and November 13, 1997,
between CCI and The Wireless Company.
12.Dealer Agreement, dated June 24, 1997, between CCI and Reidy,
Rhodes & Taylor.
13. Dealer Agreement, dated November 4, 1997, between CCI and
Maine Radio.
14.Dealer Agreement, dated August 7, 1997, between CCI and
Comelec East (2 markets).
15.Dealer Agreement, dated January 5, 1998, between CCI and
Industrial Communications.
16.Dealer Agreement, dated May 30, 1997, between CCI and Team
One Communications (6 markets).
17.Dealer Agreement, dated May 30, 1997, between CCI and Ft.
Myers Communications.
18.Dealer Agreement, dated May 16, 1997, between CCI and
Spectrum Communications.
19.Dealer Agreement, dated May 15, 1997, between CCI and
Communications Unlimited.
20.Dealer Agreement, dated February 13, 1997, between CCI and
Segno Communications.
21.Dealer Agreement, dated June 12, 1997, between CCI and
Emergency Radio Service.
22.Dealer Agreement, dated April 1, 1997, between CCI and
CommQuest Wireless.
23. Dealer Agreement, dated June 10, 1997, between CCI and EMCO.
24. Dealer Agreement, dated May 22, 1997, between CCI and Telcom
Rentals.
25.Dealer Agreement, dated May 4, 1997, between CCI and Dorler
Communications (2 markets).
26. Dealer Agreement, dated May 12, 1997, between CCI and
Anderson Radio.
27.Dealer Agreement, dated August 15, 1997, between CCI and
Chrouch Communications.
28. Dealer Agreement, dated April 15, 1997, between CCI and Alpha
Wireless.
17
29.Dealer Agreement, dated June 4, 1997, between CCI and
Diversified Electronics.
30.Dealer Agreement, dated May 27, 1997, between CCI and South
Sales Communications.
31.Dealer Agreement, dated June 3, 1997, between CCI and Two-Way
Radio of Carolina.
32.Dealer Agreement, dated June 1, 1997, between CCI and
Wireless Communications.
33.Dealer Agreement, dated June 7, 1997, between CCI and
Carolina Communications.
34. Dealer Agreement, dated July 3, 1997, between CCI and S&P
Communications.
35.Dealer Agreement, dated May 8, 1997, between CCI and Texas
Communications.
36.Dealer Agreement, dated January 5, 1998, between CCI and
Industrial Communications.
37. Dealer Agreement, dated April 29, 1997, between CCI and 2-Way
Radio
(v)(B) 1. Motorola Master Purchase Agreement.
2. JJ&D Master Purchase Agreement.
3. Unitel Master Purchase Agreement.
(v)(C) See Annex 2.32 for a copy of the Company's standard Customer
Service Agreement.
(vi) See list of agreements in Section 2.18(a)(iv) above.
(vii) The Company has entered into the following agreements to dispose
of assets not in the ordinary course of business:
1. Pursuant to a letter agreement dated October 2, 1997, CCI is
obligated to transfer approximately 500 licenses to CELLSMR
License Holding, L.C., a Texas Limited Liability Company
("CELLSMR") (which such transfer has already been reflected on
the schedule of licenses contained in Annex 2.19), for
providing certain technology relating to the construction and
build-out of approximately 1,500 licenses (the "Treatch
Agreement"). The Treatch Agreement is attached hereto as Annex
2.9(g).
2. The Company has received an offer from Southern Communications
to purchase 71 channels from the Company for approximately
$1.4 million. The channels are considered by the Company to be
excess capacity for the term of the current business plan.
(viii) None.
(ix) None.
(x) (A) Pursuant to the Offshore Subscription Agreement between the
Company and certain purchasers of the Company's Series B Preferred
Stock, the Company is restricted from issuing any securities under
Regulation S until the first to occur of the following: (i) the
then-remaining Liquidation Preference, as defined, of the Preferred
Stock is no greater than Two Hundred Eight Five Thousand ($285,000)
18
United States Dollars; (ii) April 20, 1998; (iii) such purchasers give
written approval for such additional financings.
(B) Under the terms of the Company and Guaranty Security
Agreement, the Company agreed to certain financial covenants
regarding consolidated tangible net worth, debt to
consolidated tangible net worth, accumulated radio units,
minimum annualized revenue and cash flow to debt service. The
Company is currently in default with respect to these
financial covenants. In addition, the past due installment
payments owed by the Company to the Licensees as described in
paragraph 1 above, constitutes a default under Section 4.3 of
the Security Agreement whereby the Company made an affirmative
covenant to timely discharge all of its obligations to the
extent such obligations exceed, in the aggregate, $50,000.
