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EXHIBIT 10.22
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BRIDGE NOTE PURCHASE AGREEMENT
BY AND BETWEEN
HORIZON PERSONAL COMMUNICATIONS, INC.
AND
FIRST UNION INVESTORS, INC.
DATED AS OF
FEBRUARY 15, 2000
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TABLE OF CONTENTS
Section Page
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SECTION 1. DEFINITIONS........................................................1
(a) Definitions....................................................1
(b) Accounting Terms; Financial Statements........................11
SECTION 2. AUTHORIZATION OF ISSUANCE OF THE NOTE.............................11
SECTION 3. PURCHASE AND SALE OF SECURITIES...................................12
SECTION 4. CONDITIONS OF CLOSING.............................................12
(a) Representations, Warranties and Covenants.....................12
(b) Inspection of Property and Business...........................12
(c) Consent of Third Parties, etc.................................12
(d) No Adverse Change.............................................13
(e) Financial Information.........................................13
(f) Certain Agreements............................................13
(g) Opinions of Counsel...........................................13
(h) Delivery of Closing Documents.................................13
(i) Payment of Fees and Expenses..................................15
(j) Litigation....................................................15
(k) Ownership Structure...........................................15
(l) Bankruptcy....................................................15
(m) Legality of Offering..........................................15
(n) Financial Covenants...........................................15
(o) Additional Matters............................................15
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................15
(a) Organization, Good Standing and Qualification.................16
(b) Subsidiaries and Investments..................................16
(c) Authorized and Issued Capital.................................16
(d) Authorization.................................................17
(e) Litigation....................................................17
(f) Tax Matters...................................................17
(g) Organizational and Governing Documents........................18
(h) Government Approvals; Consents................................18
(i) Representations and Warranties in Other Agreements............18
(j) Disclosure....................................................18
(k) Compliance with Securities Laws...............................18
(l) No Brokers....................................................19
(m) Financial Statements..........................................19
(n) Absence of Undisclosed Liabilities............................19
(o) Title To Properties and Assets................................20
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(p) Contracts and Commitments.....................................20
(q) Employees.....................................................20
(r) Compliance with Laws..........................................21
(s) Transactions with Affiliates..................................21
(t) Hazardous and Toxic Materials.................................21
(u) Solvency......................................................22
(v) Certain Federal Regulations...................................22
(w) Acquisition and Senior Loan Documents.........................23
(x) Use of Proceeds...............................................23
(y) Employee Benefit Plans........................................23
(z) Intellectual Property.........................................23
(aa) Absence of Certain Changes or Events..........................24
(cc) Insurance.....................................................25
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................25
SECTION 7. COVENANTS.........................................................26
(a) Payment of Notes..............................................26
(b) Financial Statements..........................................26
(c) Other Business and Financial Information......................28
(d) Corporate Existence; Franchises; Maintenance of Properties....30
(e) Compliance with Laws..........................................30
(f) Payment of Obligations........................................30
(g) Insurance.....................................................31
(h) Maintenance of Books and Records; Inspection..................31
(i) Creation or Acquisition of Subsidiaries.......................31
(j) Reserved......................................................31
(k) Further Assurances............................................31
(l) Use of Proceeds...............................................32
(m) Compliance with Agreements....................................32
(n) Indemnification...............................................32
(o) ERISA.........................................................33
(p) Brokerage.....................................................33
SECTION 8. FINANCIAL COVENANTS...............................................34
SECTION 9. NEGATIVE COVENANTS................................................34
(a) Merger; Consolidation.........................................34
(b) Indebtedness..................................................35
(c) Liens.........................................................35
(d) Disposition of Assets.........................................36
(e) Investments...................................................36
(f) Restricted Payments...........................................37
(g) Transactions with Affiliates..................................38
(h) Lines of Business.............................................38
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(i) Certain Amendments............................................38
(j) Limitation on Certain Restrictions............................38
(k) No Other Negative Pledges.....................................39
(l) Fiscal Year...................................................39
(m) Accounting Changes............................................39
(n) Extensions of Credit Agreements...............................39
(o) Limitations on Layering.......................................39
SECTION 10. Reserved...............................................40
SECTION 11. GENERAL................................................40
(a) Entire Agreement..............................................40
(b) Reimbursement of Expenses.....................................40
(c) Survival of Agreements and Representations and Warranties.....40
(d) No Waiver.....................................................41
(e) Binding Effect; Participations................................41
(f) Initial Holder................................................41
(g) Cumulative Powers.............................................41
(h) Loss of Securities; Reissue of Securities in Lesser
Denominations................................................41
(i) Communications................................................42
(j) Legend........................................................42
(k) Confidentiality; Public Announcements.........................42
(l) Governing Law.................................................43
(m) Headings......................................................43
(n) Multiple Originals............................................43
(o) Amendment or Waiver...........................................43
(p) Waiver of Jury Trial..........................................44
(q) Consent to Jurisdiction and Service of Process................44
(r) Arbitration...................................................44
Schedules
Schedule 4(e) Financial Information
Schedule 5(a) Organizational Matters
Schedule 5(b) Subsidiaries and Investments
Schedule 5(c) Capitalization
Schedule 5(e) Litigation
Schedule 5(f) Tax Matters
Schedule 5(f) Governmental Approvals; Consents
Schedule 5(p) Material Contracts
Schedule 5(q) Employees
Schedule 5(s) Affiliate Contracts
Schedule 5(t) Environmental Matters
Schedule 5(x) Use of Proceeds
Schedule 5(y) Employee Benefit Plans
Schedule 5(z) Intellectual Property
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Schedule 5(aa) Absence of Certain Changes or Events
Schedule 5(bb) Insurance
Schedule 9(b) Permitted Indebtedness
Schedule 9(c) Permitted Liens
Schedule 9(e) Permitted Investments
Schedule 10(i) Addresses for Notices
Exhibits
Exhibit 1(a) Form of RTFC Commitment Letter and Term Sheet
Exhibit 2(a) Form of Note
Exhibit 4(f)(i) Form of Conversion Agreement
Exhibit 4(f)(ii) Form of Acquisition Documents
Exhibit 4(g)(i) Form of Opinion of Company Counsel
Exhibit 4(h)(ix) Form of Officers' Certificate
Exhibit 4(h)(x) Form of Secretary's Certificate
Exhibit 7(b)(iii) Form of Management Report
Exhibit 7(i) Form of Guaranty
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BRIDGE NOTE PURCHASE AGREEMENT
THIS BRIDGE NOTE PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of this 15th day of February, 2000, by and among HORIZON
PERSONAL COMMUNICATIONS, INC., an Ohio corporation (the "Company"), and FIRST
UNION INVESTORS, INC., a North Carolina corporation (the "Purchaser").
STATEMENT OF PURPOSE
WHEREAS, the Company, the Parent (as defined below) and its
Subsidiaries (as defined below) are engaged in the business of providing
telecommunications services;
WHEREAS, the Company has requested that the Purchaser make an
investment in the Company in the form of a senior subordinated bridge note in
the original principal amount of $13,000,000 (the "Subdebt Investment"). The
Company will use the proceeds of the Subdebt Investment as set forth under
Section 5(x); and
WHEREAS, the Company and the Purchaser have reached certain agreements
with regard to the foregoing transactions, all upon the terms and conditions
more particularly described herein;
AGREEMENT
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto hereby mutually covenant,
contract and agree as follows:
SECTION 1. DEFINITIONS.
(a) Definitions. As used in this Agreement and unless the context
otherwise requires, the following terms have the meanings indicated below.
"AAA" has the meaning set forth in Section 11(r).
"Acquisition" shall mean the acquisition by the Company of 78,900
shares (19,725 voting and 59,175 non-voting) of the Parent's common stock on the
Closing Date pursuant to the terms of the Acquisition Documents.
"Acquisition Documents" shall mean (i) that certain Assignment
Agreement dated as of February 15, 2000 by and between the Company and the
Parent, (ii) the Stock Power dated February 15, 2000 executed by ALLTEL
Investments, Inc. and (iii) the letter agreement dated October 27, 1999 between
ALLTEL Investments, Inc. to Horizon Telecom Inc.
"Affiliate" means with respect to any Person, a Person (other than a
Wholly Owned Subsidiary) (i) which directly or indirectly controls, or is
controlled by, or is under common control
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with, such Person, (ii) which owns 10% or more of the equity interests of such
Person (iii) 10% or more of the voting stock (or in the case of a Person which
is not a corporation, 10% or more of the equity interests) of which is owned by
such Person or (iv) who is an executive officer or director of such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
For purposes of this Agreement and without limitation, each of the Responsible
Officers and their respective Affiliates shall each be deemed to be an Affiliate
of the Company and its Subsidiaries.
"Agreement" has the meaning set forth in the Preamble, as amended,
modified or supplemented from time to time in accordance with its terms.
"Arbitration Rules" has the meaning set forth in Section 11(r).
"Authorized Officer" means, with respect to any action specified
herein, any officer of the Company duly authorized by resolution of the Board of
Directors to take such action on its behalf, and whose signature and incumbency
shall have been certified to the Purchaser by the secretary or an assistant
secretary of the Company.
"Big Five Accounting Firm" means any of Xxxxxx Xxxxxxxx & Co. LLP, KPMG
Peat Marwick, Ernst & Young LLP, Deloitte & Touche or PriceWaterhouse Coopers or
any of their respective successors.
"Board of Directors" means that certain board of directors established
pursuant to the bylaws/code of regulations of the Company.
"Business Day" means any day other than a Saturday or Sunday, a legal
holiday or a day on which commercial banks in Charlotte, North Carolina are
required by law to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights,
options or other derivative securities to purchase any of the foregoing.
"Cash Equivalents" means (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within 90 days from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America or
any state or political subdivision thereof, maturing within 90 days from the
date of acquisition and, at the time of acquisition, having a rating of at least
A-1 or the equivalent thereof by Standard & Poor's Ratings Services or at least
P-1 or the equivalent thereof by Xxxxx'x Investors Service, Inc., (iii) time
deposits and certificates of deposit maturing within 90 days from the date of
issuance and issued by a bank or trust company organized under the laws
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of the United States of America or any state or political subdivision thereof
that has combined capital and surplus of at least $500,000,000 and that has (or
is a Subsidiary of a bank holding company that has) a long-term unsecured debt
rating of at least A or the equivalent thereof by Standard & Poor's Ratings
Services or at least A2 or the equivalent thereof by Xxxxx'x Investors Service,
Inc., (iv) repurchase obligations with a term not exceeding seven days with
respect to underlying securities of the types described in clause (i) above
entered into with any bank or trust company meeting the qualifications specified
in clause (iii) above, and (v) money market funds at least 95% of the assets of
which are continuously invested in securities of the type described in clause
(i) above.
"Casualty Event" means, with respect to any property (including any
interest in property) of the Company or any of its Subsidiaries, any loss of,
damage to, or condemnation or other taking of, such property for which the
Company or such Subsidiary receives insurance proceeds, proceeds of a
condemnation award or other compensation.
"Change of Control" means the occurrence of any of the following
events: (i) the failure of the XxXxxx Affiliates to maintain beneficial
ownership, directly or indirectly, of Voting Stock of the Parent representing
51% or more of the combined voting power of all Voting Stock of the Parent; (ii)
any Person or two or more Persons acting in concert (other than (x) the XxXxxx
Affiliates and (y) assignees of the Purchaser unless such assignees of the
Purchaser acquire Voting Stock from other stockholders of the Company) shall
have acquired beneficial ownership, directly or indirectly, of, or shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their acquisition of,
control over, Voting Stock of the Parent (or other securities convertible into
such Voting Stock) representing 25% or more of the combined voting power of all
Voting Stock of the Parent; and (iii) the failure of the Parent to maintain
beneficial ownership, directly or indirectly, of Voting Stock of the Company
representing 90% or more of the combined voting power of all Voting Stock of the
Company, provided that, for the purpose of subsection (iii) the acquisition by
the Company of shares of Bright Personal Communications Services, LLC shall not
be a "Change of Control".
"Closing" has the meaning set forth in Section 3(b).
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Commission" means the Securities and Exchange Commission and any
successor Person thereof.
"Company" has the meaning set forth in the Preamble.
"Contingent Obligation" means, with respect to any Person, any direct
or indirect liability of such Person with respect to any indebtedness or
obligation of the type described in
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clauses (i) through (viii) and (x) of the definition of Indebtedness, liability
or other obligation (the "primary obligation") of another Person (the "primary
obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to the Company and its
Subsidiaries, the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
"Contractual Obligation" means, with respect to a Person, any provision
of (i) any security issued by such Person, including provisions contained in the
articles or certificate of incorporation or bylaws or other organizational or
governing documents of such Person, or (ii) any agreement, franchise, license,
lease, permit, undertaking, contract, indenture, mortgage, deed of trust or
other instrument or understanding to which such Person is a party or by which it
or any of its assets or property is bound.
"Conversion Agreement" shall have the meaning set forth in Section
4(f).
"Credit Agreements" collectively means (i) that certain credit
agreement, dated as of August 29, 1997 (as amended or otherwise modified from
time to time in accordance with the terms hereof) between Rural Telephone
Finance Corporation ("RTFC") and the Company (ii) that certain proposed credit
agreement between RTFC and the Company outlined in the term sheet and commitment
letter dated January 31, 2000 pursuant to which an aggregate of $45,500,000
($40,500,000 secured term loan at $5,000,000 secured revolving line of credit)
can be incurred (a complete copy of such term sheet and commitment letter is
attached hereto as Exhibit 1(a)), (iii) that certain Guaranty issued by
Motorola, Inc. ("Motorola") in favor of the RTFC in connection with the loan
referred to in item (i) above, (iv) that certain Reimbursement and Security
Agreement, dated August 29, 1997, between the Company and Motorola, (v) the
proposed Guaranty to be issued by Motorola in favor of the RTFC in connection
with the loan referred to in item (ii) above and (vi) the proposed Reimbursement
and Security Agreement, between the Company and Motorola in connection with the
loan referred to in item (ii) above.
"Credit Documents" means the Credit Agreements, and all other
agreements, instruments, documents and certificates now or hereafter executed
and delivered to RTFC or Motorola by or on behalf of the Company, its
Subsidiaries, RTFC or Motorola with respect to the Credit Agreements, and the
transactions contemplated thereby, in each case as amended, modified,
supplemented or restated from time to time in accordance with their terms and
the terms of this Agreement.
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"Default" means any event or condition that, with the passage of time
or giving of notice, or both, would constitute an Event of Default.
"Disputes" has the meaning set forth in Section 11(r).
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event or otherwise, (i) matures or is mandatorily redeemable or
subject to any mandatory repurchase requirement, pursuant to a sinking fund
obligation or otherwise, (ii) is redeemable or subject to any mandatory
repurchase requirement at the sole option of the holder thereof, or (iii) is
convertible into or exchangeable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (i)
or (ii) above, in each case under (i), (ii) or (iii) above at any time on or
prior to February 14, 2001; provided, however, that only the portion of Capital
Stock that so matures or is mandatorily redeemable, is so redeemable at the
option of the holder thereof, or is so convertible or exchangeable on or prior
to such date shall be deemed to be Disqualified Capital Stock.
