EXHIBIT A
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SECURITIES PURCHASE AGREEMENT
Dated as of June 30, 1997
among
BLUE CHIP CAPITAL FUND II
LIMITED PARTNERSHIP
MIAMI VALLEY VENTURE FUND L.P.
FAIRCOM INC.
FAIRCOM FLINT INC.
and
FAIRCOM MANSFIELD INC.
SECURITIES PURCHASE AGREEMENT
This Agreement is dated as of June 30, 1997, among BLUE CHIP
CAPITAL FUND II LIMITED PARTNERSHIP, an Ohio limited partnership
("Blue Chip"), MIAMI VALLEY VENTURE FUND L.P., an Ohio limited
partnership ("Miami Valley") (Blue Chip and Miami Valley being
collectively referred to herein as the "Investors"), FAIRCOM
FLINT INC., a Delaware corporation ("Faircom Flint") , FAIRCOM
MANSFIELD INC., a Delaware corporation ("Faircom Mansfield")
(Faircom Flint and Faircom Mansfield being collectively referred
to herein as the "Subsidiaries"), and FAIRCOM INC., a Delaware
corporation (the "Corporation").
A. The Corporation and the Subsidiaries require funds to
implement their business plans and the Investors are willing to
provide such funds.
B. The Corporation desires to issue, and the Investors
desire to purchase, Class A and Class B Convertible Subordinated
Promissory Notes (the "Class A Notes," the "Class B Notes," and
collectively, the "Notes") from the Corporation, all on the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants herein contained, the parties agree
as follows:
1. Definitions.
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As used in this Agreement, the following terms have the
meanings specified in this Section 1.
1.1 "Affiliate" -- A Person which controls, is
controlled by, or is under common control with another Person.
1.2 "AT&T Financing" -- The first term loan in the
principal amount of $7,371,254.23 from AT&T Commercial Finance
Corporation ("AT&T") to Faircom Flint (the "First AT&T Loan") and
the second term loan in the principal amount of $5,128,745.77
from AT&T to Faircom Mansfield (the "Second AT&T Loan"), both
being made pursuant to the Amended and Restated Loan Agreement
between AT&T and the Subsidiaries of even date herewith.
1.3 "Balance Sheet" -- See Section 4.7.
1.4 "Business" -- The business conducted by the
Corporation through its Subsidiaries as of the date hereof.
1.5 "Business Day" -- Any day that is not a Saturday
or Sunday or a day on which banks located in Cincinnati, Ohio,
and are authorized or required to be closed.
1.6 "Blue Chip" -- See the first paragraph of this
Agreement.
1.7 "Blue Chip Letter of Credit" -- A letter of credit
in the amount of $3,100,000 issued by Star Bank N.A. to secure
the Subordinated Promissory Note (the "Subordinated Citicorp
Note") of even date herewith from the Corporation to Citicorp
issued in connection with the Citicorp Purchase.
1.8 "Citicorp Purchase" -- The purchase by the
Corporation and the Subsidiaries of that certain 10% Senior
Exchangeable Note due December 1, 2004, and that certain 8.65%
Senior Convertible Note due December 1, 2004 (the "Citicorp
Notes"), both owned by Citicorp Venture Capital, Ltd.
("Citicorp"), pursuant to the April 28, 1997 Letter Agreement
from the Corporation to Citicorp as amended by the June 30, 1997,
Letter Agreement from the Corporation to Citicorp.
1.9 "Closing" -- See Section 2.4.
1.10 "Closing Date" -- The date and time of the
Closing.
1.11 "Common Stock" -- See Section 4.3.
1.12 "Contemplated Transactions" -- The issuance and
sale of the Notes, the Citicorp Purchase, the Radio Station
Acquisition, and the AT&T Financing.
1.13 "Conversion Shares" - Any shares of Common Stock
which may be issued upon conversion of the Notes.
1.14 "Corporation" -- See the first paragraph of this
Agreement.
1.15 "Damages" -- See Section 10.2.
1.16 "Default" -- an event or condition which, with
giving of notice or the passage of applicable grace periods or
both, would become an Event of Default.
1.17 "Encumbrance" -- Any mortgage, lien, or
restriction of any kind, including, any restriction on the use,
voting, transfer, receipt of income or other exercise of any
attributes of ownership, other than any restrictions on transfer
of stock of the Corporation or the Subsidiaries arising under
federal or state securities laws.
1.18 "Event of Default" -- See Section 11.
1.19 "FCC" -- The Federal Communications Commission.
1.20 "Governmental Agency" -- Any federal, state or
municipal government or any agency, commission or authority
thereof.