However, pursuant to a Letter Agreement (the "MaCap Letter")
dated February 25, 1997, and as clarified on March 5, 1998,
MarCap agreed to modify these covenants as set forth on
Exhibit A to the MarCap Letter. MarCap also agreed to waive
existing covenant defaults through April 30, 1998, provided
that the Company uses its diligent best efforts to raise at
least $5 million of equity financing and $15 million of
aggregate financing by such date (the "Waiver").
(xi) The Company does not have any powers of attorney or other similar
delegations of authority made by the Company or any Subsidiary to any
other person or entity.
(xii) See Annex 2.19.
(b) 1. The Company has past due installment payments owed to certain
holders of FCC Licenses ("Licensees") that have entered into license
option agreements with the Company or its Subsidiaries. The aggregate
amount of these past due amounts is approximately $271,400 ($64,300 for
the quarter ended June 30, 1997; $64,300 for the quarter ended
September 30, 1997; $64,300 for the quarter ended December 31, 1997;
and an estimated $78,500 for the quarter ending March 31, 1998). Under
the terms of the Company's standard agreement with the Licensees, the
Company has 30 days from the date any Licensee sends a notice of
termination to pay all delinquent payments. If the Company tenders such
payment, the agreement with the Licensee remains in full force and
effect.
2. Under the terms of the Security Agreement, the Company
agreed to certain financial covenants regarding consolidated
tangible net worth, debt-to-consolidated tangible net worth,
accumulated radio units, minimum annualized revenue and cash
flow- to-debt service. Pursuant to the MarCap Letter, MarCap
agreed to modify these covenants as set forth on Exhibit A to
the MarCap Letter; and MarCap also agreed to waive existing
covenants through April 30, 1998, provided that the Company
uses its diligent best efforts to raise at least $5 million of
equity and $15 million of aggregate financing by such date.
2.19 Licenses.
(a) Attached hereto as Annex 2.19 is a complete list of licenses held
by the Company or its Subsidiaries or for which the Company has an
option to acquire. The Company is the holder of each license listed
under the "Transferred To" column that is listed as the Company and is
indicated as being transferred to the Company or any of its
subsidiaries. The Company has an option to acquire all licenses that
have a date under the heading "Option to Acquire Expires." The Company
has executed a promissory note and is in the process of having the FCC
transfer all licenses that state that the Company has a executed a
19
purchase agreement with the licensee and issued a promissory note as
indicated under the heading "Prom. Note."
(b) Attached hereto as Annex 2.19 is a list of the Company's business
licenses and other licenses or permits that are material to the
Company's business.
(c) None.
2.20 Insurance.
(a) Directors, Officers and Corporate Liability Insurance Policy,
Policy Number: 861-01-90 Insurer: National Union Fire Insurance Company
of Pittsburgh, Pa., 175 Water Street, New York, New York, 10038
Expiration Date: January 21, 1999 Annual Premiums: $88,000 Description
of Policy: This is a general Directors, Officer and Corporate liability
policy that provides up to $5 million of coverage for securities and
other claims. Claims Made: None.
(b) General Liability Insurance Policy: Insurer: Kaercher Insurance,
P.O. Box 1868, Las Vegas, NV 89126 Expiration Date: March 3, 1999
Annual Premiums: $48,945 Description of Policy: This is a general
blanket business liability policy with aggregate claims for up to $2
million. In addition, the policy covers automobile liability for up to
$1 million. Claims Made: None.
(c) Key Man Insurance Polciy: Insurer: Northwestern National Life
Insurance Expiration Date: June 5, 2001 Annual Premiums: $3,510
Description of Policy: This is a 5 year term life insurance policy on
the life of Robert W. Moore for $2,000,000. Claims Made: None.
(d) Worker's Compensation Policy Insurer: Kaercher Insurance Expiration
Date: March 9, 1999 Description of Policy: This is a general worker's
compensation policy. Claims Made: None.
2.21 Affiliate Transactions.
(a) None.
(b) None.
2.22 Employees; Labor Relations.
(a) See Annex 2.22(a) for a list of each employee of the Company and
its Subsidiaries.
(b) None.
2.23 Environmental Matters.
(a) - (h)None.
