[GRAPHIC Charys
OMITTED] Holding Company, Inc.
March 4, 2005
CCI ASSOCIATES, LTD.
ATTN. XX. XXXXXXX X. XXXXX, CEO
00000 XXXXXXX XX.
SAN ANTONIO, TX 78259
Dear Xx. Xxxxx:
Charys Holding Company, Inc., a Delaware corporation, is pleased to provide you
with this Letter Agreement (the "Letter Agreement") that outlines terms under
which Charys Holding Company, Inc. or its authorized subsidiary ("Buyer") will
acquire the assets, obligations and liabilities related to certain real property
located in Bexar County, Texas owned by CCI Associates, Ltd., a Texas limited
partnership ("Associates" or "Seller"). This letter agreement is binding on
Seller and Buyer unless otherwise provided herein, with finalization of the
details of the transaction to be refined in a definitive purchase agreement (the
"Definitive Agreement") with Associates which the parties agree to finalize
within 30 days after signing this Letter Agreement. The provisions of the
Definitive Agreement will supersede and replace this Letter Agreement in all
respects once finalized and executed.
SUMMARY OF TERMS
1. PARTIES; DEFINITIONS
(a) Charys Holding Company, Inc. is a Delaware corporation located
at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, XX 00000.
(b) CCI Associates, Ltd. is a Texas limited partnership located at
00000 Xxxxxxx Xxxx, Xxx Xxxxxxx, XX 00000. The partnership's sole purpose is to
own certain land and buildings in Bexar County, Texas which are leased to CCI
Telecom, Inc. for use as its primary business location.
(c) CCI Telecom, Inc. (CCI) will be a wholly owned subsidiary of
Buyer after execution of the Plan and Agreement of Triangular Merger between
Charys Holding Company, Inc, Charys Acquisition Company, Inc. and CCI Telecom,
Inc. of even date herewith (the "Merger Agreement"). Included herewith as
Attachment 1 is the Merger Agreement, which is incorporated herein for all
purposes.
(d) Xxxxx Properties, Inc. is a Texas corporation that is wholly
owned by Xx. Xxxxxxx X. Xxxxx. Xxxxx Properties, Inc. owns 1% of Associates and
is the sole general partner of Associates.
[GRAPHIC Charys
OMITTED] Holding Company, Inc.
(e) Xx. Xxxxxxx X. Xxxxx is the CEO of CCI. Xx. Xxxxx owns a
71.58% limited partnership interest in Associates, and he is the sole owner of
Xxxxx Properties, Inc.
(f) "Closing" is defined as the time the Definitive Agreement is
concluded and executed by all parties hereto, and "Final Closing" is defined as
the time that title to the property has been transferred to Buyer in exchange
for the consideration set forth herein.
2. TRANSACTION. Subject to the terms and conditions of the Definitive
Agreement, Buyer shall purchase the real property located in Bexar County, Texas
owned by Associates (such real property being more fully described in the
Appraisal dated January 25, 2005 included herein as Attachment 3 and
incorporated herein for all purposes) that is leased to CCI (the "Property") at
the time of the Final Closing, and Buyer will assume all liabilities and
obligations associated with the Property in exchange for delivery of 250,000
shares of Charys Holding Company, Inc. common stock to Seller, subject to
certain adjustments and additional payments as described in Section 4 of this
Letter Agreement. The ability to assume liabilities related to the Property by
Xxxxx is subject to the provisions of any of the agreements creating such
liabilities, including but not limited to the terms of any loan documents.
3. CLOSING. Upon execution of this Letter Agreement, Associates and Buyer
shall be bound to complete the transaction described herein, and will negotiate
and finalize a Definitive Agreement, which agreement shall include terms
substantially similar to those expressed in this Letter Agreement. This
Letter Agreement shall be executed in conjunction with the merger contemplated
in the Merger Agreement. Associates and Buyer agree that all reasonable efforts
shall be expended to complete the Definitive Agreement within 30 days of
execution of this Letter Agreement at Closing. Final Closing will occur on a
date to be agreed upon between Associates and Buyer after Xxxxx has identified a
subsequent purchaser of the Property or secured financing adequate to release
all currently existing liens on the Property. At Final Closing, Associates
will convey the Property to Buyer for the consideration set forth in Section 4
herein.
4. CONSIDERATION. In exchange for conveyance of the Property to Buyer at the
Final Closing, and subject to the terms of the Definitive Agreement, Xxxxx
agrees to transfer 250,000 shares of Charys Holding Company, Inc. common stock
to Associates. The number of shares to be conveyed to Associates and related
cash adjustments are described as follows:
(a) The 250,000 shares referenced above are subject to a "Make
Whole Calculation" as described in Sections 7 and 8 of the Merger Agreement, but
are also subject to the provisions of Section 4 (b) below. The Make Whole
Provision and Calculation in the Merger Agreement occurs on the date which is 24
months after the effective date of the Merger Agreement. The Make Whole
Provision and Calculation
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[GRAPHIC Charys
OMITTED] Holding Company, Inc.
related to the 250,000 shares in this Letter Agreement shall be applied
concurrently with the Merger Agreement Make Whole Provision and Calculation.