"Dollars" or "$" means dollars of the United States of America.
"EBITDA" means consolidated net income of the Company and its
Subsidiaries increased by (i) any interest expense, (ii) any income taxes paid
or accrued in the applicable fiscal year and (iii) any allowance for
depreciation or amortization, in each case determined in accordance with GAAP
for such period.
"Environmental Claims" has the meaning set forth in Section 5(t).
"Environmental Law" has the meaning set forth in Section 5(t).
"Environmental Notice" has the meaning set forth in Section 5(t).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under Section 414 of the Code.
"ERISA Event" with respect to any Person means (i) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA, with respect to
any Plan of such Person or any of its ERISA Affiliates unless the 30-day notice
requirement with respect to such event has been waived by the PBGC; (ii) the
provision by the administrator of any Plan of such Person or any of its ERISA
Affiliates of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a Plan amendment
referred to in Section 4041(e) of ERISA); (iii) the cessation of operations at a
facility of such Person or any of its ERISA Affiliates in
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the circumstances described in Section 4068(f) of ERISA; (iv) the failure by
such Person or any of its ERISA Affiliates to make a payment to a Plan required
under Section 302(f)(1) of ERISA; (v) the adoption of an amendment to a Plan of
such Person or any of its ERISA Affiliates requiring the provision of security
to such Plan, pursuant to Section 307 of ERISA; or (vi) the institution by the
PBGC of proceedings to terminate a Plan of such Person or any of its ERISA
Affiliates, pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that could constitute grounds for
the termination of, or the appointment of a trustee to administer, such Plan.
"Event of Default" has the meaning set forth in the Note.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"Financial Officer" means, with respect to the Company, the chief
financial officer, vice president finance, principal accounting officer or
treasurer of the Company.
"Financial Statements" has the meaning set forth in Section 4(e).
"GAAP" means generally accepted accounting principles, as set forth in
the statements, opinions and pronouncements of the Accounting Principles Board,
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained as in effect
from time to time (subject to the provisions of Section 1(b)).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" has the meaning set forth in Section 7(i).
"Hazardous Discharge" has the meaning set forth in Section 5(t).
"Hazardous Materials" has the meaning set forth in Section 7(o).
"Indebtedness" means, with respect to any Person (without duplication),
(i) all indebtedness and obligations of such Person for borrowed money or in
respect of loans or advances of any kind, (ii) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (iii) all
reimbursement obligations of such Person with respect to surety bonds, letters
of credit and bankers' acceptances (in each case, whether or not drawn or
matured and in the stated amount thereof, (iv) all obligations of such Person to
pay the deferred purchase price of property or services, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance
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with GAAP, recorded as capital leases, to the extent such obligations are
required to be so recorded, (vii) all Disqualified Capital Stock issued by such
Person, with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any (for purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Agreement, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the board of directors or other governing body
of the issuer of such Disqualified Capital Stock), (viii) the net termination
obligations of such Person under any Hedge Agreements, calculated as of any date
as if such agreement or arrangement were terminated as of such date, (ix) all
Contingent Obligations of such Person and (x) all indebtedness referred to in
clauses (i) through (ix) above secured by any Lien on any property or asset
owned or held by such Person regardless of whether the indebtedness secured
thereby shall have been assumed by such Person or is nonrecourse to the credit
of such Person.
"Indemnified Party" has the meaning set forth in Section 7(n).
"Initial Public Offering" means an initial underwritten public offering
of the Company's Common Stock pursuant to a registration statement filed under
the Securities Act.
"Intellectual Property" means all technology, know-how and trade
secrets relating to or used in the business of the Company and its Subsidiaries,
including (i) the computer programs and software relating to or used in the
business of the Company, together with the operating codes, source codes,
updates, upgrades, modifications, enhancements and any user and technical
documentation or utilities with respect thereto, (ii) all patents, patent
licenses and patent applications, copyrights and copyright applications, trade
secrets, proprietary information, proposals and rights and other intellectual
property rights relating to the business of the Company and its Subsidiaries and
(iii) all trademarks, trade names, service marks and logos (including any
registration and any application for registration of any of the foregoing),
relating to or used in the business of the Company and its Subsidiaries.
"Intellectual Property Licenses" has the meaning set forth in Section
5(z).
"Investments" has the meaning set forth in Section 9(e).
"Latest Balance Sheet" means the balance sheet dated as of December 31,
1999.
"Letter Agreement" shall mean that certain letter agreement dated
February 15, 2000 between the Company and the Purchaser.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature,
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whether voluntary or involuntary, including, without limitation, the interest of
any vendor or lessor under any conditional sale agreement, title retention
agreement, capital lease or any other lease or arrangement having substantially
the same effect as any of the foregoing, or set off rights of depository
institutions against deposit accounts with such depository institutions for
customary fees and expenses.
"Losses" has the meaning set forth in Section 7(n).
"Material Adverse Change" means any material adverse change in the
condition (financial or otherwise), operations, business, properties or assets
of the Company and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means (a) a material adverse effect upon (i)
the condition (financial or otherwise), operations, business, properties or
assets of the Parent and its Subsidiaries taken as a whole, (ii) the ability of
the Company, the Parent or any Subsidiary to perform its obligations under this
Agreement or any of the other Transaction Documents to which it is a party or
(iii) the legality, validity or enforceability of this Agreement or any of the
other Transaction Documents or the rights and remedies of the Purchaser and the
parties hereunder and thereunder.
"Material Contracts" has the meaning set forth in Section 5(p).
"XxXxxx Affiliates" shall mean all direct and lineal descendants of
Xxxxxx Xxxxx XxXxxx and their respective spouses, trusts and Affiliates.
"Multiemployer Plan" means any "multiemployer plan "within the meaning
of Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate
makes, is making or is obligated to make contributions or has made or been
obligated to make contributions.
"Note" or "Notes" has the meaning set forth in Section 2.
"Obligations" means all principal of and interest (including, to the
greatest extent permitted by law, post-petition interest) on the Note and all
fees, expenses, indemnities and other obligations owing, due or payable at any
time by the Company to the Purchaser or any other Person entitled thereto, under
this Agreement or any of the other Transaction Documents.
"Organic Change" means any of the following: (i) any sale, assignment,
lease, conveyance, exchange, transfer, sale-leaseback or other disposition of
more than 25% of the assets, business or properties of the Company and its
Subsidiaries, on a consolidated basis, whether in one or a series of
transactions, whether or not in the ordinary course of business and whether or
not directly or indirectly or through the sale or other disposition of equity
securities of any of the Subsidiaries of the Company, other than those
transactions expressly permitted by clauses (i) through (iii) of Section 9(d)
and (ii) any (x) merger, consolidation or other combination to which the Company
or any of its Subsidiaries is a party or (y) liquidation, winding up or
dissolution of the Company or any of its Subsidiaries, other than (A) those
transactions expressly permitted by clauses (i) and (ii) of Section
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9(a), (B) the Company may merge with an Affiliate incorporated solely for the
purpose of reincorporating the Company in another jurisdiction to realize tax or
other benefits and (C) those transactions expressly consented to in writing by
the Purchaser.
"Owned Intellectual Property" has the meaning set forth in Section
5(z).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Parent" means Horizon Telecom, Inc., an Ohio corporation.
"Permanent Financing" means any debt or equity financing by the
Company; provided, however, that neither the Company's issuance of debt
securities constituting Permitted Senior Debt nor the Company's issuance of
equity securities in a private placement which yields gross proceeds in an
aggregate amount of less than $20,000,000 shall constitute a Permanent
Financing.
"Permitted Acquisition" means (a) any Acquisition with respect to which
all of the following conditions are satisfied: (i) each business acquired shall
be within the permitted lines of business described in Section 9(h) and shall be
incorporated, organized or formed in the United States, (ii) any Capital Stock
given as consideration in connection therewith shall be Capital Stock of the
Company or one of its Affiliates, other than a Subsidiary of the Company, (iii)
in the case of an Acquisition involving the acquisition of control of Capital
Stock of any Person, immediately after giving effect to such Acquisition such
Person (or the surviving Person, if the Acquisition is effected through a merger
or consolidation) shall be the Company or a Subsidiary of the Company (in which
case, (A) the Company and such Subsidiary's management and/or selling
shareholders (as such management and shareholders are in effect for the
corresponding acquired business during the fiscal quarter, immediately preceding
such Permitted Acquisition) shall own, in the aggregate, 100% of such
Subsidiary's Capital Stock and (B) the Company shall own no less than 75% of the
Total Voting Power of such Subsidiary), and (iv) the Person to be acquired (or
its board of directors or equivalent governing body) has not (A) announced it
will oppose such Acquisition or (B) commenced any action which alleges that such
Acquisition violates, or will violate, any Requirement of law and all of the
conditions and requirements of Sections 7(i) and 7(k) applicable to such
Acquisition are satisfied; (b) any other Acquisition to which the Purchaser
shall have given its prior written consent (which consent may be in its sole
discretion and may be given subject to such additional terms and conditions as
the Purchaser shall establish) and with respect to which all of the conditions
and requirements set forth in this definition and in Section 7(i), and in or
pursuant to any such consent, have been satisfied or waived in writing by the
Purchaser; or (c) the acquisition of additional Capital Stock of Bright Personal
Communications Services, LLC.
"Permitted Liens" has the meaning set forth in Section 9(c).
"Permitted Senior Debt" has the meaning set forth in Section 9(b).
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"Person" means any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" means any "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Company or any ERISA
Affiliate may have any liability.
"POPs" has the meaning set forth in Section 8(a).
"Projections" has the meaning set forth in Section 5(m).
"Purchaser" has the meaning set forth in the Preamble and its
successors and assigns.
"Related Party" or "Related Parties" means spouses, lineal ancestors or
descendants, natural or adopted, and spouses of lineal ancestors or descendants,
or trusts for the sole benefit of any of such Persons.
"Required Purchasers" means the holders of at least 51% of the
outstanding principal of the Note or Notes.
"Requirement of Law" means, with respect to any Person, the charter,
articles or certificate of incorporation, formation or organization, partnership
or operating agreements and bylaws or other organizational or governing
documents of such Person, and any statute, law, treaty, rule, regulation, order,
decree, writ, injunction or determination of any arbitrator or court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
or otherwise pertaining to any or all of the transactions contemplated by this
Agreement and the other Transaction Documents.
"Responsible Officer" means, with respect to the Company, the
president, the chief executive officer, any other executive officer, or any
Financial Officer of the Company, and any other officer or similar official
thereof responsible for the administration of the obligations of the Company in
respect of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Subsidiary" means, with respect to any Person, any corporation or
other Person of which more than 50% of the outstanding Capital Stock having
ordinary voting power to elect a majority of the board of directors, board of
managers or other governing body of such Person, is at the time, directly or
indirectly, owned or controlled by such Person and one or more of its other
Subsidiaries or a combination thereof (irrespective of whether, at the time,
securities of any other class or classes of any such corporation or other Person
shall or might have voting power by reason of the happening of any contingency).
When used without reference to a parent entity, the term "Subsidiary" shall be
deemed to refer to a Subsidiary of the Company.
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"Subsidiary Guarantor" has the meaning set forth in Section 7(i).
"Total Voting Power" means, with respect to any Person, the total
number of votes which may be cast in the election of directors of such Person at
any meeting of stockholders of such Person if all securities entitled to vote in
the election of directors of such Person (on a fully diluted basis, assuming the
exercise, conversion or exchange of all rights, warrants, options and securities
exercisable for, exchangeable for or convertible into, such voting securities)
were present and voted at such meeting (other than votes that may be cast only
upon the happening of a contingency).
"Transaction Documents" means this Agreement, the Note, the Credit
Agreements, the Acquisition Documents, the Conversion Agreement, the Letter
Agreement and all other agreements, exhibits, documents and schedules related
thereto.
"Voting Stock" means, with respect to any Person, Capital Stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Wholly Owned" means, with respect to any Subsidiary of any Person (the
"parent"), that 100% of the outstanding Capital Stock of such Subsidiary is
owned, directly or indirectly, by such parent unless it is a Requirement of Law
that any third Person who is a member of the board of directors (or any
equivalent body) holds shares of such Subsidiary's outstanding Capital Stock, in
which case, the percentage of shares of such Subsidiary's outstanding Capital
Stock that does not have to be held as a Requirement of Law by such board
member(s) is owned directly or indirectly, by such parent.
(b) Accounting Terms; Financial Statements. Except as specifically
provided otherwise in this Agreement, all accounting terms used herein that are
not specifically defined shall have the meanings customarily given them in
accordance with GAAP. Notwithstanding anything to the contrary in this
Agreement, for purposes of calculation of the financial covenants set forth in
Section 8, all accounting determinations and computations hereunder shall be
made in accordance with GAAP as in effect as of the date of this Agreement
applied on a basis consistent with the basis used in preparing the most recent
Financial Statements of the Company referred to in Section 5(m). In the event
that any changes in GAAP after such date are required to be applied to the
Company and would affect the computation of the financial covenants contained in
Section 8, such changes shall be followed only from and after the date this
Agreement shall have been amended to take into account any such changes.
SECTION 2. AUTHORIZATION OF ISSUANCE OF THE NOTE. The Company has authorized the
issuance to the Purchaser of the Company's senior subordinated promissory bridge
note in the original principal amount of $13,000,000, in substantially the form
of Exhibit 2(a) (the "Note").
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SECTION 3. PURCHASE AND SALE OF THE NOTE.
(a) Subject to the terms and conditions herein set forth, and in
reliance upon the representations and warranties of the Company contained
herein, the Company shall sell to the Purchaser and the Purchaser shall purchase
from the Company the Note for a purchase price of $13,000,000.
(b) The closing of the issuance, purchase and sale of the Note
(the "Closing") shall take place at Xxxxx & Xxx Xxxxx, PLLC on February 15,
2000, or at such other time and place as may be mutually agreed upon in writing
by the Company and the Purchaser; provided, however, that the Closing shall take
place no later than February 18, 2000. At the Closing, the Company will issue,
sell and deliver to the Purchaser the Note in the amount set forth and the
Purchaser will pay to the Company the purchase price therefor by wire transfer
of immediately available funds pursuant to written instructions delivered to the
Purchaser by the Company prior to the Closing.
SECTION 4. CONDITIONS OF CLOSING. The Purchaser's obligations to purchase and
pay for the Note at the Closing are subject to the Purchaser determining, in its
sole discretion, that the following conditions have been satisfied (or the
Purchaser waiving in writing the conditions that it has determined have not been
satisfied), on or before the Closing Date:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Company contained in Section 5 shall be true and correct
at and as of the Closing Date with the same force and effect as if such
representations and warranties had been made as of the Closing Date. In
addition, the Company will have performed all agreements, obligations and
covenants required herein to be performed by it on or prior to the Closing.
(b) Inspection of Property and Business. The Company will have
allowed, and shall have caused the Parent to allow, permitted representatives of
the Purchaser to visit and inspect its properties, to examine the
organizational, business and financial records of the Company, the Parent and
their Subsidiaries, and make copies thereof or extracts therefrom, and to
discuss the affairs, finances and accounts of the Company, the Parent and their
Subsidiaries with the directors, managers, officers, shareholders, members,
partners, key employees and independent accountants of the Company, the Parent
and their Subsidiaries; provided, however, that the Purchaser agrees to hold all
such information confidential in accordance with Section 11(k).