2.24 Customers.
(a) Attached hereto as Annex 2.24(a) is a list of the top 10 customers
of the Company.
(b) Attached hereto as Annex 2.24(b) is a list of the top 10 suppliers
of the Company.
(c) None.
(d) None.
2.25 Accounts Receivable.
20
None.
2.28 Registration Rights.
The Persons listed below have certain registration rights with respect
to securities of the Company as described below:
1. Pursuant to the terms of a Conversion Agreement, dated March 24,
1995, Green Valley Partners ("Green Valley") is entitled to piggy-back
registration rights with respect to shares of Common Stock of the Company issued
upon conversion of certain outstanding debt. This piggy-back registration right
is subject to underwriter cut-back in the event that the underwriter of the
public offering notifies Green Valley that it is willing or able to proceed with
the proposed offering only with respect to a smaller number of shares of Common
Stock of the Company than the number of shares proposed to be offered
collectively by the Company and Green Valley. This registration provision does
not address priority cut-back with respect to other holders of the Company's
securities that may be entitled to registration rights.
2. Pursuant to Stock Option Agreements, each dated as of September 13,
1995, by and between the Company and Golden Rhino Ltd. ("GRL"), the Company
granted GRL registration rights with respect to up to 250,000 shares of Common
Stock of the Company issuable upon exercise of the options (the "GRL Option
Stock"). Pursuant to Section 7 of the Option Agreements, in the event the
Company files a registration statement under the Securities Act during the 3
year period ending September 13, 1998, either for the account of the Company or
any other Person (except for a registration statement on Form S-8, S-14 or other
inappropriate form), at the request of a majority in interest of the holders of
GRL Option Stock, the Company agreed to include the GRL Option Stock in any such
registration statement. This registration provision does not address underwriter
cut-back or priority cut-back with respect to other holders of the Company's
securities that may be entitled to registration rights.
3. Pursuant to the terms of a private placement offering of 1,342,999
units (each consisting of 1 share of Common Stock of the Company and 1 warrant
to purchase one share of Common Stock of the Company) completed on March 12,
1996, the holders of such units ("1995 Private Placement Holders") are entitled
to 1 demand registration for shares of Common Stock held by them and shares of
Common Stock issuable upon exercise of the warrants; provided, however, that the
1995 Private Placement Holders are not entitled to such demand registration
until after the 180th day following the Company's next registered public
offering.
4. Pursuant to a private placement offering of $3,000,000 8%
Convertible Debentures due September 6, 1998 ("8% Debentures") to Cygni, S.A.,
and a Registration Rights Agreement, effective as of August 30, 1996, the
holder(s) of the 8% Debentures are entitled to 1 demand registration if shares
of Common Stock of the Company issued upon conversion of the Debentures (and
shares issued upon exercise of certain warrants issued in connection with the 8%
Debentures) are issued with any restrictive legend. If the Company fails to
comply with this registration provision, it is obligated to pay the holders of
such registration right $100,000 in liquidated damages. Pursuant to Section 2.2
of the Registration Rights Agreement, the holders of the 8% Debentures also are
entitled to piggy-back registration rights provided that any such securities
included on behalf of such holders would be registered as a "shelf" registration
and not part of any underwriting arrangement entered into by the Company and/or
other holders of securities of the Company who may be participating in such
registration. Section 2.1(b) of the Registration Rights Agreement provides for a
standard underwriter cut-back and a first priority registration right with
respect to other holders of the Company's securities that are entitled to
registration rights; provided, however, with respect only to the piggy-back
registration provisions set forth in Section 2.2, Section 2.1(b) (including the
registration priority provisions set forth therein) does not apply with respect
to the Company's first registered public offering.
5. Pursuant to a Registration Rights Agreement, dated February 19,
21
1997, between the Company and Willora Company Limited ("Willora"), Willora has
the right to 1 demand registration with respect to the shares of the Common
Stock of the Company which are issued and/or issuable upon conversion of the 8%
Convertible Debentures held by Willora.
6. Pursuant to a Stock Purchase Warrant, dated February 19, 1997,
between the Company and Willora, Willora is entitled to piggy-back registration
rights with respect to all shares of Common Stock of the Company underlying such
warrant. The registration provision of this Stock Purchase Warrant provides for
a standard underwriter cut-back and a pro-rata cut-back with respect to other
holders of the Company's securities proposing to register securities in any such
offering.