1.21 "Guaranty" -- See Section 2.1.
1.22 "Miami Valley" -- See the first paragraph of this
Agreement.
1.23 "Notes" -- See Recital B of this Agreement.
1.24 "Person" -- Any individual or corporate entity.
1.25 "Radio Station Acquisition" -- The acquisition by
Faircom Mansfield of two (2) radio stations in Mansfield, Ohio,
WYHT(FM) and WMAN(AM), pursuant to the Asset Purchase Agreement
for the Sale of the Assets of the Radio Stations WMAN (AM) and
WYHT (FM), Mansfield, Ohio, from Treasure Radio Associates L.P.
to Faircom Mansfield Inc., made as of May 20, 1997.
1.26 "Subsidiaries" -- See the first paragraph of this
Agreement.
1.27 "Taxes" -- All taxes, penalties, or other
assessments or charges including income and value added taxes and
customs duties, imposed by any Governmental Agency.
1.28 "Tax Returns" -- Any return, report, information
return or other document (including any related or supporting
information) filed or required to be filed with any Governmental
Agency in connection with any Taxes.
2. Purchase and Sale of the Securities.
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2.1 Issuance of Notes.
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(a) The Investors shall purchase from the Corporation,
and the Corporation shall issue to the Investors, the Notes, in
substantially the form attached hereto as Exhibit 2.1(a)(i).
Blue Chip shall purchase $4,250,000 principal amount of each of
the Class A Notes and the Class B Notes, and Miami Valley shall
purchase $750,000 principal amount of each of the Class A Notes
and the Class B Notes. All payments of principal and interest
due from the Corporation under the Notes shall be unconditionally
guaranteed by each of the Subsidiaries, jointly and severally,
and the Corporation shall cause each of the Subsidiaries to
execute a Guaranty in substantially the form of Exhibit
2.1(a)(ii) hereto (collectively, the "Guaranty").
(b) (i) In consideration of the issuance and sale of
the Notes, at the Closing, the Investors shall lend to the
Corporation $7,000,000 in immediately available funds as follows:
Blue Chip: $5,500,000
Miami Valley: $1,500,000
The Investors shall note the advance of the $7,000,000 as of the
Closing Date on the Notes.
(ii) on or before July 31, 1997, Blue Chip shall lend to the
Corporation an additional $3,000,000, together with payment of
interest thereon at a rate of nine percent (9%) per annum from
the date of Closing in immediately available funds, which shall
be used to pay the principal amount of, and accrued interest on,
the Subordinated Citicorp Note, which additional advance shall be
noted on the Class B Note held by Blue Chip as if such $3,000,000
had been advanced on the Closing Date, provided that concurrent
with such payment (a) Citicorp shall deliver to Blue Chip the
Blue Chip Letter of Credit and (b) Citicorp shall deliver to the
Corporation the Subordinated Citicorp Note for cancellation. In
the event of a draw down under the Blue Chip Letter of Credit for
the principal of and interest owing under the Subordinated
Citicorp Note, Blue Chip's obligation to make such additional
loan shall be terminated and Blue Chip shall note the additional
advance of $3,000,000 on the Class B Note held by Blue Chip as if
such $3,000,000 had been advanced on the Closing Date. Blue
Chip, at its option, may make payment directly to Citicorp in
payment in full of the Subordinated Citicorp Note, but in such
event, Citicorp shall deliver the Subordinated Citicorp Note to
the Corporation for cancellation and the Blue Chip Letter of
Credit to Blue Chip, and Blue Chip shall note the additional
advance of $3,000,000 on the Class B Note held by Blue Chip as if
such $3,000,000 had been advanced on the Closing Date.
2.2 Use of Proceeds. The Corporation and the
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Subsidiaries shall use the proceeds of the sale of the Notes as
follows:
(a) $3.6 million shall be used for the Radio Station
Acquisition; and
(b) $6.4 million shall be used for the Citicorp
Purchase.
2.3 The Closing. The closing (the "Closing") of the
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purchase of the Notes (as more particularly described in Section
3.1) shall take place simultaneously with the execution of this
Agreement.
3. The Closing.
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3.1 The Closing.
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(a) Place and Time of Closing. The Closing is taking
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place simultaneously with the execution hereof at the offices of
Xxxxxxx & Xxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) Deliveries by the Corporation. At the Closing,
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the Corporation shall deliver the following to the Investors:
(i) The Notes, executed by the Corporation.
(ii) Corporate resolutions of the Corporation's
board of directors authorizing the Contemplated Transactions.