(c) Consent of Third Parties, Governmental Authorities, etc. The
Company shall have presented, and shall have caused the Parent to present,
evidence satisfactory to the Purchaser to the effect that (i) all consents,
waivers and amendments required in connection with the consummation of the
transactions related to this Agreement and the other Transaction Documents and
the transactions contemplated hereby and thereby have been obtained (including,
but not limited to, RTFC, the Ohio Public Utilities Commission and Sprint), (ii)
the transactions related to the Subdebt Investment and the Acquisition shall not
violate, or constitute or trigger the occurrence of an event of default with
respect to, any Contractual Obligations of the Company, the Parent or any of
their Subsidiaries and (iii) neither the Company, the Parent nor any of their
Subsidiaries is in violation of or default under or with respect to any material
Contractual Obligations.
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(d) No Adverse Change. Since December 31, 1998, no Material
Adverse Change shall have occurred or be anticipated in the condition (financial
or otherwise), properties, proposed business operations, management, potential
competition or any other matter affecting (including, but not limited to,
litigation, proceedings, bankruptcy, insolvency or other claims) the Company,
the Parent or any of their Subsidiaries or their business prospects, which is or
could be materially adverse.
(e) Financial Information. The Company shall have provided, and
shall have caused the Parent to provide, the Purchaser with such financial
information relative to the Company's and the Parent's financial condition which
may be reasonably requested by the Purchaser, which information shall include,
at a minimum, the financial statements listed on Schedule 4(e) (collectively,
the "Financial Statements").
(f) Certain Agreements. The following agreements shall have been
entered into by the appropriate parties, shall have been delivered to the
Purchaser, shall be satisfactory in form and substance to the Purchaser and
shall be in full force and effect:
(i) Conversion Agreement, in the form of Exhibit 4(f)(i)
(the "Conversion Agreement"), between the Company, and the Purchaser;
and
(ii) the Acquisition Documents, in the form of Exhibit
4(f)(ii) (the "Acquisition Documents"), among the Company and Alltel
Investments, Inc. of the other Acquisition Documents.
(g) Opinions of Counsel. The Purchaser shall have received (i)
from Arnall Golden & Xxxxxxx, LLP, legal counsel for the Company, a favorable
opinion as of the Closing Date, substantially in the form of Exhibit 4(g)(i) and
(ii) from Xxxxxx Xxxxxxx & Xxxxxxx, special counsel for the Company, a favorable
opinion as of the Closing Date as to Ohio matters.
(h) Delivery of Closing Documents. The Purchaser shall have
received the following closing documents, in form and substance satisfactory to
the Purchaser, and all of which shall, except as specified below, be fully
executed originals:
(i) this Agreement;
(ii) the Note;
(iii) a copy of the Credit Documents, certified by the
secretary or an assistant secretary of the Company to
be true, correct and complete;
(iv) the Acquisition Documents;
(v) long form certificates of the Secretary of State of
the jurisdictions of incorporation, formation or organization of the
Company and each of its Subsidiaries as to the
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good standing of the Company and each of its Subsidiaries in such
jurisdictions as of a date within five Business Days prior to the
Closing Date;
(vi) certificates of the Secretary of State of each
jurisdiction in which the Company and each of its Subsidiaries are
qualified to do business as to their good standing in such
jurisdictions and, where available, certificates of the relevant state
taxing authorities as to the payment by such Person of all taxes in
such jurisdictions;
(vii) certificate, dated as of the Closing Date, of the
chief executive officer and chief financial officer of the Company,
substantially in the form of Exhibit 4(h)(vii), stating that the
conditions specified in Section 4 have been fully satisfied;
(viii) certificates, dated as of the Closing Date,
substantially in the form of Exhibit 4(h)(viii), of the respective
secretaries of the Company and each of its Subsidiaries certifying (A)
that the copies of the certificate or articles of incorporation,
formation or organization and bylaws or other organizational and
governing documents of the Company and each of its Subsidiaries,
attached thereto and as amended to date, are true, complete and
correct, (B) that the copies of the resolutions of the directors,
managers, partners, members and shareholders of the Company,
authorizing the transactions contemplated by this Agreement and each of
the Transaction Documents (including the issuance of the Note) and the
escrowing of shares of Capital Stock of the Parent attached thereto are
true, complete and correct, (C) as to the incumbency of each Person
executing this Agreement and each of the Transaction Documents on
behalf of the Company or any of its Subsidiaries, and (D) as to any
other matters reasonably requested by the Purchaser.
(ix) copies of the consents, waivers and amendments to be
obtained by the Company pursuant to the provisions of Section 4(e), the
Financial Statements to be provided by the Company pursuant to the
provisions of Section 4(g) and the insurance policies to be maintained
by the Company pursuant to the provisions of Section 7(g);
(x) certificate, dated as of the Closing Date,
substantially in the form of Exhibit 4(h)(x), of the chief executive
officer and chief financial officer of the Company and each of its
Subsidiaries as to the solvency of such Person;
(viii) to the extent not provided for herein, true, complete
and correct copies of all Transaction Documents; and
(viiiii) any and all other documents, certificates, and
assurances which may be reasonably requested by the Purchaser in
connection with its commitments as set forth herein.
(i) Payment of Fees and Expenses. The Company shall have paid at
Closing via wire transfer of immediately available funds (i) all fees, if any,
owing to the Purchaser pursuant to the term sheet dated February 14, 2000
between the Company and the Purchaser and (ii) all expenses of the Purchaser
pursuant to Section 11(b), including attorneys' fees and expenses.
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(j) Litigation. There shall not exist any pending litigation or
investigation affecting or relating to the Company, the Parent or any of their
Subsidiaries, this Agreement and the other Transaction Documents that in the
reasonable judgment of the Purchaser could materially adversely affect the
Company, the Parent or any of their Subsidiaries that has not been settled,
dismissed, vacated, discharged or terminated prior to the Closing Date.
(k) Ownership Structure. The capital and ownership structure of
the Company, the Parent and their Subsidiaries (after giving effect to the
Acquisition and the Transaction Documents) shall be as described in Schedule
5(b) and Schedule 5(c). The Purchaser shall be satisfied with the management
structure, legal structure, voting control, tax matters, accounting practices,
liquidity, total leverage and total capitalization of the Company, the Parent
and their Subsidiaries as of the Closing Date.
(l) Bankruptcy. There shall be no bankruptcy or insolvency
proceedings with respect to the Company, the Parent or any of their
Subsidiaries.
(m) Legality of Offering. On the Closing Date, the sale and
issuance of the Note shall be legally permitted by all laws and regulations to
which each of the Purchaser and the Company are subject.
(n) Financial Covenants. The covenants contained in Section 8
shall be true and correct as of Closing Date after giving effect to the
Acquisition, the sale of the Note and the borrowings under the Credit
Agreements.
(o) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Purchaser and its counsel.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce the
Purchaser to enter into this Agreement, the Company hereby represents and
warrants to the Purchaser that, before and after giving effect to the
Acquisition and the other transactions contemplated by this Agreement and the
other Transaction Documents, as of the date hereof:
(a) Organization, Good Standing and Qualification. Each of the
Company and the Parent is a corporation duly incorporated, validly existing and
in good standing under the laws of Ohio. As applicable, each of the Company's
Subsidiaries has all required corporate power and authority to own its property
and to carry on its business as presently conducted. The Company, the Parent and
each of its Subsidiaries are qualified and authorized to do business in, and are
in good standing as foreign corporations in, all other jurisdictions in which
such qualification or authorization is necessary for the conduct of the
businesses in which the Company, the Parent and each of their Subsidiaries are
now engaged, except where the failure to be so qualified would not have a
Material Adverse Effect. Schedule 5(a) lists with respect to each of the
Company, the Parent and their Subsidiaries (i) its jurisdiction of
incorporation, formation or organization, (ii) all states in which it is
qualified to do business and (iii) all licenses and permits of Governmental
Authorities held by it. Neither the Company, the Parent nor any of their
Subsidiaries owns or leases property or have
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employees in any state in which it is not qualified to do business. The
licenses, permits and other rights and privileges listed on Schedule 5(a)
constitute all the material licenses, permits and other rights and privileges
required for each of the Company, the Parent and their Subsidiaries to carry on
its business as now conducted and as proposed to be conducted.
(b) Subsidiaries and Investments. Neither the Company, the Parent
nor their Subsidiaries has any Subsidiaries, other than the Subsidiaries listed
on Schedule 5(b). Except for such Subsidiaries listed on Schedule 5(b), neither
the Company, the Parent nor their Subsidiaries (i) owns or controls any
securities or owns other investments in any Person or (ii) is a participant in
any joint venture, partnership or similar arrangement.
(c) Authorized and Issued Capital. The authorized capitalization
of the Company, the Parent and each of their Subsidiaries is set forth on
Schedule 5(c). Except as set forth on Schedule 5(c), the Company and the Parent
have not issued any other shares of their Capital Stock and there are no further
subscriptions, contracts or agreements for the issuance or purchase of any other
or additional equity interest in the Company, the Parent or any of their
Subsidiaries, either in the form of options, agreements, warrants, calls,
convertible securities or other similar rights. All the outstanding shares of
Capital Stock have been duly and validly authorized and issued and are fully
paid and nonassessable and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws. Set forth on
Schedule 5(c) is a listing of all directors, managers, officers, partners,
members and shareholders (including the number of shares of each class or
percentage partnership interest, as the case may be, owned by each such Person)
of the Company, the Parent and each of their Subsidiaries and of the holders of
all outstanding options, agreements, warrants, calls, convertible securities and
other rights relating to the issuance of equity securities of, or interests in,
the Company, the Parent and each of their Subsidiaries. Except as set forth on
Schedule 5(c), neither the Company, the Parent nor any of their Subsidiaries is
a party to any "phantom stock", employee stock option plan, other equity-based
incentive plan or similar agreement. Except as set forth on Schedule 5(c), (i)
there are no preemptive or similar rights to purchase or otherwise acquire
equity securities of, or interests in, the Company, the Parent or any of their
Subsidiaries pursuant to any Requirement of Law or Contractual Obligation
applicable to the Company, the Parent or any of their Subsidiaries and (ii) no
registration rights under the Securities Act have been granted by the Company,
the Parent or any of their Subsidiaries with respect to its equity securities or
interests.
(d) Authorization. The execution and delivery by the Company of
this Agreement and each Transaction Document to which it is a party, the
performance by the Company and its Subsidiaries of their obligations hereunder
and thereunder, and the issuance to the Purchaser of the Note, as herein
provided, have been duly authorized by all necessary corporate action of the
Company and its Subsidiaries and the board of directors and shareholders, as
appropriate, so that when issued and delivered (i) the Note will constitute the
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance or other similar law of general applicability relating to or
affecting the enforcement of creditors' rights generally or by general equitable
principles; (ii) this Agreement and each of the Transaction Documents to which
it is a party will constitute the legal, valid and binding agreements of the
Company, enforceable against it in accordance with their respective terms,
except as enforceability
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may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other similar law of general
applicability relating to or affecting the enforcement of creditors' rights
generally or by general equitable principles; and (iv) neither the execution and
delivery of this Agreement and each of the Transaction Documents to which they
are a party, and the performance by the Company, the Parent and their
Subsidiaries of their obligations hereunder and thereunder, nor the issuance of
the Note, will be in contravention of any Requirement of Law applicable to the
Company, the Parent or any of their Subsidiaries or any Contractual Obligation
to which the Company or any of its Subsidiaries may be subject.
(e) Litigation. Except as set forth on Schedule 5(e), there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, the
Parent or any of their Subsidiaries, or any of their respective officers,
directors, managers, partners, members or shareholders, which involves the
possibility of any judgment or liability which might have a Material Adverse
Effect on the right of the Company, the Parent or any of their Subsidiaries to
conduct their respective businesses as now conducted or as proposed to be
conducted.
(f) Tax Matters. Each of the Company, the Parent and their
Subsidiaries has timely filed all federal, state and local tax returns and
reports required to be filed by it and has paid all taxes, assessments, fees and
other charges levied upon its properties that are shown thereon as due and
payable, other than those that are being consented in good faith and by proper
proceedings and for which adequate reserves have been established in accordance
with GAAP. Such returns accurately reflect in all material respects all
liability for taxes of the Company, the Parent and their Subsidiaries for the
periods covered thereby. As of the Closing Date and except as set forth on
Schedule 5(f), there is no ongoing audit or examination or, to the knowledge of
the Company, other investigation by any Governmental Authority of the tax
liability of the Company, the Parent or any such Subsidiaries, and there is no
unresolved claim by any Governmental Authority concerning the tax liability of
the Company, the Parent or any such Subsidiaries for any period for which tax
returns have been or were required to have been filed, other than unsecured
claims for which adequate reserves have been established in accordance with
GAAP. As of the Closing Date, the Company, the Parent or their Subsidiaries have
not waived or extended or has not been requested to waive or extend the statute
of limitations relating to the payment of any taxes.
(g) Organizational and Governing Documents. The certificates or
articles of incorporation, formation or organization, partnership or operating
agreements and bylaws of the Company, the Parent and each of their Subsidiaries
furnished to the Purchaser pursuant to Section 4(h) are in full force and
effect, without further changes, amendments or modification.
(h) Government Approvals; Consents. Except as set forth on
Schedule 5(h), the Company and the Parent are not required to obtain any order,
consent, approval or authorization of, or make any declaration or filing with,
any Governmental Authority or other Person in connection with (i) the
negotiation, execution, delivery and performance of this Agreement or any of the
other Transaction Documents, (ii) the offer, issuance, sale and delivery to the
Purchaser of the Note, or (iii)
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the consummation of any other transaction contemplated by this Agreement or any
of the Transaction Documents.
(i) Representations and Warranties in Other Agreements. The
representations and warranties made by the Company, the Parent and their
Subsidiaries, in the Credit Agreements, the Acquisition Documents, the
Transaction Documents, and in any other agreements, instruments or certificates
delivered pursuant hereto or thereto, are true and correct in all material
respects (except where any such representation and warranty is stated as being
true only as of a specific date, in which case such representation and warranty
was true and correct in all material respects on such date).
(j) Disclosure. Neither this Agreement, any of the other
Transaction Documents, nor any other written statement or materials furnished by
or on behalf of the Company, the Parent or their Subsidiaries to the Purchaser
in connection with this Agreement and the transactions contemplated hereby,
contains any untrue statement of any material fact, or omits to state any
material fact that is necessary in order to make the statements contained herein
or therein, in the light of the circumstances under which they were made,
complete and not misleading. There exists no undisclosed fact or circumstance
which, to the knowledge of Company, the Parent or any of their Subsidiaries,
would reasonably be likely to result in a Material Adverse Effect.
(k) Compliance with Securities Laws. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Section 6 hereof,
the offer and sale of the Note and the Capital Stock acquired pursuant to the
Acquisition Documents, are not required to be registered pursuant to the
provisions of Section 5 of the Securities Act or any state securities laws.