7. Pursuant to a Registration Rights Agreement, dated December 10,
1997, holders of the Company's Series B 8% Convertible Preferred Stock are
entitled to 1 demand registration in the event that Regulation S is materially
amended and the underlying shares are not freely tradable after the applicable
restricted period under Regulation S. In the event the Company fails to comply
with these registration provisions, the Company is liable for liquidated damages
equal to 1% of the principal amount of the securities for the first three months
and 3% per month for each month thereafter until the shares have been
registered. The payment of the liquidated damages by the Company does not
relieve it of its registration obligations.
8. Pursuant to a Conversion Agreement, dated as of December 29, 1995,
the Company granted SMR Digital Communications, Inc. ("SMR Digital") the same
registration rights as those granted to the 1995 Private Placement Holders.
9. Pursuant to an Assignment Agreement, dated as of December 29, 1995,
the Company granted Tele-Lease the same registration rights as those granted to
the 1995 Private Placement Holders.
10. Pursuant to Option Agreements, each dated as of October 1, 1997,
between the Company and Jan S. Zwaik, Anthony Welwood and Alyson Sheradin,
respectively, the Company granted such persons piggy-back registration rights
only in the event the shares of Common Stock of the Company underlying such
options are not eligible for registration on Form S-8. The registration
provision of the Option Agreements provides for a standard underwriter cut-back
and a pro-rata cut-back with respect to other holders of the Company's
securities proposing to register securities in any such offering.
11. Pursuant to a Warrant Agreement, dated January 1, 1997, between the
Company and Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
("Christensen") with respect to 300,000 shares of Common Stock, Christensen is
entitled to piggy-back registration rights only in the event the shares of
Common Stock of the Company underlying the subject warrants are not eligible for
registration on Form S-8. The registration provision of the Warrant Agreement
provides for a standard underwriter cut-back and a pro-rata cut-back with
respect to other holders of the Company's securities proposing to register
securities in any such offering.
12. Pursuant to an Option Agreement, dated July 9, 1997, between the
Company and Jan Zwaik, Mr. Zwaik is entitled piggy-back registration rights only
in the event the shares of Common Stock of the Company underlying such option
are not eligible for registration on Form S-8. The registration provision of the
Option Agreement provides for a standard underwriter cut-back and a pro-rata
cut-back with respect to other holders of the Company's securities proposing to
register securities in any such offering.
13. Pursuant to a Consulting Agreement, dated July 6, 1995, between the
Company and Newhouse Consulting Ltd., the Company granted this consultant the
same registration rights as those granted to the 1995 Private Placement Holders.
14. Pursuant to a Consulting Agreement, dated September 1995, between
the Company and Rolfe Widdowson Family Limited Partnership, the Company granted
this consultant the same registration rights as those granted to the 1995
22
Private Placement Holders.
15. Pursuant to a Conversion Agreement, dated September 22, 1995, by
and between David M. Munch ("Munch"), CCI and the Company, Munch converted
$25,000 indebtedness of a loan into 16,667 shares of Common Stock of the
Company. This piggy-back registration right is subject to underwriter cut-back
in the event that the underwriter of the public offering notifies Munch that it
is willing or able to proceed with the proposed offering only with respect to a
smaller number of shares of Common Stock of the Company than that proposed to be
collectively offered by the Company and Munch. This registration provision does
not address priority cut-back with respect to other holders of the Company's
securities that are entitled to registration rights.
16. A warrant to purchase 385,604 shares of Common Stock of the Company
was assigned to Global Scope Ltd. ("GSL") by Green Valley on December 26, 1995.
GSL is entitled to 1 demand registration for the Common Stock of the Company
underlying the warrant at any time after the 180th day following the first
registered public offering conducted by the Company for its own account. There
are no provisions related to a standard underwriter cut-back or priority
cut-back with respect to other holders of registration rights.
17. Pursuant to a Stock Option Agreement, dated April 16, 1996, between
the Company and 707 Corp., 707 Corp. is entitled to piggy-back registration
rights with respect to shares of Common Stock of the Company issuable upon
exercise of the stock option. This registration provision does not address
underwriter cut-back or priority cut-back with respect to other holders of
registration rights.
18. Pursuant to a Stock Option, dated April 16, 1996, between the
Company and JJ&D, L.L.C. ("JJ&D"), JJ&D is entitled to piggy-back registration
rights with respect to shares of Common Stock of the Company issuable upon
exercise of the stock option. This registration provision does not address
underwriter cut-back or priority cut-back with respect to other holders of
registration rights.