(iii) An opinion of Fulbright & Xxxxxxxx L.L.P.,
counsel to the Corporation, in the form of Exhibit 3.1(b)(iii)
hereto.
(iv) An opinion of Xxxxx Xxxxx & Xxxxx P.L.C.,
special communications law counsel to the Corporation, in the
form of Exhibit 3.1(b)(iv) hereto.
(v) Copies of the consents listed on Exhibits 4.5
and 4.6.
(vi) A Certificate of Good Standing for the
Corporation issued by the Secretary of State of Delaware and
dated within ten (10) days of the Closing.
(vii) Copies of the Corporation's Certificate of
Incorporation and By-Laws, certified by the Secretary of the
Corporation.
(viii) Certificate of the Corporation, executed by
a responsible officer of the Corporation and certifying the
closing of (A) the Radio Station Acquisition, (B) the AT&T
Financing, including the closing of both the First AT&T Loan and
the Second AT&T Loan, and (C) the Citicorp Purchase in accordance
with the terms of the agreements provided to the Investors
without any waiver of material right by the Corporation or the
Subsidiaries.
(ix) Evidence of the closing of (A) the Radio
Station Acquisition, (B) the AT&T Financing, and (C) the Citicorp
Purchase in form and substance acceptable to the Investors,
including without limitation, copies of all material documents.
(x) All other documents required by this Agreement
or otherwise reasonably requested by Blue Chip, Miami Valley, or
their counsel in connection with the Contemplated Transactions.
(c) Deliveries by the Subsidiaries. At the Closing,
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the Subsidiaries, as applicable, shall deliver the following to
the Investors:
(i) Corporate resolutions of each Subsidiary's
board of directors authorizing the Contemplated Transactions.
(ii) An opinion of Fulbright & Xxxxxxxx L.L.P.,
counsel to the Subsidiaries, in the form of Exhibit 3.1(b)(iii)
hereto.
(iii) Copies of the consents listed on Exhibits
4.5 and 4.6.
(iv) A Certificate of Good Standing for Faircom
Flint issued by the Secretary of State of Delaware and dated
within ten (10) days of the Closing.
(v) A Certificate of Good Standing for Faircom
Mansfield issued by the Secretary of State of Delaware and dated
within ten (10) days of the Closing.
(vi) Copies of Faircom Flint's Certificate of
Incorporation and By-Laws, certified by the Secretary of Faircom
Flint.
(vii) Copies of Faircom Mansfield's Certificate of
Incorporation and By-Laws, certified by the Secretary of Faircom
Mansfield.
(viii) All other documents required by this
Agreement or otherwise reasonably requested by Blue Chip, Miami
Valley, or their counsel in connection with the Contemplated
Transactions.
(ix) The Guaranty, executed by the Subsidiaries.
(d) Deliveries by Blue Chip at the Closing. At the
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Closing, Blue Chip shall deliver the following to the
Corporation:
(i) Wire transfer of funds in the aggregate
amount of $5,500,000 to such account(s) as shall be mutually
agreed upon by Blue Chip and the Corporation and which shall be
designated in writing by the Corporation.
(ii) The Blue Chip Letter of Credit.
(iii) All other documents required by this
Agreement to be delivered by Blue Chip at the Closing.
(e) Deliveries by Miami Valley at the Closing. At the
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Closing, Miami Valley shall deliver the following to the
Corporation:
(i) Wire transfer of funds in the aggregate
amount of $1,500,000 to such account(s) as shall be mutually
agreed upon by Miami Valley and the Corporation and which shall
be designated in writing by the Corporation.
(ii) All other documents required by this
Agreement to be delivered by Miami Valley at the Closing.
4. Representations of the Corporation and the
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Subsidiaries. In order to induce the Investors to enter into
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this Agreement, the Corporation and the Subsidiaries jointly and
severally represent to the Investors as follows:
4.1 Organization of the Corporation and the
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Subsidiaries; Authorization. The Corporation and each of the
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Subsidiaries is a corporation duly organized and validly existing
under the laws of Delaware with full corporate power and
authority to execute, deliver and perform this Agreement, the
Notes, and the Guaranty, to conduct the Business, to own its
properties and to consummate the Contemplated Transactions. Each
of this Agreement, the Notes, and the Guaranty and all other
documents required to be executed and delivered by the
Corporation and the Subsidiaries in connection with the
Contemplated Transactions has been duly authorized by all
necessary corporate action of each of the Corporation and the
Subsidiaries and constitutes legal, valid and binding obligations
of the Corporation and the Subsidiaries, enforceable against each
of them, as applicable, in accordance with their terms.