Neither the Company nor any agent on its behalf has solicited or will solicit
any offers to sell or has offered to sell or will offer to sell all or any part
of the Note, and the Capital Stock to be acquired pursuant to the Acquisition
Documents, to any Person so as to bring the sale of Note, and the Capital Stock
to be acquired pursuant to the Acquisition Documents, by the Company within the
registration provisions of the Securities Act or any state securities laws. All
prior offerings and sales of securities of the Company, the Parent and their
Subsidiaries were in compliance with all applicable federal and state securities
laws.
(l) No Brokers. The Company has not dealt with any broker, finder,
commission agent or other similar Person in connection with the offer and sale
of the Note by the Company to the Purchaser or the transactions contemplated by
this Agreement, and the Company is not under any obligation to pay any broker's
fee, finder's fee or commission in connection with such transactions.
(m) Financial Statements.
(i) The audited Financial Statements, complete and
correct copies of which have previously been furnished to the Purchaser
by the Company, present fairly and accurately the financial condition,
results of operations and changes in financial position of the Company
and it Subsidiaries in accordance with GAAP, consistently applied, as
of the dates and for the periods set forth therein. The unaudited
Financial Statements, complete and correct copies of which have
previously been furnished to the Purchaser by the Company, present
fairly and accurately the financial condition and results of operations
of the Company and its
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Subsidiaries as of the dates and for the periods set forth therein,
subject to the lack of footnote disclosure and changes resulting from
normal year-end adjustments, none of which, alone or in the aggregate,
would have a Material Adverse Effect. Since December 31, 1998 there has
been no Material Adverse Change.
(ii) As an inducement to the Purchaser to enter into this
Agreement and the other Transaction Documents, the Company has caused
to be provided to the Purchaser the projections listed on Schedule 4(e)
(the "Projections") prepared by the Company. The Company represents and
warrants that, after a good faith review of information currently
available: (A) the assumptions underlying the Projections are
reasonable; (B) the Projections are based upon good faith and diligent
estimates of the anticipated operating results and consummation of the
Subdebt Investment; and (C) no event has occurred and no circumstance
has arisen since the date of the Projections which would render the
Projections or the assumptions underlying the Projections misleading or
no longer reasonable.
(n) Absence of Undisclosed Liabilities. Neither the Company, the
Parent nor any of their Subsidiaries has any material obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known to the Company, whether due or to become due and regardless of when
asserted), other than (i) liabilities set forth on the Latest Balance Sheet
(including any notes thereto), (ii) liabilities and obligations which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business and which do not individually or in the aggregate have a Material
Adverse Effect and (iii) obligations expressly disclosed in the other schedules
and exhibits attached to this Agreement.
(o) Title To Properties and Assets. Each of the Company, the
Parent and each of their Subsidiaries has good and marketable title in fee
simple (or its equivalent under applicable law) to all real property owned by
it. Each of the Company, the Parent and each of their Subsidiaries has good and
valid title to, or a valid leasehold interest in, all other properties and
assets used by it, located on its premises or shown on the Latest Balance Sheet
or acquired thereafter, free and clear of all Liens, other than for (i)
properties and assets disposed of in the ordinary course of business since the
date of the Latest Balance Sheet, (ii) Liens disclosed on the Latest Balance
Sheet (including the notes thereto) or (iii) Permitted Liens. All facilities,
machinery, equipment, fixtures, vehicles and other properties owned, leased or
used by the Company, the Parent or any of their Subsidiaries are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. Neither the Company, the Parent nor any
Subsidiary is in violation of any material zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties. The Affiliates of the Company do not own or
lease any properties or assets that are used by the Company, the Parent or any
of their Subsidiaries except as set forth on Schedule 5(s).
(p) Contracts and Commitments. Schedule 5(p) lists, as of the
Closing Date, each "material contract" (within the meaning of Item 601(b)(10) of
the Regulation S-K under the Exchange Act) to which either the Company, the
Parent or any of their Subsidiaries is a party, by which it or their respective
properties is bound or to which it is subject (collectively, the "Material
Contracts"), and also indicates the parties thereto. As of the Closing Date, (i)
to the knowledge of the
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Company, each Material Contract is in full force and effect and is enforceable
by the Company, the Parent or their Subsidiary that is a party thereto in
accordance with its terms and (ii) neither the Company, the Parent nor any of
their Subsidiaries (nor, to the knowledge of the Company, any other party
thereto) is in breach of or default under any Material Contract in any material
respect or has given notice of termination or cancellation of any Material
Contract.
(q) Employees. Set forth on Schedule 5(q) is a complete list of
all employment agreements between the Company, the Parent or any of their
Subsidiaries and any employee of the Company, the Parent or any of their
Subsidiaries, respectively. Except as set forth on Schedule 5(q), the Company is
not aware that any executive or key employee of the Company, the Parent or any
of their Subsidiaries or any group of employees of the Company, the Parent or
any of their Subsidiaries has any plans to terminate employment with the
Company, the Parent or any of their Subsidiaries. With respect to employees who
are terminating their employment, Schedule 5(q) provides a true and correct
summary of all severance benefits being provided by the Company, the Parent or
any of their Subsidiaries to such employees. Neither the Company, the Parent nor
any of their Subsidiaries nor, to the Company's best knowledge, any of its or
their employees, is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting, collective bargaining or similar agreement relating to,
affecting or in conflict with, the present or proposed business activities of
the Company, the Parent or any of their Subsidiaries or any such Person's right
to participate in the affairs of the Company, the Parent or any of their
Subsidiaries.
(r) Compliance with Laws. Neither the Company, the Parent nor any
of their Subsidiaries has violated any Requirement of Law, which violation would
reasonably be expected to have a Material Adverse Effect, and neither the
Company, the Parent nor any of their Subsidiaries has received notice of any
such violation.
(s) Transactions with Affiliates. Except as set forth on Schedule
5(s), there are no Contractual Obligations of the Company, the Parent or any of
their Subsidiaries to any of the officers, directors, managers, shareholders,
members, employees, Affiliates or their respective Affiliates, or Related
Parties, of the Company, the Parent or any of their Subsidiaries other than (i)
for payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company, the Parent or their Subsidiaries,
(iii) for standard employee benefits made generally available to all employees
of the Company (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company) and (iv) pursuant
to any of the Transaction Documents. None of the officers, directors, managers,
shareholders, members, employees, Affiliates, or their respective Affiliates or
Related Parties, of the Company, the Parent or any of their Subsidiaries has
incurred Indebtedness to the Company or has any direct or indirect ownership
interest in any Person with which the Company is affiliated or, to the Company's
best knowledge, with which the Company, the Parent or any of their Subsidiaries
has a business relationship except that such Person may own stock in publicly
traded companies. Other than as set forth on Schedule 5(s), no officer,
director, manager, shareholder, member, employee, Affiliate, or any of their
respective Affiliates or Related Parties, of the Company, the Parent or any of
their Subsidiaries, is, directly or indirectly, interested in any material
Contractual Obligation with the Company. Except as may be expressly disclosed in
notes to the Financial Statements, the Company is not a guarantor or indemnitor
of any Indebtedness of any other Person.
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(t) Hazardous and Toxic Materials. There has been no complaint,
order, citation or notice with regard to air emissions, Hazardous Discharges (as
defined below) or other environmental, health or safety matters affecting any of
the premises owned or leased by the Company or any of its Subsidiaries or the
businesses therein conducted. There has been no spill, discharge, release or
cleanup of any Hazardous Material with respect to such premises (except spills,
discharges or releases in the ordinary course of business and permitted by
applicable Environmental Law (as defined below)) ("Hazardous Discharge"), and,
accordingly, such properties are clean of all such Hazardous Materials. To the
extent the premises owned or leased by the Company, the Parent or any of their
Subsidiaries are used for the handling, storage, transportation or disposal of
Hazardous Materials, such use is in accordance with applicable Environmental Law
and the Company, the Parent and their Subsidiaries has obtained all necessary
permits, licenses and approvals in connection with applicable Environmental Law.
Except as set forth on Schedule 5(t), no underground or above-ground storage
tanks or surface impoundments are located on any of the premises owned or leased
by the Company, the Parent or any of their Subsidiaries. As used herein
"Hazardous Materials" means (A) any petroleum or petroleum products, radioactive
materials, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(B) any chemicals, materials or substances (including, without limitation, human
blood and blood products, pathological wastes, sharps, body parts, contaminated
bedding, surgical wastes and other disposable medical equipment and material
that may pose a risk to the public health, welfare or the marine environment)
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "medical wastes",
"biological wastes", "laboratory wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants" or "pollutants", or words of
similar import, under any applicable Environmental Law; and (C) any other
chemical, material or substance exposure to which is prohibited, limited or
regulated by any Governmental Authority. "Environmental Law" means any federal,
state or local statute, law, rule, regulation, ordinance, code, policy or rule
of common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. ss. 9601 et seq.; the Marine Protection, Research and
Sanctuaries Act of 1972, as amended, 33 U.S.C. ss. 1401 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. ss. 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42
U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. xx.xx. 201 &
300f et seq.; the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq.;
and their counterparts under applicable state and local laws. "Environmental
Claims" means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of non-compliance or violation,
investigations or proceedings relating in any way to any Environmental Law or
any permit issued under any such Environmental Law, including without limitation
(x) any and all Environmental Claims by governmental or regulatory authorities
for enforcement, cleanup, removal, response, remedial or other actions or
damages, fines or penalties pursuant to any applicable Environmental Law, and
(y) any and all Environmental Claims by any third party seeking damages,
contribution,
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indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
(u) Solvency. After giving effect to the Acquisition and the other
transactions contemplated by this Agreement and the other Transaction Documents,
(i) the fair value of the Company's assets exceeds the book value of the
Company's liabilities, (ii) the Company is generally able to pay its debts as
they become due and payable and (iii) the Company does not have unreasonably
small capital to carry on its business as it is currently conducted.
(v) Certain Federal Regulations. Neither the Company, the Parent
nor any Person controlling, controlled by or under common control with the
Company or the Parent is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company and the Parent are not
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined under the Investment Company Act
of 1940, as amended. The Company is not engaged principally or as one of its
activities in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" (as each such term is defined or used in
Regulations G and U of the Board of Governors of the Federal Reserve System). No
part of the proceeds of the Note will be used for purchasing or carrying margin
stock or for any purpose which violates, or which would be inconsistent with,
the provisions of Regulations G, T, U or X of such Board of Governors.
(w) Acquisition and Credit Documents. The Acquisition Documents
and Credit Documents delivered to the Purchaser pursuant to Section 4(h)
comprise a full and complete copy of all agreements between the parties thereto
with respect to the subject matter thereof and all transactions related thereto,
and there are no agreements or understandings, oral or written, or side
agreements not contained therein that relate to or modify the substance thereof.
(x) Use of Proceeds. The proceeds from the issuance of the Note
will be used for the purposes set forth on Schedule 5(x) and, in furtherance of
such purposes, shall be disbursed to the Persons (including, without limitation,
Subsidiaries of the Company) listed on such Schedule 5(x) in the amounts set
forth opposite their respective names.
(y) Employee Benefit Plans. Except as set forth in Schedule 5(y),
the Company and the Parent do not maintain or contribute to any employee benefit
plan, stock option, bonus or incentive plan, severance pay policy or agreement,
deferred compensation agreement, or any similar plan or agreement. Each of the
Company and its ERISA Affiliates is in compliance in all material respects with
the applicable provisions of ERISA and the regulations and published
interpretations thereunder. No ERISA Event has occurred as to which the Company
or any ERISA Affiliate was required to file a report with the PBGC, and the
present value of all benefit liabilities under each Plan (based on those
assumptions used to fund such Plan) did not, as of the last annual valuation
date applicable thereto, exceed the value of the assets of such Plan. The
Company and its ERISA Affiliates are not required to make, or accrue an
obligation to make, contributions to any Multiemployer Plan and, during the past
five years, neither the Company nor any ERISA Affiliate has made, has been
required to make, or accrued an obligation to make, any contribution to any
Multiemployer Plan. There are no
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unfunded obligations of the Company or the Parent under any retirement, pension,
profit-sharing, deferred compensation plan or similar program.
(z) Intellectual Property.
(i) Schedule 5(z) sets forth a complete and correct list
of all Intellectual Property that is owned by the Company, the Parent
and their Subsidiaries (the "Owned Intellectual Property"). To the
knowledge of the Company, the Owned Intellectual Property constitutes
all Intellectual Property used by, and necessary for the conduct of the
business of, the Company, the Parent and their Subsidiaries. The Owned
Intellectual Property does not infringe the rights of any other Person
in respect of any Intellectual Property, and none of the Owned
Intellectual Property is being infringed in any material respect by any
other Person. To the knowledge of the Company, neither the Company nor
the Parent nor any of the Company's nor the Parent's employees or
consultants nor any of the Subsidiaries or any of their employees or
consultants has any agreements or arrangements with former employers of
such employees or consultants relating to any Intellectual Property of
such employers, which interfere or conflict with the performance of
such employee's or consultant's duties for the Company, the Parent or
such Subsidiary or results in any former employers of such employees
and consultants having any rights in, or claims on, the Owned
Intellectual Property. To the knowledge of the Company, the activities
of the Company's or the Parent's employees and consultants and the
employees and consultants of each Subsidiary on behalf of the Company,
the Parent or such Subsidiary do not violate any agreements or
arrangements which any such employees have with former employers. Each
current and former employee of the Company, the Parent and their
Subsidiaries, and each of the Company's, the Parent's and their
Subsidiaries' consultants has executed an agreement regarding
confidentiality and proprietary information and, to the knowledge of
the Company, none of such employees and consultants are in violation of
such agreements. Schedule 5(z) lists all Owned Intellectual Property
which has been duly registered with, filed in or issued by, as the case
may be, the United States Patent and Trademark Office and United States
Copyright Office or other filing offices, domestic or foreign, and
identifies the office with which such filing was made. Each Owned
Intellectual Property registration and filing listed in Schedule 5(z)
is in full force and effect.
(ii) Schedule 5(z) sets forth a complete and correct list
of all material Contractual Obligations (A) pursuant to which the use
by any Person of Intellectual Property is licensed or permitted by the
Company, the Parent or any of their Subsidiaries and (B) pursuant to
which the use by the Company, the Parent or any of their Subsidiaries
of Intellectual Property is licensed or permitted by any other Person
(collectively, the "Intellectual Property Licenses"). All Intellectual
Property Licenses (A) are in full force and effect in accordance with
their terms, and (B) are free and clear of any Liens (other than
Permitted Liens). Neither the Company, the Parent nor any of their
Subsidiaries nor, to the Company's best knowledge, any of the other
Parties thereto is in default under any of the Intellectual Property
Licenses, and no such default is currently threatened. There is no
claim or demand of any Person pertaining to, or any proceeding which is
pending or, to the best knowledge of the Company, threatened, that
challenges the rights of the Company, the Parent or any of their
Subsidiaries in respect of
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any Intellectual Property, Owned Intellectual Property or any of the
Intellectual Property Licenses. None of the Owned Intellectual Property
or any Intellectual Property Licenses are subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any court,
tribunal, arbitrator or other Governmental Authority. The Company has
taken commercially reasonable steps to maintain and protect its trade
secrets. To the Company's knowledge, any Person licensing Intellectual
Property from the Company has taken all commercially reasonable steps
to maintain and protect the Intellectual Property which is subject to
such license.