19. Pursuant to a stock option agreement issued to AMG Capital
International S.A. ("AMG"), AMG was granted was registration rights the same
rights as the purchasers in the 1995 Private Placement Holders.
20. Pursuant to Mutual Settlement Agreement and Release Agreements
entered into between the Company and the persons listed below, the Company
granted each person "piggy back registration rights" with regard to any
registration statement that the Company files, except a registration statement
on Form S-4, S-8, or other inappropriate form (the "Settlement Registration
Rights"), (this registration provision does not address underwriter cut-back or
priority cut-back with respect to other holders of registration rights):
a. Barbara Taylor - 10,200 shares
b. Herbert Ruetsch - 10,200 shares
c. Doris Shaw - 10,200 shares
d. Tim Nickles - 8,500 shares
e. Chad Donn, Inc. 8,000 shares.
21. Under the M&A Agreement, the Company has agreed to issue freely
tradeable shares of Common Stock in consideration of consulting services to be
provided to the Company.
22. Pursuant to the Mutual Settlement and Release Agreement dated
September 1997, the Company granted registration rights equal to the Settlement
Registration Rights to the following persons relating to an aggregate of 101,700
shares of Common Stock: Roy Farrington, Virginia Ferrington, Bruce Farrington,
Marlys Johnson and Lois Mason.
2.30 Restrictions on Conduct of Business.
See Section 2.18(a)(ii) above.
23
2.31 Banks and Brokerage Accounts.
(a) See Annex 2.31(a) attached hereto for a list of all bank and
brokerage accounts held by the Company and its subsidiaries.
(b) See Annex 2.31(a).
(c) None.
2.32 Warranty Obligations.
(a) Attached hereto as Annex 2.32 is the Company's standard Customer
Service Agreement and Terms and Conditions.
(b) None.
(c) None.
2.35 Additional Regulatory Matters.
(a)(i-iv) See Annex 2.19.
(c) None.
(d) None.
Projections.
See Annex 2.40.
Permitted Liens. The Company has Liens on certain assets pursuant to
the agreements listed as Items 1-4, 5-12 and 18 in Section 2.18(a)(iv) of
this Disclosure Schedule.
Secretary's Certificate
Pursuant to Section 5.4 of the Investment Agreement, dated as of
May 1, 1998 (the Investment Agreement"; capitalized terms used but not defined
herein shall have the respective meanings ascribed to them in the Investment
Agreement), between Recovery Equity Investors II, L.P., a Delaware limited
partnership, and Chadmoore Wireless Group, Inc., a Colorado corporation (the
"Company"), I, Alyson A. Sheradin, in my capacity as Secretary of the Company
and on behalf of the Company, DO HEREBY CERTIFY that:
(1) I am the duly elected, qualified and acting Secretary of the
Company.
(2) Attached hereto as Exhibit A is a true, complete and correct
copy of the Articles of Incorporation of the Company (the "Charter"), as amended
and in full force and effect on the date hereof, and except for the Charter
Amendment no other amendment or other document relating to or affecting the
Charter has been authorized, been filed with the Secretary of State of Colorado
or become effective and no action has been taken by the Company, or any of its
stockholders, directors or officers in contemplation of the filing of any such
other amendment or document or in contemplation of the liquidation, dissolution
or winding-up of the Company.
(3) Attached hereto as Exhibit B is a true, complete and correct
copy of the by-laws of the Company as in full force and effect on the date
hereof.
(4) Attached hereto as Exhibit C is a true, complete and correct
copy of resolutions adopted by the Board of Directors of the Company with
respect to the Investment Agreement, the Operative Agreements and all the
transactions contemplated thereby, which resolutions were duly and validly
adopted at a meeting of the Board of Directors of the Company held on April 30,
1998. All such resolutions are in full force and effect on the date hereof in
the form in which adopted and no other resolutions have been adopted by the
Board of Directors of the Company or any committee thereof relating to the
Investment Agreement, the Operative Agreements or any of the transactions
contemplated thereby.
(5) Each of the individuals named in Schedule A hereto is a duly
elected or appointed, qualified and acting officer or director of the Company
who holds, and at all times since the date of execution of the Investment
Agreement has held, the offices set opposite such individual's name, and the
signature written opposite the name and title of such officer is such officer's
genuine signature.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to
be executed as of the day of May, 1998.