4.2 No Conflict as to the Corporation or the
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Subsidiaries. Neither the execution and delivery of this
____________
Agreement, nor the Notes or the Guaranty, nor the consummation of
any or all of the Contemplated Transactions will violate (a) any
provision of the Certificate of Incorporation or the By-laws of
the Corporation or either of the Subsidiaries, (b) any agreement
or commitment to which the Corporation or either of the
Subsidiaries is a party or (c) any law or order of any court or
other Governmental Agency applicable to the Corporation or either
of the Subsidiaries.
4.3 Capitalization.
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(a) The Corporation. The authorized stock of the
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Corporation consists solely of 35,000,000 shares of common stock
(the "Common Stock"), $0.01 par value, of which 7,378,199 shares
were duly issued and outstanding on the date of this Agreement.
(b) The Conversion Shares will be issued to the
Investors free and clear of all Encumbrances and all such
securities will be duly authorized, validly issued and fully paid
and nonassessable. No legend or other reference to any purported
Encumbrance will appear upon any certificate representing the
Conversion Shares except as provided herein or as required by
federal or state securities laws. All of the outstanding shares
of the Corporation and the Subsidiaries have been duly authorized
and validly issued and are fully paid and nonassessable. None of
the outstanding shares of the Corporation or the Subsidiaries has
been issued in violation of any applicable law, preemptive right
or agreement, including any federal or state securities laws.
(c) There are no outstanding commitments of any kind
relating to the issuance or transfer of any stock of the
Corporation or the Subsidiaries other than as contemplated by
this Agreement and except for the stock option plans and other
agreements set forth on Exhibit 4.3(c) hereto.
(d) The Corporation has reserved a sufficient number
of shares of Common Stock to permit the issuance of the
Conversion Shares.
4.4 Incorporation of the Corporation and the
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Subsidiaries. Except for the qualification of the Corporation as
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a foreign corporation in the State of New York, Faircom Flint as
a foreign corporation in the State of Michigan, and Faircom
Mansfield as a foreign corporation in the State of Ohio, the
Corporation and each of the Subsidiaries is not, and is not
required to be, qualified as a foreign corporation under the laws
of any other jurisdiction, except to the extent the failure to
qualify as such a foreign corporation would not have a material
effect on the Corporation or the Business. Exhibit 4.4(b) lists
all of the subsidiaries of the Corporation. Except as set forth
on Exhibit 4.4(b), the Corporation owns all of the stock of the
Subsidiaries free and clear of all Encumbrances, and all such
stock has been duly authorized and validly issued and is fully
paid and nonassessable. Except for ownership of the Subsidiaries
by the Corporation, and except pursuant to the Contemplated
Transactions, neither the Corporation nor either of the
Subsidiaries owns, or has any agreement or commitment to acquire,
any stock of any Person or any direct or indirect equity or
ownership interest in any other business. Neither the
Corporation nor either of the Subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire
any of its equity or debt securities or any interest therein or
pay any dividend or make any other distribution in respect
thereof or issue any equity securities other than as contemplated
by this Agreement.
4.5 Approvals of Governmental Agencies. Except as set
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forth in Exhibit 4.5 hereto, no approval or authorization of, or
filing with, any Governmental Agency is required to be obtained
or made by the Corporation or the Subsidiaries in connection with
the execution and delivery of this Agreement, the Notes or the
Guaranty, or the Contemplated Transactions, or for the
performance by the Corporation or the Subsidiaries of their
obligations under this Agreement, the Notes or the Guaranty. All
required filings by the Corporation or the Subsidiaries with the
Securities and Exchange Commission ("SEC") or any state
securities agency have been made. None of such filings contains
any misstatement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements
therein not materially misleading. Copies of the Corporation's
annual report on Form 10-K for the year ended 1996 and the
Corporation's quarterly report on Form 10-Q for the quarter ended
March 31, 1997, have been delivered to the Investors.
4.6 Other Consents. Except as set forth in Exhibit
______________
4.6 hereto, no consent of any Person is required to be obtained
by the Corporation or the Subsidiaries in connection with this
Agreement, the Notes, the Guaranty or the Contemplated
Transactions.
4.7 Financial Statements. Copies of the consolidated
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financial statements of the Corporation and the Subsidiaries for
the fiscal years ended December 31, 1995, and 1996, and of the
quarterly balance sheet of the Corporation as of March 31, 1997,
(such financial statements and balance sheet, collectively, the
"Balance Sheet") and consolidated statements of income and cash
flows of the Corporation and its Subsidiaries for the quarter
then ended have been delivered previously to the Investors. Such
financial statements are true and complete in all material
respects and fairly present the consolidated assets, liabilities,
financial condition and results of operations of the Corporation
and the Subsidiaries as at the respective dates thereof and for
the periods therein referred to, all in accordance with generally
accepted United States accounting principles consistently applied
throughout the periods involved.