(aa) Absence of Certain Changes or Events. Except as set forth in
Schedule 5(aa), since the date of the Latest Balance Sheet, the Company, the
Parent and each of their Subsidiaries has conducted its business only in the
ordinary course consistent with its past practices, and neither the Company, the
Parent nor any of their Subsidiaries has (i) incurred, or agreed to incur,
Indebtedness, (ii) experienced any damage, destruction or loss that, to the
extent not covered by insurance, has had or reasonably would be expected to have
a Material Adverse Effect, (iii) declared, set aside or paid any dividend or
other distribution (whether in cash, equity securities, interests or property)
in respect of its equity securities, (iv) entered into any material Contractual
Obligation involving any director, officer, manager, shareholder, member,
employee, Affiliate or their respective Affiliates or Related Parties of the
Company, the Parent or any of their Subsidiaries, (v) granted or committed to
grant to any director, officer, manager, member, employee or Affiliate of the
Company, the Parent or any of their Subsidiaries any material increase in
compensation or benefits, (vi) granted or committed to grant to any director,
officer, manager, employee or Affiliate of the Company, the Parent or any of
their Subsidiaries any increase in or right to severance or termination pay or
any other compensation or benefits payable upon a change in control of any such
entity or (vii) taken any action that, if taken after the Closing Date hereof,
reasonably would be expected to constitute a breach of any of the covenants set
forth in Section 7.
(bb) Insurance. Schedule 5(bb) sets forth a true and complete
summary of all insurance policies or arrangements carried or maintained by the
Company as of the Closing Date, indicating in each case the insurer, policy
number, expiration, amount and type of coverage and deductibles. The assets,
properties and business of the Company, the Parent and their Subsidiaries are
insured against such hazards and liabilities, under such coverages and in such
amounts, as are customarily maintained by prudent companies similarly situated
and under policies issued by insurers of recognized responsibility.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Company as follows:
(a) It is an "accredited investor" as that term is defined in Rule
501 of the Securities Act, and that, in making the purchases contemplated
herein, it is specifically understood and agreed that the Purchaser is acquiring
the Note for the purpose of investment and not with a view towards the sale or
distribution thereof within the meaning of the Securities Act; provided,
however, that the disposition of the Purchaser's property shall at all times be
and remain within its control.
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(b) It understands that the Note will not be registered under the
Securities Act, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act, and that it
must hold the Note indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable state securities laws or is
exempt from registration.
(c) It understands that the exemption from registration afforded
by Rule 144 (the provisions of which are known to the Purchaser) promulgated by
the Commission under the Securities Act depends on the satisfaction of various
conditions, including the requirement that the Company has been subject to the
reporting requirements of Section 13 or Section 15 of the Exchange Act for at
least 90 days, and that, if applicable, Rule 144 affords the basis for sales
only in limited amounts and that the Company does not now qualify under Rule 144
and may not ever qualify.
(d) It has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
(e) It has been furnished with or has had access to the
information it has requested from the Company and the Parent and has had an
opportunity to discuss with the management of the Company and the Parent the
business and financial affairs of the Company, the Parent and their
Subsidiaries, and has generally such knowledge and experience in business and
financial matters and with respect to investments in securities or privately
held companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto; provided,
however, that the foregoing shall in no way affect, diminish or derogate from
the representations and warranties made by the Company hereunder or the right of
the Purchaser to rely thereon and to seek indemnification hereunder.
(f) The execution and delivery of this Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary action of the Purchaser, do not conflict with or result in a breach of
any of the Purchaser's governing documents or any Contractual Obligation or any
Requirement of Law and constitute legal, valid and binding agreements of the
Purchaser enforceable against it in accordance with their respective terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights generally or by general equitable principles.
SECTION 7. COVENANTS. The Company covenants and agrees, that until the payment
in full of all principal and interest under the Note together with all
Obligations and all amounts then due and owing under the other Transaction
Documents:
(a) Payment of Notes. The Company will duly and punctually pay the
principal of, and interest and any premium on, any Note when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration or otherwise pursuant to the terms of the Note), subject to
applicable grace periods.
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(b) Financial Statements. The Company will deliver to the
Purchaser:
(i) As soon as available and in any event within 60 days
after the end of each fiscal quarter, beginning with the fiscal quarter
ending March 31, 2000, unaudited consolidated balance sheets of the
Parent, the Company and their Subsidiaries, as of the end of such
fiscal month and unaudited consolidated statements of income, cash
flows and stockholders' equity for the Company and such Subsidiaries
for the fiscal quarter then ended and for that portion of the fiscal
year then ended, in each case setting forth comparative consolidated
(or consolidating) figures as of the end of and for the corresponding
period in the preceding fiscal year together with comparative budgeted
figures for the fiscal year then ended, all in reasonable detail and
prepared in accordance with GAAP (subject to the absence of notes
required by GAAP and subject to normal year-end adjustments) applied on
a basis consistent with that of the preceding quarter or containing
disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles
and practices during such quarter;
(ii) As soon as available and in any event within 120 days
after the end of each fiscal year, beginning with the fiscal year
ending December 31, 1999, (A) an audited consolidated balance sheet of
the Parent, the Company and their Subsidiaries as of the end of such
fiscal year and audited consolidated statements of income, cash flows
and stockholders' equity for the Company and its Subsidiaries for the
fiscal year then ended, including the notes thereto, in each case
setting forth comparative figures as of the end of and for the
preceding fiscal year together with comparative budgeted figures for
the fiscal year then ended, all in reasonable detail and certified by
an independent certified public accounting firm of recognized national
standing reasonably acceptable to the Purchaser, together with (1) a
report thereon by such accountants that is not qualified as to going
concern or scope of audit and to the effect that such financial
statements present fairly the consolidated financial condition and
results of operations of the Company and its Subsidiaries as of the
dates and for the periods indicated in accordance with GAAP applied on
a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles
and practices during such year, and (2) a report by such accountants to
the effect that, based on and in connection with their examination of
the financial statements of the Company and its Subsidiaries, they
obtained no knowledge of the occurrence or existence of any Default or
Event of Default relating to accounting or financial reporting matters,
or a statement specifying the nature and period of existence of any
such Default or Event of Default disclosed by their audit; provided,
however, that such accountants shall not be liable by reason of the
failure to obtain knowledge of any Default or Event of Default that
would not be disclosed or revealed in the course of their audit
examination, and (B) an unaudited consolidating balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year and
unaudited consolidating statements of income, cash flows and
stockholders' equity for the Company and its Subsidiaries for the
fiscal year then ended, all in reasonable detail; and
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(iii) Concurrently with each delivery of the financial
statements described in paragraphs (i) and (ii) of this Section 7(b), a
report in form and analysis similar to the reports attached as Exhibit
7(b)(iii), or in such other form as may be acceptable to the Purchaser,
regarding such topics as such company's financial condition and results
of operations, such company's business and corresponding industry and
such company's management.
(c) Other Business and Financial Information. The Company will
deliver to the Purchaser:
(i) Concurrently with each delivery of the financial
statements described in Section 7(b)(ii), and in any event not later
than 120 days after the last day of each fiscal year, beginning with
the fiscal year ending December 31, 1999, a certificate executed by a
Financial Officer of the Company in form and substance satisfactory to
the Purchaser;
(ii) As soon as available and in any event within 30 days
prior to the end of each fiscal year, beginning with the fiscal year
ending December 31, 2000, a consolidating operating budget for the
Parent, the Company and their Subsidiaries for the succeeding fiscal
year (prepared on a monthly basis), consisting of a consolidating
balance sheet and consolidating statements of income and cash flows,
together with a certificate of a Financial Officer of the Company to
the effect that such budgets have been prepared in good faith and are
reasonable estimates of the financial position and results of
operations of the Parent, the Company and their Subsidiaries for the
period covered thereby; and as soon as available from time to time
thereafter, any modifications or revisions to or restatements of such
budgets;
(iii) Promptly upon receipt thereof, copies of any
"management letter" submitted to the Company, the Parent or any of
their Subsidiaries by its certified public accountants in connection
with each annual, interim or special audit, and promptly upon
completion thereof, any response reports from the Company, the Parent
or any such Subsidiary in respect thereof;
(iv) Promptly upon the sending, filing or receipt thereof,
copies of (A) all financial statements, reports, notices and proxy
statements that the Company, the Parent or any of their Subsidiaries
shall send or make available generally to its shareholders, (B) all
regular, periodic and special reports, registration statements and
prospectuses that the Company, the Parent or any of their Subsidiaries
shall render to or file with the Commission, the National Association
of Securities Dealers, Inc. or any national securities exchange, and
(C) all press releases and other statements made available generally by
the Company, the Parent or any of their Subsidiaries to the public
concerning material developments in the business of the Company, the
Parent or any of their Subsidiaries;
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(v) Promptly upon (and in any event within five Business
Days after) any Responsible Officer of the Company obtaining knowledge
thereof, written notice of any of the following:
(A) the occurrence of any Default or Event of
Default, together with a written statement of a Responsible
Officer of the Company specifying the nature of such Default
or Event of Default, the period of existence thereof and the
action that the Company has taken and proposes to take with
respect thereto;
(B) the institution or receipt of notice of a
threatened institution of any action, suit, investigation or
proceeding against or affecting the Company, the Parent or any
of their Subsidiaries including any such investigation or
proceeding by any Governmental Authority (other than routine
periodic inquiries, investigations or reviews), that would, if
adversely determined, be reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect, and any
material development in any litigation or other proceeding
previously reported pursuant to Section 5(e) or this
subsection;
(C) the receipt by the Company, the Parent or
any of their Subsidiaries from any Governmental Authority of
(1) any notice asserting any failure by the Company, the
Parent or any of their Subsidiaries to be in compliance with
applicable Requirements of Law or that threatens the taking of
any action against the Company, the Parent or any of their
Subsidiary or sets forth circumstances that, if taken or
adversely determined, would be reasonably likely to have a
Material Adverse Effect, or (2) any notice of any actual or
threatened suspension, limitation or revocation of, failure to
renew, or imposition of any restraining order, escrow or
impoundment of funds in connection with, any license, permit,
accreditation or authorization of the Company, the Parent or
any of their Subsidiaries, where such action would be
reasonably likely to have a Material Adverse Effect;
(D) the occurrence of any ERISA Event, together
with (1) a written statement of a Responsible Officer of the
Company specifying the details of such ERISA Event and the
action that the Company has taken and proposes to take with
respect thereto, (2) a copy of any notice with respect to such
ERISA Event that may be required to be filed with the PBGC and
(3) a copy of any notice delivered by the PBGC to the Company
or such ERISA Affiliate with respect to such ERISA Event;
(E) the occurrence of any material default
under, or any proposed or threatened termination or
cancellation of, any Material Contract or other material
contract or agreement to which the Company, the Parent or any
of their Subsidiaries is a party, the termination or
cancellation of which would be reasonably likely to have a
Material Adverse Effect;
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(F) the occurrence of any of the following: (1)
the assertion of any Environmental Claim against or affecting
the Company, the Parent any of their Subsidiaries or any of
their respective real property, leased or owned, or the
Company's or the Parent's discovery of a basis for such an
Environmental Claim; (2) the receipt by the Company, the
Parent or any of their Subsidiaries of notice of any alleged
violation of or noncompliance with any Environmental Laws, or
any release of Hazardous Materials; or (3) the taking of any
remedial action or investigation by the Company, the Parent,
any of their Subsidiaries or any other Person in response to
the actual or alleged generation, storage, release, disposal
or discharge of any Hazardous Materials on, to, upon or from
any real property leased or owned by the Company, the Parent
or any of their Subsidiaries; but in each case under clauses
(1), (2) and (3) above, only to the extent the same would be
reasonably likely to have a Material Adverse Effect; and
(G) any other matter or event that has, or would
be reasonably likely to have, a Material Adverse Effect,
together with a written statement of a Responsible Officer of
the Company setting forth the nature and period of existence
thereof and the action that the Company has taken and proposes
to take with respect thereto;
(vi) Promptly after (and in any event within 30 days
thereafter) each fiscal month a Lease Payment Report with respect to
all payments made under leases for real property due and payable during
such month; and
(vii) As promptly as reasonably possible, such other
information about the business, condition (financial or otherwise),
operations or properties of the Company, the Parent or any of their
Subsidiaries (including any Plan and any information required to be
filed under ERISA) as the Purchaser may from time to time reasonably
request.
(d) Corporate Existence; Franchises; Maintenance of Properties.
The Company will, and shall cause the Parent and each of their Subsidiaries to,
(i) maintain and preserve in full force and effect its corporate existence,
except as expressly otherwise permitted otherwise by Section 9(a), (ii) obtain,
maintain and preserve in full force and effect all other rights, franchises,
licenses, permits, certifications, approvals and authorizations required by
Governmental Authorities and necessary to the ownership, occupation or use of
its properties or the conduct of its business, except to the extent the failure
to do so would not be reasonably likely to have a Material Adverse Effect, and
(iii) keep all material properties in good working order and condition (normal
wear and tear excepted) and from time to time make all necessary repairs to and
renewals and replacements of such properties, except to the extent that any of
such properties are obsolete or are being replaced.
(e) Compliance with Laws. The Company will, and shall cause the
Parent and each of their Subsidiaries to, comply in all respects with all
Requirements of Law applicable in respect of the conduct of its business and the
ownership and operation of its properties, except to
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the extent the failure so to comply would not be reasonably likely to have a
Material Adverse Effect.
(f) Payment of Obligations. The Company will, and shall cause the
Parent and each of their Subsidiaries to, (i) pay all liabilities and
obligations as and when due (subject to any applicable subordination
provisions), except to the extent failure to do so would not be reasonably
likely to have a Material Adverse Effect, and (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it, upon its income
or profits or upon any of its properties, prior to the date on which penalties
would attach thereto, and all lawful claims that, if unpaid, might become a Lien
upon any of the properties of the Company, the Parent or any of their
Subsidiaries; provided, however, that neither the Company, the Parent nor any of
their Subsidiaries shall be required to pay any such unsecured tax, assessment,
charge, levy or claim that is being contested in good faith and by proper
proceedings and as to which the Company, the Parent or any of their Subsidiaries
is maintaining adequate reserves with respect thereto in accordance with GAAP.
(g) Insurance. The Company will, and shall cause the Parent and
each of their Subsidiaries to, maintain with financially sound and reputable
insurance companies insurance with respect to its assets, properties and
business, against such hazards and liabilities, of such types and in such
amounts, as is customarily maintained by companies in the same or similar
businesses similarly situated.
(h) Maintenance of Books and Records; Inspection. The Company
will, and shall cause the Parent and each of their Subsidiaries (to the extent
the Company and the Parent have any Subsidiaries after the Closing Date) to, (i)
maintain adequate books, accounts and records, in which full, true and correct
entries shall be made of all financial transactions in relation to its business
and properties, and prepare all financial statements required under this
Agreement, in each case in accordance with GAAP and in compliance with the
requirements of any Governmental Authority having jurisdiction over it, and (ii)
permit employees or agents of the Purchaser to inspect its properties and
examine or audit its books, records, working papers and accounts and make copies
and memoranda of them, and to discuss its affairs, finances and accounts with
its officers and employees and, upon notice to the Company, the independent
public accountants of the Company, the Parent and of their Subsidiaries (and by
this provision the Company and the Parent authorize such accountants to discuss
the finances and affairs of the Company, the Parent and of their Subsidiaries),
all at such times and from time to time, upon reasonable notice and during
business hours, as may be reasonably requested.