By:
-----------------------------
Name: Alyson A. Sheradin
EXHIBIT C TO SECRETARY'S CERTIFICATE
WIRELESS GROUP, INC.
MINUTES OF A
MEETING OF THE BOARD OF DIRECTORS
April 30, 1998 and May 1, 1998
Pursuant to notice duly given or waived, a regular meeting of the Board
of Directors of Chadmoore Wireless Group, Inc., a Colorado corporation (the
"Corporation"), was held via conference call on April 30, 1998 at 3:30 p.m.
until such meeting was adjourned and reconvened via conference call on May 1,
1998, at 10:30 a.m. (the "Meeting"). The following directors were present at the
Meeting in person or via conference telephone: Robert W. Moore, Jan S. Zwaik and
William C. Bossung. Each director was present at the Meeting in person or via
conference telephone such that he could hear and be heard by each other
participant and communicate with all other members of the Board of Directors.
Gilles S. Attia of Graham & James LLP, corporate counsel to the Company, was
also present at the Meeting via conference telephone.
Mr. Moore, the Corporation's President and Chief Executive Officer,
called the Meeting to order and recorded the minutes of the Meeting.
1. Financing Transaction.
As the first order of business, the Board of Directors discussed the
terms and conditions of the Corporation's proposed $7.5 million private equity
financing (the "Financing") with Recovery Equity Partners II, L.P. ("Recovery").
Mr. Moore gave a brief summary to the Board of Directors regarding the key deal
points in the Financing. The Board held a general discussion regarding the
Financing including without limitation the proposed terms, conditions, covenants
and agreements contained in the Investment Agreement attached as Exhibit A
hereto ("Investment Agreement") and the documents attached thereto as exhibits
and the transactions contemplated thereby. Mr. Zwaik noted that over the past
few months the officers of the Company have been diligently seeking alternative
funding sources. The Board of Directors considered among other things (i) the
timing of other financing alternatives and the Company's need for an immediate
infusion of capital to support the critical path under its business plan, (ii)
the need for the Company to obtain the necessary capital in order to implement
its optimal business plan and (iii) the potential of an investor to act as a
strategic partner in the Company's business. In light of the foregoing factors,
the Board of Directors concluded that the Financing is in the best interests of
the Corporation and its shareholders. After a general discussion, upon a motion
duly made and seconded, the Board of Directors unanimously approved the
following resolutions:
RESOLVED: That the Investment Agreement, in substantially the form
attached hereto as Exhibit A, is hereby approved and the proper officers
of the Corporation be, and each of them hereby is, authorized and
directed to execute, on behalf of the Corporation, the Investment
Agreement, with such modifications, additions and deletions as they may
deem appropriate after consultation with counsel (the making of such
modifications, additions and deletions shall constitute evidence of
approval by this Board of Directors of such modifications, additions and
deletions without any further action on the part of the Board of
Directors).
RESOLVED FURTHER: That the Board of Directors hereby approves the
Certificate of Designation of Rights and Preferences in substantially the
form set forth on Exhibit B hereto ("Certificate of Designation")
authorizing and creating a new class of preferred stock of the
Corporation designated as Series C Preferred Stock, $0.001 par value
("Series C Preferred"), with the preferences, limitations and relative
rights described in the Certificate of Designation.
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, authorized and directed to cause the Certificate of
Designation to be filed with the Secretary of State of the State of
Colorado and such officers are authorized and directed to take or cause
to be taken all other actions as they deem necessary in connection with
such filing.
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, authorized and directed to issue and sell 8,854,662
shares of the Common Stock of the Corporation, $0.001 par value ("Common
Stock"), and 10,119,614 shares of Series C Preferred Stock, $0.001 par
value ("Series C Preferred Stock"), at a purchase price of $0.3953 per
share pursuant to terms and conditions set forth in the Investment
Agreement.
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, authorized and directed to issue to Recovery each of the
Stock Purchase Warrants attached as Exhibit H-1, Exhibit H-2 and Exhibit
H-3 to the Investment Agreement (the "Warrants") pursuant to which
Recovery will have the right to purchase shares of the Common Stock of
the Company pursuant to the terms, conditions and limitations set forth
in the Warrants.
RESOLVED FURTHER: That the Registration Rights Agreement, in
substantially the form attached as Exhibit F to the Investment Agreement,
is hereby approved and the proper officers of the Corporation be, and
each of them hereby is, authorized and directed to execute, on behalf of
the Corporation, the Registration Rights Agreement, with such
modifications, additions and deletions as they may deem appropriate after
consultation with counsel (the making of such modifications, additions
and deletions shall constitute evidence of approval by this Board of
Directors of such modifications, additions and deletions without any
further action on the part of the Board of Directors).