That is, the 2 year period for the 250,000 shares in this Letter Agreement shall
start on the signing of this Letter Agreement and conclude simultaneously with
the Make Whole in the Merger Agreement, even if the time from the Final Closing
from this Letter Agreement to the Make Whole in this Letter Agreement is less
than 2 years.
(b) Buyer intends to sell or finance the Property after acquiring
the Property at the Final Closing. If during the 2 year period following the
effective date of the Merger Agreement Buyer obtains net proceeds of at least
$1.8 million either from the sale or financing of the Property, then the Make
Whole Calculation shall apply. The Definitive Agreement will contain provisions
regarding Buyer making diligent, good faith efforts to sell or finance the
Property to bona fide, third party buyers, with the General Partner of
Associates being periodically informed of all activities relating to the sale of
financing of the Property. The sum payable by Buyer to Associates under the Make
Whole Calculation shall be paid by Xxxxx to Associates as set forth in the
Merger Agreement.
(c) The consideration paid in this transaction shall include cash
payments by Xxxxx to Associates in order to reimburse the owners of Associates
for the federal income taxes, if any, that will be due by the owners of
Associates attributable to this transaction. Such payments shall not exceed
$125,000 in the aggregate and shall be paid to the owners of Associates on or
before the date on which their federal income tax payments related to this
transaction are due.
5. REGISTRATION RIGHTS. The shares acquired by Associates under Section 4
above shall contain registration rights and shall be governed by the
registration rights agreement that is Attachment C to the Merger Agreement.
6. CHARYS SHARES. All shares of the Charys Holding Company, Inc. common
stock to be received by Associates under the terms of the Definitive Agreement
shall be restricted in their resale as provided in the Securities Act of 1933,
as amended (the "Securities Act"), and shall contain a legend as required by
Rule 144 promulgated under the Securities Act ("Rule 144"), which shall read as
follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO
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[GRAPHIC Charys
OMITTED] Holding Company, Inc.
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
No fractional shares of the Charys Holding Company, Inc. common stock shall be
issued in connection with the transaction contemplated herein. In the event that
any fractional shares of the Charys Holding Company, Inc. common stock would be
issued to Associates, the number of shares of such stock to be issued shall be
rounded up to the nearest whole share. The Definitive Agreement will contain
representations, warranties and covenants as to the Charys Holding Company, Inc.
shares to be delivered to Seller and as to Buyer's operation of such company
during the period of ownership of such shares by Buyer acceptable to Buyer.
7. REPURCHASE/RIGHT OF FIRST REFUSAL. As part of this Letter Agreement,
Buyer grants Xx. Xxxxxxx X. Xxxxx or his designee ("Xxxxx") certain rights with
respect to the Property:
(a) During the three years following the Final Closing, if Xxxxx
receives a bona fide offer from a third party for purchase of the property and
Xxxxx considers such offer as viable, Xxxxx has a first right to purchase the
Property. That is, should Xxxxx desire to purchase the Property on
substantially equal terms, including purchase price, as that offered to or
solicited by Xxxxx, Xxxxx shall have: i) a period of 10 days from receipt by
Xxxxx of written notice from Xxxxx for Xxxxx to indicate his interest in
matching the offer; and ii) 30 days after receipt of notice of such offer from
Buyer to provide evidence to Buyer that Xxxxx has obtained the financing or
other means of matching the purchase price set forth in the offer. This right
of first refusal shall expire three years after the date of the Final Closing or
upon the sale of the property by Xxxxx to the bona fide third party from whom
the offer was received should Xxxxx not exercise his right of first refusal as
to that offer, but otherwise such right shall be a continuing right should the
transaction with the bona fide third party not close. The terms of this right of
first refusal will be further detailed in the Definitive Agreement.
(b) From the Final Closing until the third anniversary of the
Final Closing, and assuming that Xxxxx has not previously sold the Property as
authorized herein or in the Definitive Agreement, Xxxxx shall have the right to
purchase the property from Buyer for an amount equal to the greater of: i) $2.4
million, which is the appraised value of the Property as of January 25, 2005, as
shown in the Appraisal attached hereto as ATTACHMENT 3, or ii) the then current
appraised value of the Property. In the event a bona fide third party offer as
described in Section 7(a) is received before or during the process of Xxxxx'x
acquisition of the Property under this Section 7 (b) and such bona fide offer
exceeds either the then current appraised value of the Property or $2.4 million,
whichever amount is greater, then the terms of Section 7 (a) herein shall govern
Xxxxx'x potential purchase of the Property. As used herein, "current" means
dated within three (3) months of the date that Xxxxx exercised any rights set
forth in this Section 7.