(i) Creation or Acquisition of Subsidiaries. Subject to the
provisions of Section 9(e), the Company may from time to time create or acquire
new Subsidiaries or new Wholly Owned and the Wholly Owned Subsidiaries of the
Company may create or acquire new Wholly Owned Subsidiaries, provided that
concurrently with (and in any event within 15 Business Days thereafter) the
creation or direct or indirect acquisition by the Company thereof, each such new
Subsidiary (a "Subsidiary Guarantor") will execute and deliver to the Purchaser
a guaranty ("Guaranty"), or a joinder thereto, substantially in the form of
Exhibit 7(i) pursuant to which new Subsidiary shall become a party thereto and
shall guarantee the payment in full of the Note.
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(j) Reserved.
(k) Further Assurances. The Company and the Parent will, and will
cause each of their Subsidiaries to, make, execute, endorse, acknowledge and
deliver any amendments, modifications or supplements hereto and restatements
hereof and any other agreements, instruments or documents, and take any and all
such other actions, as may from time to time be reasonably requested by the
Purchaser to effect, confirm or further assure or protect and preserve the
interests, rights and remedies of the Purchaser under this Agreement and the
other Transaction Documents.
(l) Use of Proceeds. The Company will use the proceeds of the sale
of the Note solely for the purposes set forth on Schedule 5(x).
(m) Compliance with Agreements. The Company will and shall cause
the Parent to, perform and observe, and will cause each of their Subsidiaries to
perform and observe, all of their material obligations to the Purchaser, and the
holders of the Notes set forth in this Agreement, the Notes, and the other
Transaction Documents to which it is a party and the certificate or articles of
incorporation, formation or organization and bylaws or other organizational and
governing documents of the Company, the Parent or any of their Subsidiaries.
(n) Indemnification.
(i) The Company, without limitation as to time, will
defend and indemnify the Purchaser and its officers, directors,
managers, employees, attorneys and agents (each, an "Indemnified
Party") against, and hold each Indemnified Party harmless from, all
losses, claims, damages, liabilities, costs (including the costs of
preparation and actual attorneys' fees and expenses reasonably
incurred) (collectively, the "Losses") incurred by any Indemnified
Party as a result of, or arising out of, or relating to (A) any
misrepresentation or breach of any representation or warranty made by
the Company herein, (B) any breach of any covenant, agreement or
obligation of the Company, the Parent or any of their Subsidiaries
contained in any of the Transaction Documents or (C) any investigation
or proceeding against the Company or any Indemnified Party and arising
out of or in connection with this Agreement or any of the Transaction
Documents, whether or not the transactions contemplated by this
Agreement are consummated, which investigation or proceeding requires
the participation of, or is commenced or filed against, any Indemnified
Party because of this Agreement, any other Transaction Document or such
other documents and the transactions contemplated hereby or thereby,
other than any Losses resulting from action on the part of such
Indemnified Party which is finally determined in such proceeding to be
primarily and directly a result of such party's gross negligence or
willful misconduct. The Company agrees to reimburse each Indemnified
Party promptly for all such Losses as they are incurred by such
Indemnified Party in connection with the investigation of, preparation
for or defense of any pending or threatened claim or any action or
proceeding arising therefrom. The Purchaser agrees to reimburse the
Company for any payments made by the Company to the Purchaser pursuant
to this paragraph for Losses which are finally determined in such
proceeding to primarily and
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directly result from the gross negligence or willful misconduct of the
Purchaser. The obligations of the Company under this paragraph will
survive any transfer of the Note, or the Capital Stock issued pursuant
to the Acquisition Documents by the Purchaser and the termination of
this Agreement. In the event that the foregoing indemnity is
unavailable or insufficient to hold an Indemnified Party harmless, then
the Company will contribute to amounts paid or payable by such
Indemnified Party in respect of such Indemnified Party's Losses in such
proportions as appropriately reflect the relative benefits received by
and fault of the Company and such Indemnified Party in connection with
the matters as to which such Losses relate and other equitable
considerations.
(ii) If any action, proceeding or investigation is
commenced, as to which any Indemnified Party proposes to demand such
indemnification, it shall notify the Company with reasonable
promptness; provided, however, that any failure by such Indemnified
Party to notify the Company shall not relieve the Company from its
obligations hereunder except to the extent the Company is prejudiced
thereby. The Company shall be entitled to assume the defense of any
such action, proceeding or investigation, including the employment of
counsel and the payment of all fees and expenses. The Indemnified Party
shall have the right to employ separate counsel in connection with any
such action, proceeding or investigation and to participate in the
defense thereof, but the fees and expenses of such counsel shall be
paid by the Indemnified Party, unless (A) the Company has failed to
assume the defense and employ counsel as provided herein, (B) the
Company has agreed in writing to pay such fees and expenses of separate
counsel or (C) an action, proceeding, or investigation has been
commenced against both the Indemnified Party and/or the Company and
representation of both the Company and the Indemnified Party by the
same counsel would be inappropriate because of actual or potential
conflicts of interest between the parties. In the case of any
circumstance described in clauses (A), (B) or (C) of the immediately
preceding sentence, the Company shall be responsible for the reasonable
fees and expenses of such separate counsel actually incurred; provided,
however, that the Company shall not in any event be required to pay the
fees and expenses of more than one separate counsel (and, if deemed
necessary by such separate counsel, appropriate local counsel who shall
report to such separate counsel) for all Indemnified Parties. The
Company shall be liable only for settlement of any claim against an
Indemnified Party made with the Company's written consent.
(o) ERISA. The Company shall, and shall cause each of the Parent
and their respective Subsidiaries to comply in all material respects with the
applicable provisions of ERISA and neither the Company, the Parent nor any of
their ERISA Affiliates will make, or will accrue an obligation to make, any
contribution to any Multiemployer Plan.
(p) Brokerage. The Company shall pay, and hold the Purchaser
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any claim against the Company, or arising as a result of actions taken by
the Company or any of its officers, directors, employees or agents, for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement.
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(q) Amendment of Covenants. If the Company amends or adopts any
term or provision under the Credit Documents that as a result of such amendment
or adoption imposes more restrictive terms or provisions on the Company than the
terms and provisions in effect as set forth in the credit agreement, dated as of
August 29, 1997 between RTFC and the Company, then the Company shall amend or
adopt, in a correspondingly more restrictive manner, any term or provision set
forth under Sections 7, 8 or 9 hereunder to track such amendments.
SECTION 8. FINANCIAL COVENANTS. The Company covenants and agrees that, until the
payment in full of all principal and interest under the Note together with all
Obligations and all amounts then due and owing under the other Transaction
Documents:
(a) Covered POPs: The Company shall build-out its PCS network so
as to achieve the total number of population equivalents ("POPs") covered by
Company's Federal Communication Commission licensed or partitioned area equal to
or greater than as follows:
December 31, 2000 2,615,000
(b) Wireless Subscribers: The Company shall have total wireless
subscribers equal to or greater than the numbers established as follows:
December 31, 2000 35,100
SECTION 9. NEGATIVE COVENANTS. The Company covenants and agrees that, until the
payment in full of all principal and interest under the Note together with all
Obligations and all amounts due and owing under the other Transaction Documents:
(a) Merger; Consolidation. The Company will not, and shall cause
the Parent to, not permit or cause any of their respective Subsidiaries to,
liquidate, wind up or dissolve, or enter into any consolidation, merger or other
combination, or agree to do any of the foregoing; provided, however, that:
(i) the Company may merge or consolidate with another
Person so long as (x) the Company is the surviving entity, (y) unless
such other Person is a Wholly Owned Subsidiary immediately prior to
giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
Sections 7(h) and (i) shall be satisfied, and (z) immediately after
giving effect thereto, no Default or Event of Default would exist; and
(ii) any such Subsidiary may merge or consolidate with
another Person or a Subsidiary may be liquidated into the Company so
long as (x) the surviving entity is the Company or a Subsidiary
Guarantor, (y) unless such other Person is a Wholly Owned Subsidiary
immediately prior to giving effect thereto, such merger or
consolidation shall constitute a Permitted Acquisition and the
applicable conditions and requirements of
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Sections 7(h) and (i) shall be satisfied, and (z) immediately after
giving effect thereto, no Default or Event of Default would exist.
(b) Indebtedness. The Company will not, and shall cause the Parent
to not, permit or cause any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Indebtedness other than:
(i) Indebtedness incurred under the Credit Documents up
to an aggregate principal amount of up to $70,000,000; provided that
(x) such Indebtedness is incurred in accordance with Section 8, Section
9(n) and Section 9(o) and (y) immediately after giving effect thereto,
no Default or Event of Default would exist and; provided, further, that
Indebtedness existing on the Closing Date arising under the Credit
Documents shall be permitted hereunder(collectively, "Permitted Senior
Debt");
(ii) Indebtedness existing under the Note;
(iii) accrued expenses (including salaries, accrued
vacation and other compensation), current trade or other accounts
payable and other current liabilities arising in the ordinary course of
business and not incurred through the borrowing of money, provided that
the same shall be paid when due except to the extent being contested in
good faith and by appropriate proceedings;
(iv) loans and advances by the Company, the Parent or any
Subsidiary Guarantor to any other Subsidiary Guarantor or by any
Subsidiary Guarantor to the Company or the Parent, provided that any
such loan or advance is subordinated in right and time of payment to
the Subdebt Obligations and is evidenced by an Intercompany Note or
some other promissory note, in form and substance satisfactory to the
Purchaser;
(v) Indebtedness existing on the Closing Date and
described in Schedule 9(b); and
(vi) other unsecured Indebtedness not exceeding $250,000
in aggregate principal amount outstanding at any time.
(c) Liens. The Company will not, and shall cause the Parent to,
not permit or cause any of their respective Subsidiaries to, directly or
indirectly, make, create, incur, assume or suffer to exist, any Lien upon or
with respect to any part of its property or assets, whether now owned or
hereafter acquired, or file or permit the filing of, or permit to remain in
effect, any financing statement or other similar notice of any Lien with respect
to any such property, asset, income or profits under the Uniform Commercial Code
of any state or under any similar recording or notice statute, or agree to do
any of the foregoing, other than the following (collectively, "Permitted
Liens"):
(i) Liens created under the Credit Documents;
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(ii) Liens in existence on the Closing Date and set forth
on Schedule 9(c);
(iii) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar
Liens incurred in the ordinary course of business for sums not
constituting borrowed money that are not overdue for a period of more
than 30 days or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP (if so required) or for which bonds have been
obtained;
(iv) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of Default
incurred in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure the performance of letters of
credit, bids, tenders, statutory obligations, surety and appeal bonds,
leases, government contracts and other similar obligations (other than
obligations for borrowed money) entered into in the ordinary course of
business; and
(v) Liens for taxes, assessments or other governmental
charges or statutory obligations that are not delinquent or remain
payable without any penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required).
(d) Disposition of Assets. The Company will not, and shall cause
the Parent to, not permit or cause any of their respective Subsidiaries to,
sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or
a series of transactions) all or any portion of its assets, business or
properties (including, without limitation, any Capital Stock of any such
Subsidiary), or enter into any arrangement with any Person providing for the
lease by the Company, the Parent or any such Subsidiary as lessee of any asset
that has been sold or transferred by the Company, the Parent or such Subsidiary
to such Person, or agree to do any of the foregoing, except for:
(i) sales of inventory in the ordinary course of
business;
(ii) the sale or exchange of used or obsolete equipment to
the extent (A) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement equipment or (B) such equipment
is no longer necessary for the operations of the Company, the Parent or
their applicable Subsidiary in the ordinary course of business; and
(iii) the sale, lease or other disposition of assets by a
Subsidiary of the Company to the Company, the Parent to the Parent or
to a Subsidiary Guarantor if, immediately after giving effect thereto,
no Default or Event of Default would exist.
(e) Investments. The Company will not, and shall cause the Parent
to, not permit or cause any of their respective Subsidiaries to, directly or
indirectly, purchase, own, invest in or
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otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) Investments consisting of purchases and acquisitions
of inventory, supplies, materials and equipment in the ordinary course
of business,
(iii) Investments consisting of loans and advances to
employees for reasonable travel, relocation and business expenses in
the ordinary course of business, extensions of trade credit in the
ordinary course of business, and prepaid expenses incurred in the
ordinary course of business;
(iv) without duplication, Investments consisting of
intercompany Indebtedness permitted under clause (iv) of Section 9(b);
(v) Investments existing on the Closing Date and
described in Schedule 9(e);
(vi) Investments consisting of the making of capital
contributions or the purchase of Capital Stock (a) by the Company, the
Parent or any Subsidiary in any other Wholly Owned Subsidiary that is
(or immediately after giving effect to such Permitted Investment will
be) a Subsidiary Guarantor, provided that the Company complies or cause
the Parent to comply with the provisions of Section 7(i), (b) by any
Subsidiary in the Company or the Parent and (c) by the Company in
Bright Personal Communications Services, LLC; and
(vii) Investments made by the Parent in the Company or any
Subsidiary.
(f) Restricted Payments. The Company will not, and shall cause the
Parent to, not permit or cause any of their respective Subsidiaries to, directly
or indirectly, declare or make any dividend payment, or make any other
distribution of cash, property or assets, in respect of any of its Capital Stock
or any warrants, rights or options to acquire its Capital Stock, or purchase,
redeem, retire or otherwise acquire for value any shares of its Capital Stock or
any warrants, rights or options to acquire its Capital Stock, or set aside funds
for any of the foregoing, except that:
(A) the Company may declare and make dividend
payments or other distributions payable solely in its common
stock;
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(B) each Wholly Owned Subsidiary of the Company
or of the Parent may declare and make dividend payments or
other distributions to the Company or to the Parent or another
Wholly Owned Subsidiary of the Company, to the extent not
prohibited under applicable Requirements of Law; and
(C) the Parent shall have the right to make
dividend payments or other distributions to its shareholders
in an aggregate amount of up to $3,000,000 in any fiscal year.
(g) Transactions with Affiliates. The Company will not, and shall
cause the Parent to, not permit or cause any of their respective Subsidiaries
to, enter into any transaction (including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any service) with any
officer, director, stockholder or other Affiliate of the Company, the Parent or
any Subsidiary, except in the ordinary course of its business and upon fair and
reasonable terms that are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person other than an Affiliate of the
Company, the Parent or such Subsidiary; provided, however, that nothing
contained in this Section shall prohibit:
(i) transactions described on Schedule 5(s) or otherwise
expressly permitted under this Agreement; and
(ii) the payment by the Company of reasonable and
customary fees to members of its Board of Directors.
(h) Lines of Business. The Company will not, and shall cause the
Parent to, not permit or cause any of their respective Subsidiaries to, engage
in any business other than the businesses engaged by it on the Closing Date or
businesses and activities reasonably related thereto.