RESOLVED FURTHER: That the Shareholders Agreement, in substantially the
form attached as Exhibit G to the Investment Agreement ("Shareholders
Agreement"), is hereby approved and the proper officers of the
Corporation be, and each of them hereby is, authorized and directed to
execute, on behalf of the Corporation, the Shareholders Agreement, with
such modifications, additions and deletions as they may deem appropriate
after consultation with counsel (the making of such modifications,
additions and deletions shall constitute evidence of approval by this
Board of Directors of such modifications, additions and deletions without
any further action on the part of the Board of Directors).
RESOLVED FURTHER: That the Advisory Agreement, in substantially the form
attached as Exhibit C hereto, is hereby approved and the proper officers
of the Corporation be, and each of them hereby is, authorized and
directed to execute, on behalf of the Corporation, the Advisory
Agreement, with such modifications, additions and deletions as they may
deem appropriate after consultation with counsel (the making of such
modifications, additions and deletions shall constitute evidence of
approval by this Board of Directors of such modifications, additions and
deletions without any further action on the part of the Board of
Directors).
RESOLVED FURTHER: That there be reserved an aggregate of 8,854,662 shares
of Common Stock and 10,119,614 shares of Series C Preferred for issuance
pursuant to the Investment Agreement, and 28,732,410 shares of Common
Stock for issuance upon exercise of the Warrants (plus such additional
shares of Common Stock as may become issuable under the Warrants from
time to time as a result of adjustments in the number of shares of Common
Stock subject to the Warrants by operation of the provisions contained
therein).
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, empowered and directed to authorize the delivery of the
share certificates evidencing the shares of Common Stock and Series C
Preferred to be issued and sold by the Corporation in the Financing and
that such shares, when sold and issued in accordance with the Investment
Agreement, will be validly issued, fully paid and nonassessable.
RESOLVED FURTHER: That, subject to the representations and warranties of
Recovery set forth in Section 3.3 of the Investment Agreement, the Common
Stock, Series C Preferred and the Warrants shall be offered, issued and
sold to Recovery in accordance with the exemption from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Rule 506 of Regulation D promulgated under
the Securities Act, and such offers, issuances and sales shall be
qualified or exempt under applicable state securities laws.
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, authorized and directed to cause (i) a Notice on Form D
to be filed with the United States Securities and Exchange Commission and
(ii) a filing with the California Department of Corporations.
RESOLVED FURTHER: That the officers of the Corporation be, and each of
them hereby is, authorized and directed, in the name and on behalf of
this Corporation, or otherwise, to execute all such instruments,
documents and certificates and to take all such further and other action
in connection with the resolutions hereinabove adopted as they may deem
necessary, advisable or proper to effectuate the Financing.
RESOLVED FURTHER: That all acts and things heretofore done by any officer
or any agent of the Corporation, on or prior to the date hereof, in
connection with the negotiation and preparation of the agreements related
to the Financing and other transactions contemplated thereby, and the
same hereby are, in all respects ratified, confirmed, approved and
adopted as acts on behalf of the Corporation.
After approving the Board resolutions set forth above, the Meeting was
adjourned and the Board of Directors agreed to reconvene the Meeting on May 1,
1998 at 10:30 a.m. via conference call.
The Board of Directors reconvened on May 1, 1998 at 10:30 a.m. via
conference call, and Mr. Moore called the Meeting to order.
2. Stock Option Grants.
The Board of Directors next discussed proposed stock option grants to
certain of the Corporation's employees. Mr. Moore circulated a list of employees
to be considered for stock option grants (the "Option List"). A discussion was
then held regarding the proposed stock option grants. Mr. Moore noted that, as a
courtesy, representatives of Recovery were given the opportunity to review the
Option List and had indicated that Recovery was comfortable with the Option List
in light of the Financing and business objectives of the Corporation. After a
review and discussion, upon a motion duly made and seconded, the Board adopted
the following resolutions (with Mr. Moore abstaining from the vote with respect
to stock options proposed to be granted to him and Mr. Zwaik abstaining from the
vote with respect to stock options proposed to be granted to him):
RESOLVED: That the Board hereby determines it to be in the best interests
of the Corporation to grant nonqualified stock options, in the amounts
and to the employees set forth on Exhibit D, pursuant to the terms and
conditions of the Corporation's 1998 Nonqualified Stock Option Plan and
agreements previously approved by the Board thereunder, and all other
applicable federal and state securities and tax laws.