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[GRAPHIC Charys
OMITTED] Holding Company, Inc.
8. INTERVENING PERIOD. During the period between execution of this Letter
Agreement and the Final Closing, the parties to this Letter Agreement agree:
(a) To conduct all business operations as usual in the ordinary
course of business, and not to enter into any agreements that would materially
change the structure, operations or contractual arrangements relative to any
party other than as contemplated in the Merger Agreement. This includes, but is
not limited to, fulfilling the terms of all contracts and other agreements that
the parties have entered into as of the date of this Letter Agreement, including
any lease arrangements, and making payment of all obligations as they become
due, including payment of mortgages and taxes on the Property. Xxxxxx agrees to
maintain the Property in the ordinary course of business.
(b) That Buyer or any other party designated by Buyer may market
the Property for sale and search for and negotiate financing to pay in full any
existing loans on the Property, provided Xxxxx keeps Associates reasonably
informed of such activities.
9. POWER AND AUTHORITY - ASSOCIATES AND BUYER. Xxxxx Properties, Inc.,
acting as General Partner for Associates, has full power and authority to
execute, deliver, and cause the performance of this Letter Agreement and any
related agreements between Buyer and Seller to be delivered in connection
herewith, including, without limitation, the Definitive Agreement. Xxxxx and the
undersigned representative of Buyer have full power and authority to execute,
deliver, and cause the performance of this Letter Agreement and any related
agreements between Buyer and Seller to be delivered in connection herewith,
including, without limitation, the Definitive Agreement. Xxxxx and Seller agree
to execute any and all further agreements or documents as may be reasonably
necessary to consummate the transactions contemplated in this Letter Agreement
at the Closing and the Final Closing.
10. EXPENSES. Buyer will be responsible for payment of all fees and expenses
incurred with regard to the transaction contemplated hereunder, including any
finders' fees, fees to investment bankers or to other financial advisers, and
Xxxxx's and Xxxxxx's attorneys' fees. Buyer will only be responsible, however,
for payment of Xxxxxx's attorneys' fees up to and including the amount of
$7,500. Associates represents and warrants to Buyer that Associates has not
incurred any fees or expenses of any nature, other than attorneys' fees.
11. DESTRUCTION OF PROPERTY. If, on or before the Final Closing, any
substantial portion of the improvements located on the Property shall suffer a
loss because of fire, flood, tornado, hurricane, riot, accident or other
calamity, whether or not insured, to such an extent that in the opinion of Buyer
there will be such a delay in repairing or replacing said improvements so as to
materially affect the future operations of the improvements, then Buyer may, at
its sole option, terminate this Agreement by providing written notice to Seller,
and neither party will have any further obligation to the other except for
Xxxxx's obligation to pay the expenses set forth in Section 10 herein.
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[GRAPHIC Charys
OMITTED] Holding Company, Inc.
12. VENUE; GOVERNING LAW; MISCELLANEOUS. This Letter Agreement contains
all agreements between the parties hereto, other than those set forth in the
Merger Agreement, and may be amended only by a written agreement executed by all
parties hereto. Any provisions of this Letter Agreement that are deemed invalid
or unenforceable shall be severable from the remainder of this Letter Agreement
and will not affect the validity of the remainder of this Letter Agreement. This
Letter Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
agreement. This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and applicable federal law,
without giving effect to the principles of choice of law of any state. Venue for
any dispute between the parties hereto shall lie in Bexar County, Texas. This
Letter Agreement shall be binding upon and inure to the benefit of the
signatories hereto and their respective successors, heirs, administrators,
trustees, executors and assigns.
13. DEFAULT. Should any party default under the obligations required of
them under this Letter Agreement, any non-defaulting party may avail itself of
any and all remedies provided by law or in equity as to the defaulting party,
including but not limited to termination of this Letter Agreement. A prevailing
party in any legal action brought hereunder shall be entitled to collect its
attorneys' fees.
14. MULTIPLE COUNTERPARTS. This Agreement may be signed in multiple
counterparts each when taken together shall constitute one original.
[SEE NEXT PAGE FOR SIGNATURES]
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[GRAPHIC Charys
OMITTED] Holding Company, Inc.
Executed effective as of the 4th day of March, 2005.
CHARYS HOLDING COMPANY, INC.
By: ___________________________
Xxxxx X. Xxx, Xx., Chief Executive Officer
CCI ASSOCIATES, LTD., a Texas limited
partnership
By: Xxxxx Properties, Inc., its General
Partner
By: ___________________________
Xxxxxxx X. Xxxxx, President
CCI TELECOM, INC., a Nevada Corporation
By: ___________________________
Xxxxxxx X. Xxxxx, Chief Executive Officer
______________________________________________
Xxxxxxx X. Xxxxx, in his individual capacity
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