(i) Certain Amendments. The Company will not, and shall cause the
Parent to, not permit or cause any of their respective Subsidiaries, to amend,
modify or change (A) any provision of its articles or certificate of
incorporation or bylaws or code of regulations other than in a manner that could
not reasonably be expected to adversely affect the Purchaser in its capacity as
holders of the Note.
(j) Limitation on Certain Restrictions. The Company will not, and
shall cause the Parent to, not permit or cause any of their respective
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any restriction or encumbrance on (i) the ability of
the Company, the Parent and any of their Subsidiaries to perform and comply with
their respective obligations under the Transaction Documents or (ii) the ability
of any such Subsidiary to make any dividend payments or other distributions in
respect of its Capital Stock, to repay Indebtedness owed to the Company, the
Parent or any such other Subsidiary, to make loans or advances to the Company,
the Parent or any such other Subsidiary, or to transfer any of its assets or
properties to the Company, the Parent or any such other Subsidiary, (excluding
(i) any agreement or instrument creating a Permitted Lien (but only to the
extent such agreement or
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restriction applies to the assets subject to such Permitted Lien), and (ii)
operating leases of real or personal property entered into by the Company, the
Parent or any such Subsidiaries as lessee in the ordinary course of business),
in each case other than such restrictions or encumbrances existing under or by
reason of the Credit Documents, the Transaction Documents or applicable
Requirements of Law.
(k) No Other Negative Pledges. The Company will not, and shall
cause the Parent to, not permit or cause any of their respective Subsidiaries
to, directly or indirectly, enter into or suffer to exist any agreement or
restriction that prohibits or conditions the creation, incurrence or assumption
of any Lien upon or with respect to any part of its property or assets, whether
now owned or hereafter acquired, or agree to do any of the foregoing, other than
as set forth in (i) this Agreement and the Credit Documents, (ii) any agreement
or instrument creating a Permitted Lien (but only to the extent such agreement
or restriction applies to the assets subject to such Permitted Lien), and (iii)
operating leases of real or personal property entered into by the Company, the
Parent or any of their Subsidiaries as lessee in the ordinary course of
business.
(l) Fiscal Year. The Company will not, and shall cause the Parent
to, not permit or cause any of their respective Subsidiaries to, change the
ending date of its fiscal year to a date other than December 31.
(m) Accounting Changes. The Company will not, and shall cause the
Parent to, not permit or cause any of their respective Subsidiaries to, make or
permit any material change in its accounting policies or reporting practices,
except as may be required by GAAP.
(n) Modifications of Credit Agreements. The Company shall not
amend, refinance, replace or otherwise modify either of the Credit Agreements or
any of the Credit Documents (i) to increase by more than 110% the sum of the
outstanding term loans and revolving loan commitments under the Credit
Agreements at the time of such amendment or modification, (ii) to amend any (A)
financial covenant, (B) affirmative covenant or (C) negative covenant in any
manner that would reasonably be likely to adversely affect the Purchaser than as
set forth in the credit agreement dated August 29, 1997 between the Company and
RTFC as in effect on the Closing Date and/or amend the defined terms used
therein that are more burdensome or restrictive with respect to the Company
(except for amendments to such financial, affirmative or negative covenants
which are also reflected in amendment(s) under this Agreement), or (iii) to
amend any term or provision that imposes more restrictive terms with respect to
the payment of the Indebtedness under this Agreement than the terms and
conditions contained in the credit agreement dated August 29, 1997 between the
Company and RTFC as in effect on the Closing Date.
(o) Additional Limitations on Indebtedness. Notwithstanding the
provisions of Section 9(b), the Company shall not incur any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness (i) arising under
the Credit Agreements and senior in any respect in right of payment to any
Indebtedness arising under the Transaction Documents (including the Note) or
(ii) that is equal in right of payment to any Indebtedness arising under the
Transaction Documents (including the Note).
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SECTION 10. RESERVED.
SECTION 11. GENERAL. As further and special provisions set forth under this
Agreement, the parties hereto further warrant, covenant, contract and agree each
with the other as follows:
(a) Entire Agreement. This Agreement, the Transaction Documents
and other documents referred to herein and therein constitute the entire
understanding among the parties as to the subject matter specifically referred
to herein or therein.
(b) Reimbursement of Expenses. The Company agrees (a) whether or
not the transactions contemplated by this Agreement shall be consummated, to pay
upon demand all reasonable out-of-pocket costs and expenses of the Purchaser
(including, without limitation, the reasonable fees and expenses of counsel to
the Purchaser) in connection with (i) the Purchaser's due diligence
investigation in connection with, and the preparation, negotiation, execution,
delivery of, this Agreement and the other Transaction Documents, and any
amendment, modification or waiver hereof or thereof or consent with respect
hereto or thereto and (ii) the administration, monitoring and review of the Note
(including, without limitation, out-of-pocket expenses for travel, meals,
long-distance telephone calls, wire transfers, facsimile transmissions and
copying and with respect to the engagement of appraisers, consultants, auditors
or similar Persons by the Purchaser at any time, whether before or after the
Closing, to render opinions concerning the Company's financial condition), (b)
to pay upon demand all reasonable out-of-pocket costs and expenses of the
Purchaser (including, without limitation, reasonable attorneys' fees and
expenses) in connection with (x) any refinancing or restructuring of the Note,
whether in the nature of a "work-out," in any insolvency or bankruptcy
proceeding or otherwise and whether or not consummated, and (y) the enforcement,
attempted enforcement or preservation of any rights or remedies under this
Agreement or any of the other Transaction Documents, whether in any action, suit
or proceeding (including any bankruptcy or insolvency proceeding) or otherwise,
and (c) to pay and hold the Purchaser harmless from and against all liability
for any intangibles, documentary, stamp or other similar taxes, fees and
excises, if any, including any interest and penalties, and any finder's or
brokerage fees, commissions and expenses (other than any fees, commissions or
expenses of finders or brokers engaged by the Purchaser), that may be payable in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents.
(c) Survival of Agreements and Representations and Warranties. All
agreements and all representations and warranties contained herein or made in
writing by the Company in connection herewith, to the extent applicable, shall
survive the execution and delivery of this Agreement and other documents
referred to herein and shall continue until the Purchaser ceases to own any
Note.
(d) No Waiver. No delay by or on behalf of the Purchaser in
exercising any rights conferred hereunder, and no course of dealing between the
Purchaser and the Company shall operate as a waiver of any right granted
hereunder, unless expressly waived in writing by the party whose waiver is
alleged.
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(e) Binding Effect; Participations. All covenants,
representations, warranties and other stipulations in this Agreement and other
documents referred to herein, given by or on behalf of any of the parties
hereto, shall bind and inure to the benefit of the respective successors, heirs,
personal representatives and assigns of the parties hereto, except that the
Company may not assign or transfer any of its rights or obligations under this
Agreement or any of the other Transaction Documents without the prior written
consent of the Purchaser. This Agreement, the Note and any of the other
Transaction Documents may be endorsed, assigned and transferred in whole or part
by the Purchaser. The Purchaser may grant participations in the Note, this
Agreement and the other Transaction Documents (or any portion thereof). The
Purchaser shall notify the Company in writing of any such endorsement,
assignment or transfer by the Purchaser. In the event of any such grant of a
participation in the Note, all references in this Agreement requiring the
consent waiver or amendment of the Purchaser shall instead require an action by
the Required Purchasers.
(f) Initial Holder. The Company shall be entitled to treat and
deal with the Purchaser, and shall not be required to recognize any other Person
as the holder of the Note, except after production of such Note duly endorsed
for transfer, together with such documentation as the Company may reasonably
require concerning compliance with federal or state securities laws, or after
receipt by the Company of written notice from the Person theretofore entitled to
be treated as the holder advising the Company of the transfer of such Note to
such other Person and stating the latter's address, together with such
documentation as the Company may reasonably require concerning compliance with
federal or state securities laws.
(g) Cumulative Powers. No remedy herein conferred upon the
Purchaser or any holder of the Note is intended to be exclusive of any other
remedy, and each such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter existing at law, or in equity or by
statute or otherwise.
(h) Loss of Securities; Reissue of Securities in Lesser
Denominations. Upon:
(i) receipt of evidence satisfactory to the Company of
loss, theft, mutilation or destruction of the Note, and
(ii) in the case of any such loss, theft or destruction,
upon delivery of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such
mutilation, upon surrender and cancellation of such Note,
the Company will make and deliver a new Note of like tenor, in lieu of such
lost, stolen, mutilated or destroyed Note. In addition, upon request of any
holder of a Note or other securities of the Company or the Parent now or
hereafter issued by the Company or the Parent to the Purchaser, and upon
surrender of such Note or other securities to the Company and compliance with
any restrictive legends, the Company or the Parent will reissue, in lesser
denominations to parties designated by such holder, new certificates, warrants
or other securities in the equivalent amounts of such other securities
surrendered.
40
46
(i) Communications. All communications and notices provided for
hereunder shall be sent by personal delivery, nationally recognized overnight
courier, facsimile or registered or certified mail, to the Purchaser and the
Company at their respective addresses set forth on Schedule 11(i), or to such
other address with respect to any party as such party shall notify the other
parties hereto in writing. Any notice required to be given hereunder by one
party to another shall be deemed to have been received (i) when delivered, if
personally delivered or sent via facsimile, or (ii) one day following delivery
to a nationally recognized overnight courier or (iii) on the third business day
following the date on which the piece of mail containing such communication is
posted, if sent by certified or registered mail. Except as otherwise provided
for herein, all requests for disclosure or other provision of information to be
made or otherwise given by the Company shall be completed no later than 10 days
following the receipt by the Company of a written request therefor in the manner
described in this Section.
(j) Legend.
The Note and each certificate, if any, issued pursuant to the
Acquisition Documents will bear a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED UNLESS THE COMPANY
HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS BEING MADE IN
COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
(k) Confidentiality; Public Announcements.
(i) The Purchaser shall use its best efforts not to make
public disclosure of any information designated by the Company in
writing as confidential, including financial terms and financial and
organizational information contained in any documents, statements,
certificates, materials or information furnished, or to be furnished,
by the Company in connection with the transactions contemplated by this
Agreement; provided, however, that the foregoing shall not be
construed, now or in the future, to apply to any information reflected
in any recorded document, information which is independently developed
by the Purchaser, information obtained from sources other than the
Company or information that is or becomes in the public domain, nor
shall it be construed to prevent the Purchaser from (i) making any
disclosure of any information (A) if required to do so by any
Requirement of Law, (B) to any Governmental Authority having or
claiming authority to regulate or oversee any aspect of the Purchaser's
business or that of the corporate parent or affiliates of the Purchaser
in connection with the exercise of such authority or claimed authority,
or (C) pursuant to subpoena; or (ii) to the extent the Purchaser or its
counsel deems necessary or appropriate to do so to effect or preserve
its security for any applicable investment or financing or to enforce
any remedy provided herein or in any applicable investment or financing
documents or otherwise available by law; or (iii) making, on a
confidential basis, such disclosures as the Purchaser
41
47
deems necessary or appropriate to such Purchaser's legal counsel or
accountants (including outside auditors); or (iv) making such
disclosures as the Purchaser reasonably deems necessary or appropriate
to any bank or financial institution or other entity, and/or counsel to
or other representatives of such bank or financial institution or other
entity, to which the Purchaser in good faith desires to sell an
interest in any applicable investment or financing; provided, however,
that such bank, financial institution or other entity or counsel to or
representative thereof, agrees to take reasonable steps to maintain the
confidentiality of such disclosures.
(ii) The Purchaser shall have the right to review and
approve, such approval not to be unreasonably withheld, any public
announcement or public filing made after the Closing Date relating to
the Note or to the Purchaser in any way before any such announcement or
filing is announced or filed, provided, however, no review or approval
shall be required for any such announcement or filing required to be
announced or filed by law. In addition, the Purchaser shall provide the
Company an opportunity to review and approve any public announcement
issued by the Purchaser specifically relating to the Note, such
approval not to be unreasonably withheld or delayed; provided, however,
no review or approval shall be required for any such announcement
required to be announced by law; provided further, the Purchaser shall
provide the Company with an advance copy of any regulatory filings or
tombstone ads prepared by or on behalf of the Purchaser, but shall not
be required to obtain approval by the Company.
(l) Governing Law. This Agreement shall be governed in all
respects by the laws of the State of North Carolina.
(m) Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
(n) Multiple Originals. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
(o) Amendment or Waiver. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the prior written
consent of the Required Purchasers to such amendment, action or omission to act;
provided, however, that, without the prior written consent of each of the
Purchasers, no such agreement shall (i) decrease the principal amount of, or
extend the maturity date of any Note, or decrease the rate of interest on the
Note, without the prior written consent of each Purchaser affected thereby, (ii)
effect any waiver, amendment or modification that by its terms changes the
amount, allocation, payment of or between the Note, or (iii) amend the
provisions of this Section 11(o), the definition of the term "Required
Purchasers" or of the term "Note". Each holder of the Note, at the time or times
thereafter outstanding, shall be bound by any consent authorized by this
Section, whether or not the Note shall have been marked to indicate such
consent.
42
48
(p) Waiver of Jury Trial. THE PURCHASER AND THE COMPANY EACH
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED
BY APPLICABLE LAW) ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER,
RELATING TO, OR CONNECTED WITH THIS AGREEMENT, THE COLLATERAL OR ANY OTHER
AGREEMENT, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR DELIVER IN CONNECTION
HEREWITH AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER
INTO THIS AGREEMENT.
(q) Consent to Jurisdiction and Service of Process. All judicial
proceedings brought against the Company with respect to this Agreement, the Note
or any of the other Transaction Documents may be brought in any state or federal
court of competent jurisdiction in the State of North Carolina, and, by
execution and delivery of this Agreement, the Company accepts, for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement from which no
appeal has been taken or is available. The Company irrevocably agrees that all
service of process in any such proceedings in any such court may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to it at its address set forth in
Schedule 11(i) or at such other address of which the Purchaser shall have been
notified pursuant thereto, such service being hereby acknowledged by the Company
to be effective and binding service in every respect. Each of the parties hereto
irrevocably waives any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which it
may now or hereafter have to the bringing of any such action or proceeding in
any such jurisdiction. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of the Purchaser to
bring proceedings against the Company in the court of any other jurisdiction.
(r) Arbitration.
(i) Notwithstanding the provisions of Section 11(q) to
the contrary, upon demand of any party hereto, whether made before or
within three months after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or
relating to this Agreement and other Transaction Documents ("Disputes")
between or among parties to this Agreement shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from
Transaction Documents executed in the future, or claims arising out of
or connected with the transactions reflected by this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in Charlotte, North Carolina. A hearing
shall begin within 90 days of demand for
43
49
arbitration, and all hearings shall be concluded within 120 days of
demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then no more than a total
extension of 60 days. The expedited procedures set forth in Rule 51 et
seq. of the Arbitration Rules shall be applicable to claims of less
than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court
having jurisdiction. Arbitrators shall be licensed attorneys selected
from the Commercial Financial Dispute Arbitration Panel of the AAA. The
parties hereto do not waive applicable federal or state substantive law
except as provided herein.