RESOLVED FURTHER: That the exercise price of such options shall be $0.51
per share, which per share exercise price represents the closing sales
price of the Common Stock of the Company as reported on the OTC Bulletin
Board as of April 30, 1998.
RESOLVED FURTHER: That the option granted to each employee set forth in
Exhibit D shall become exerciseable over a period of four (4) years (in
the amount of twenty-five percent (25%) at the end of each full year
following the date of grant) in accordance with the vesting schedule
contained in each employee's individual stock option agreement.
RESOLVED FURTHER: That the officers of the Corporation are hereby
authorized and directed to execute and deliver all documents and
instruments necessary in order to carry out the foregoing resolutions.
3. Bylaw Amendment.
As the next item of business, the Board discussed an amendment to the
by-laws of the Corporation (the "By-Laws") to provide for an increase in the
authorized number of directors to seven (the "By-Law Amendment"). The Board of
Directors held a general discussion regarding the desireability of increasing
the authorized number of directors as contemplated by the Investment Agreement
and the Shareholders Agreement. After discussion, upon a motion duly made and
seconded, the Board of Directors unanimously approved the following resolutions:
RESOLVED: That Article IV, Section 1, of the By-laws is hereby amended
and restated in its entirety to read as follows (with the amended
language set out in bold print):
"Section 1. Board of Directors. The business and affairs of the
Corporation shall be managed by a board of seven (7) directors, who need
not be shareholders of the Corporation or residents of the State of
Colorado and who shall be elected at the annual meeting of shareholders
or some adjournment thereof. Directors shall hold office until the next
succeeding annual meeting or until their successors shall have been
elected and shall qualify; however, no provision of this section shall be
restrictive upon the right of the Board of Directors to fill vacancies or
upon the right of shareholders to remove directors as is hereinafter
provided."
RESOLVED FURTHER: That the Secretary of the Corporation is authorized and
directed to execute a Certificate of Amendment of the By-laws and to
attach such Certificate of Amendment to the By-Laws contained in the
Corporation's Minute Book.
4. Director Resignation.
As the next item of business, Mr. Bossung submitted his resignation to
the Board, to be effective immediately following the Closing (as defined in the
Investment Agreement). The Board of Directors agreed to accept Mr. Bossung's
resignation immediately following the Closing and thanked him for his faithful
service to the Corporation.
5. Election of Directors.
The Board of Directors next discussed the appointment of new directors to
fill the four vacancies on the Board of Directors created by the resignation of
Mr. Bossung and the By-law Amendment approved by the Board of Directors in the
above resolutions. After a discussion, upon a motion duly made and seconded, the
Board of Directors adopted the following resolution:
RESOLVED: That, immediately following the Closing, Mssrs. Joseph
J. Finn-Egan, Jeffrey A. Lipkin, Mark Sullivan and Janice Pellar are
hereby appointed as members of the Board of Directors of the
Corporation until such time as their successors may be duly elected
and qualified.
6. Election of Assistant Secretary.
As the next item of business, the Board discussed electing Mr. Attia as
an Assistant Secretary of the Corporation. After discussion, upon a motion duly
made and seconded, the Board of Directors adopted the following resolution:
RESOLVED: That, Gilles S. Attia, is hereby elected as an Assistant
Secretary of the Corporation until the earlier of his resignation or
removal.
7. Adjournment.
There being no further business to come before the Board of Directors,
the Meeting was adjourned.
RESPECTFULLY SUBMITTED:
Robert W. Moore
President and Chief Executive Officer
Schedule A
Officers and Directors
- --------------------------------------------------------------------------------
Name Signature
- --------------------------------------------------------------------------------
Robert W. Moore,
President, Chief Executive
Officer and Director /s/ Robert W. Moore
- --------------------------------------------------------------------------------
Jan S. Zwaik
Chief Operating Officer, Director, Treasurer
and Chief Financial Officer /s/ Jan S. Zwaik
- --------------------------------------------------------------------------------
Alyson A. Sheradin,
Secretary and Vice President of
Administration /s/ Alyson A. Sheradin
- --------------------------------------------------------------------------------
William C. Bossung, Director /s/ William C. Bossung
- --------------------------------------------------------------------------------