(ii) Notwithstanding the preceding binding arbitration
provisions, each of the parties agrees to preserve, without diminution,
certain remedies that the Purchaser may employ or exercise freely,
independently or in connection with an arbitration proceeding or after
an arbitration action is brought. The Purchaser shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable (A) all rights to
foreclose against any real or personal property or other security by
exercising a power of sale granted under Transaction Documents or under
applicable law or by judicial foreclosure and sale, including a
proceeding to confirm the sale; (B) all rights of self-help including
peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (C) obtaining provisional
or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding; and (D) when applicable, a judgment
by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(iii) The parties hereto agree that they shall not have a
remedy of punitive or exemplary damages against the other in any
Dispute and hereby waive any right or claim to punitive or exemplary
damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
(iv) By execution and delivery of this Agreement, each of
the parties hereto accepts, for itself and in connection with its
properties, generally and unconditionally, the non-exclusive
jurisdiction relating to any arbitration proceedings conducted under
the Arbitration Rules in Charlotte, North Carolina and irrevocably
agrees to be bound by any final judgment rendered thereby in connection
with this Agreement from which no appeal has been taken or is
available.
(s) Parent Covenants; Parent Representations. For purposes of
Sections 7 and 9 of this Agreement, it is understood and agreed that
the Company shall use commercially reasonable efforts to cause the
Parent to comply with the terms thereof. For purposes of Section 5, all
representations and warranties as to the Parent by the Company shall be
deemed to be made to the knowledge of the Company.
44
50
(t) Authorization of Motorola Transactions. The Company is
authorized to enter into reimbursement, service acquisitions and/or
purchase transactions with Motorola with respect to the Company's
acquisition of new telecom network equipment products.
[Remainder of page intentionally left blank.]
45
51
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
HORIZON PERSONAL COMMUNICATIONS,
INC. an Ohio corporation
By:
----------------------------------
Name:
-----------------------
Title:
----------------------
FIRST UNION INVESTORS, INC.
a North Carolina corporation
By:
----------------------------------
Name:
-----------------------
Title:
----------------------
46
52
SCHEDULE 4(E)
FINANCIAL INFORMATION
1. Unaudited pro forma consolidated balance sheet for the Company and its
Subsidiaries as of, and for the period ended, December 31, 1999, giving
effect to the Acquisition and the transactions contemplated by the
Agreement, certified by the chief financial officer of the Company.
2. Unaudited consolidated financial statements for the Company as of, and
for the period ended, December 31, 1997 certified by the chief
financial officer of the Company.
3. Audited financial statements for the Company and its Subsidiaries for
fiscal years ending December 31, 1998 and a draft of the audited
financial statements for the fiscal year ending December 31, 1999,
accompanied by an audit report from Xxxxxx Xxxxxxxx, LLP, such report
to be in customary form and unqualified.
4. Financial projections for the Company and its Subsidiaries for each
fiscal year after the Closing Date through fiscal 2009, giving effect
to the Acquisition and the Investment, and certified with respect to
current and projected financial covenant compliance in form and
substance satisfactory to the Purchaser.
5. Such other financial information relating to the Company, the Parent,
their Subsidiaries or the Acquisition as the Purchaser may reasonable
request.
6. Internally prepared monthly historical operating statistics certified
by Company evidencing by market the degrees of market penetration,
coverage and subscriber counts (among other items) in a form
satisfactory to Purchaser.
53
SCHEDULE 5(A)
ORGANIZATIONAL MATTERS
A. Organization
Jurisdiction of Jurisdictions in
Name of Company Organization Which Qualified
--------------- --------------- ----------------
Horizon Personal Communications, Inc. Ohio Virginia, West Virginia, Kentucky
Horizon Telcom, Inc. Ohio
The Chillicothe Telephone Company Ohio
Horizon Services, Inc. Ohio
United Communications, Inc. Ohio
B. Licenses and Permits
Name of Company Licenses and Permits
--------------- --------------------
Company Federal Communications
Commission license to
provide Broadband PCS
wireless telecommunications
in the Chillicothe BTA.
The Chillicothe Telephone Company Certification from the
Public Utility commission
of Ohio to be a local
exchange carrier.
United Communications, Inc. Federal Communications
Commission licenses to
provide paging services in
Ohio.
54
SCHEDULE 5(B)
SUBSIDIARIES AND INVESTMENTS
1. The Chillicothe Telephone Company is a wholly owned subsidiary
of Parent.
2. Horizon Services, Inc. is a wholly owned subsidiary of Parent.
3. United Communications, Inc. is a wholly owned subsidiary of
Parent.
4. The Company owns an approximate 25% interest in Bright
Personal Communication Services, LLC, an Ohio limited liability company.
55
SCHEDULE 5(C)
CAPITALIZATION
XII. Pre-Closing Capitalization of the Company and the Parent
A. Authorized Capital
Name of Company Authorized Capital
------------------------------------- ----------------------------------------
Horizon Personal Communications, Inc. 1,000,000 shares of Class A Common Stock
1,000,000 shares of Class B Common Stock
Horizon Telcom, Inc. 200,000 shares of Class A Common Stock
500,000 shares of Class B Common Stock
B. Subscriptions, Contracts and Agreements
None, except (i) stock options were granted to certain employees of the
Company pursuant to the 1999 Stock Option Plan (ii) stock options were
granted to certain individuals associated with the Parent pursuant to
the 1999 Stock Option Plan and (iii) the stock of the Company was
pledged by Parent to the Rural Telephone Finance Cooperative pursuant
to that Pledge and Security Agreement, dated August 29, 1997, by and
between Parent and Rural Telephone Finance Cooperative.
C. Directors, Officers, Partners and Security Holders
The Chillicothe Telephone Company, Horizon Services, Inc., and United
Communications, Inc. are wholly-owned subsidiaries of the Parent. The
Company is wholly owned by Parent, except as set forth herein. Please
see the attached for a list of stockholders and the number of shares
owned.
Officer and Directors
Parent
------
Xxxxxx XxXxxx President, Director
Xxxxxx XxXxxx Chairman of the Board, Director
Xxxx Xxxxxxxx Vice President/Secretary/Treasurer, Director
Xxxxxx XxXxxx Assistant Secretary
Xxxxx XxXxxx Director
Xxxxx Xxxxxx Director
Xxxxxx X. Xxxx Director
Xxxxxx X. XxXxxx Director
Xxxx Xxxxxxxxxx Director
56
Company
-------
Xxxxxxx X. XxXxxx President, Director
Xxxxxxx Xxxxxx Director
Xxxxxx X. Xxxxxxxxx Secretary/Treasurer, Director
Xxxxxx Xxxxxx Vice President-Operations
Xxxxx X. Xxxxxxx CFO/Vice President-Finance
Xxxxxx Xxxxxx Vice President-Administration
The Chillicothe Telephone Company
---------------------------------
Xxxxxx XxXxxx President, Director
Xxxx Xxxxxxxx Vice President-Finance/Secretary/Treasurer,
Director
Xxxx Xxxxxx Vice President-Administration, Director
United Communications, Inc.
---------------------------
Xxxxxxx X. XxXxxx President, Director
Xxxxxx X. Xxxxxx Vice President, Director
Xxxxxx X. Xxxxxxxxx Secretary/Treasurer, Director
Horizon Services, Inc.,
-----------------------
Xxxxxx XxXxxx President, Director
Xxxx Xxxxxx Vice President/Secretary/Treasurer, Director
Xxxxxx XxXxxx Director
D. Preemptive and Registration Rights
The Class A Stock of Parent has preemptive rights to all but Class B
Stock, pursuant to the Articles of Incorporation of the Parent and the
Ohio Code.
All stock of the Company has the preemptive rights contained in the
Ohio Code.
All stock of the Subsidiaries has preemptive rights contained in the
Ohio Code.
57
SCHEDULE 5(E)
LITIGATION
None.
58
SCHEDULE 5(F)
TAX MATTERS
The Internal Revenue Service audited the consolidated entities (the
Parent, the Company and the Subsidiaries) for the years 1996 and 1997 and the
Internal Revenue Service and the Company settled the deficiency at the amount of
$117,134. Interest has not been assessed.
59
SCHEDULE 5(H)
GOVERNMENT APPROVALS; CONSENTS
Consent and waiver to be obtained from the Rural Telephone Finance
Cooperative.
Consent and waiver to be obtained from Motorola, Inc.
60
SCHEDULE 5(M)
PROJECTIONS
See attached.
61
SCHEDULE 5(O)
TITLE TO PROPERTIES AND ASSETS
The Company has entered into that certain Master Site Agreement, dated
August 17, 1999, by and between SBA Towers, Inc. and the Company, pursuant to
which the Company has the rights to use cell sites and cell towers.
62
SCHEDULE 5(P)
MATERIAL CONTRACTS
1. Assignment Agreement, dated February 15, 2000, by and between Parent
and Company
2. Asset Purchase Agreement, dated August 17, 1999, by and among Company,
Parent and SBA Towers, Inc.
3. Site Development Agreement, dated August 17, 1999, by and between the
Company and SBA Towers, Inc.
4. Master Site Agreement, dated August 17, 1999, by and between SBA
Towers, Inc. and the Company.
5. Master Design Build Agreement, dated August 17, 1999, by and between
the Company and SBA Towers, Inc.
6. Loan Agreement, dated August 29, 1997, by and between the Company and
Rural Telephone Finance Cooperative.
7. Secured Promissory Note, dated August 29, 1997, by and between the
Company and Rural Telephone Finance Cooperative.
8. Guaranty, dated August 29, 1997, by and between Parent and Rural
Telephone Finance Cooperative.
9. Reimbursement and Security Agreement, dated August 29, 1997, by and
among Parent and the Company and Motorola, Inc.
10. Sprint PCS Management Agreement, dated June 8, 1998, by and among
Sprint Spectrum, L.P., SprintCom, Inc. and the Company.
11. Network Services Agreement, dated August 12, 1999, by and among West
Virginia PCS Alliance, L.C., Virginia PCS Alliance, L.C. and the
Company.
12. Sprint PCS Services Agreement, dated June 8, 1998, between the Company
and Sprint PCS.
13. Revolving Line of Credit Application and Agreement (OH-S-02), dated
June 25, 1998 by and between Rural Telephone Finance Cooperative and
Parent as amended by that certain Term Extension for RTFC Line of
Credit, dated June 25, 1998, by and between Rural Telephone Finance
Cooperative and Parent.
63
14. Service Agreement, dated August 20, 1999, by and between the Company
and Bright Personal Communications Services, LLC.
15. Tax Allocation Agreement, by and among the Company, the Parent, The
Chillicothe Telephone Company, United Communications, Inc. and Horizon
Services, Inc.
16. Services Agreement between Horizon Services, Inc., the Company, the
remaining Subsidiaries and the Parent, pursuant to which Horizon
Services, Inc. provides accounting, human resources, date processing
and MIS services at cost.
17. Mortgage and Security Agreement, dated August 29, 1999 between Rural
Telephone Finance Cooperative and the Company.
18. Operating Agreement of Bright Personal Communications Services, LLC, by
and among the Company and the other members.
19. Equipment Purchase Agreement by and between the Company and Motorola,
Inc.
20 Pledge and Security Agreement, dated August 29, 1997, by and between
Parent and Rural Telephone Finance Cooperative.
21. Sprint Trademark and Service Xxxx License Agreement.
64
SCHEDULE 5(Q)
EMPLOYEES
A. Employment Arrangements:
Union contract by and between IBEW Local 578 and The Chillicothe
Telephone Company.
X. Xxxxxxxxx or Termination Pay:
None.
65
SCHEDULE 5(S)
AFFILIATE CONTRACTS
Name of Affiliate Description of Contract
----------------- -----------------------
Bright Personal Communication Services Service Agreement, dated
August 20, 1999, by and
between the Company and
Bright Personal
Communications Services,
LLC.
Parent, Company and the Subsidiaries Tax Allocation Agreement,
by and among the Company,
the Parent, The
Chillicothe Telephone
Company, United
Communications, Inc. and
Horizon Services, Inc.
Parent, Company and the Subsidiaries Services Agreement between
Horizon Services, Inc.,
the Company, the remaining
Subsidiaries and the
Parent, pursuant to which
Horizon Services, Inc.
provides accounting, human
resources, date processing
and MIS services at cost.
Parent and Company Assignment Agreement dated
as of February 15, 2000,
by and between Parent and
Company.
66
SCHEDULE 5(T)
ENVIRONMENTAL MATTERS
None.
67
SCHEDULE 5(X)
USE OF PROCEEDS
The proceeds from the issuance of the Note will be used to : (i)
finance the Acquisition; (ii) pay the loan origination fee to Purchaser; (iii)
pay fees and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by this Agreement and the
Acquisition and (iv) provide for working capital requirements and for general
corporate purposes.
68
SCHEDULE 5(Y)
EMPLOYEE BENEFIT PLANS
Company 401(k)
The Chillicothe Telephone Company 401(k)
Horizon Services, Inc. 401(k)
Horizon Services, Inc. Deferred Compensation Plan
Each of the Subsidiaries and the Company have the following plans:
1) Medical
2) Dental
3) Vision
4) Education Reimbursement
In addition, the Company has a Bonus program, but any bonus awarded is
subject to the discretion of the Directors and Officers of the Company.
69
SCHEDULE 5(Z)
INTELLECTUAL PROPERTY
The Company licenses the Sprint xxxx and Sprint PCS xxxx through the
following agreements:
1. Sprint PCS Management Agreement, dated June 8, 1998, by and
among Sprint Spectrum, L.P., SprintCom, Inc. and the Company.
2. Sprint PCS Services Agreement, dated June 8, 1998, between the
Company and Sprint PCS.
3. Sprint Trademark and Service Xxxx License Agreement.
70
SCHEDULE 5(AA)
ABSENCE OF CERTAIN CHANGES OR EVENTS
None.
71
SCHEDULE 5(BB)
INSURANCE
See attached.
72
SCHEDULE 9(B)
INDEBTEDNESS
1. Loan Agreement, dated August 29, 1997, by and between the Company $23,557,965
and Rural Telephone Finance Cooperative.
2. $9,000,000 Revolving Loan Agreement between RFTC and the Parent $7,798,556
3. Intercompany payable from the Company to the Parent $7,798,556
73
SCHEDULE 9(C)
LIENS
1. In connection with the Credit Agreement between RTFC and the Company,
RTFC has a Lien on substantially all of the assets of the Company.
74
SCHEDULE 9(E)
INVESTMENTS
1. Subordinated Capital Certificates in RFTC in the amount of $1,177,898
75
SCHEDULE 10(I)
ADDRESSES FOR NOTICES
If to the Company, to:
Horizon Personal Communications, Inc.
X X Xxx 000
00 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxx
with a copy (which shall not
constitute notice) to:
Arnall Golden & Xxxxxxx, LLP
Suite 2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx., Esq.
If to the Purchaser, to:
First Union Investors, Inc.
Xxx Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xx. Xxxx X. Xxxxxxxxxx
with a copy (which shall not
constitute notice) to:
Xxxxx & Xxx Xxxxx, PLLC
NationsBank Corporate Center
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