4.8 Title to Properties; Encumbrances. The
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Corporation or one of the Subsidiaries has good title to all the
properties and assets that the Corporation and the Subsidiaries
purport to own, including those reflected in the Balance Sheet
(except for those sold since the date of the Balance Sheet in the
ordinary course of business and consistent with past practice)
and those purchased or otherwise acquired by the Corporation or
the Subsidiaries since the date of the Balance Sheet. All
properties and assets reflected in the Balance Sheet are free and
clear of all Encumbrances except as listed on Exhibit 4.8, and
applicable zoning laws do not impair the present use of such
property. All buildings used by the Corporation or the
Subsidiaries lie wholly within the boundaries of the real
property owned or leased by it and do not encroach upon the
property of others. The properties and assets of the Corporation
and its Subsidiaries permit the Corporation, through its
Subsidiaries, to conduct the Business in the same manner as it
has been conducted up to the date of this Agreement.
4.9 Equipment. The equipment owned or leased by the
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Corporation and the Subsidiaries is in good operating condition
and repair in accordance with industry standards, subject to
normal wear and tear, and none of such equipment is in need of
maintenance or repairs except for routine maintenance and repairs
that are not significant in nature or cost. Except as set forth
in Exhibit 4.9 hereto, neither the Corporation nor either of the
Subsidiaries has received notification that it is in violation of
any applicable building, zoning, anti-pollution, health, safety
or other law or regulation in respect of its operations.
4.10 No Expropriation. No property owned or leased by
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the Corporation or the Subsidiaries is being expropriated by any
Governmental Agency with or without compensation, nor has any
such expropriation been proposed.
4.11 No Undisclosed Liabilities. Neither the
___________________________
Corporation nor the Subsidiaries has any material liabilities or
obligations of any nature that were not fully reflected or
reserved against in the Balance Sheet.
4.12 Litigation. Except as set forth in Exhibit 4.12
__________
hereto, there is no action, suit, proceeding or investigation by
or before any court or Governmental Agency pending or threatened
affecting the Corporation, the Subsidiaries, their directors,
officers, or management, this Agreement, or the Contemplated
Transactions, nor to the best of the knowledge of the
Corporation, the Subsidiaries or their officers, are any
contemplated. Except as set forth in Exhibit 4.12, neither the
Corporation nor the Subsidiaries is in violation of any
agreement, commitment or restriction to which it is a party. No
officer, director, or manager of the Corporation or the
Subsidiaries is or is now expected to be in violation of any term
of any employment contract, patent disclosure agreement,
proprietary information agreement, noncompetition agreement, or
any other contract or agreement or any restrictive covenant
relating to the right of such officer, director, or manager to be
employed by the Corporation or the Subsidiaries. Exhibit 4.12
lists any judgment or order of a court of law affecting the
Corporation or any of its Subsidiaries.
4.13 Taxes. Each of the Corporation and the
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Subsidiaries has filed on a timely basis all Tax Returns required
pursuant to all applicable laws or regulations of any
Governmental Agency. Each of the Corporation and the
Subsidiaries has paid, or established a reserve to the extent
required by United States generally accepted accounting
principles consistently applied, for all Taxes due pursuant to
those Tax Returns, or pursuant to any assessment received by it,
except such Taxes set forth in Exhibit 4.13 hereto, which are
being contested and as to which adequate reserves have been
provided in the Balance Sheet. Except as set forth in Exhibit
4.13, neither the Corporation nor the Subsidiaries has requested
any extension of time for the payment of Taxes. The charges,
accruals and reserves with respect to Taxes on the books of the
Corporation and the Subsidiaries are adequate in accordance with
United States general accounting principles consistently applied.
There exists no proposed tax assessment or tax audit against or
affecting the Corporation or the Subsidiaries except as disclosed
in the Balance Sheet or in Exhibit 4.13. All Taxes that the
Corporation or the Subsidiaries have been required by law to
withhold or collect have been duly withheld or collected and paid
to the proper Governmental Agency. All Tax Returns filed by the
Corporation and the Subsidiaries are true, correct and complete.
Any employee benefit plan of the Corporation or the Subsidiaries,
or to which the Corporation or the Subsidiaries contributes which
is subject to the provisions of the Employee Retirement Income
Security Act, is in compliance in all material respects with the
provisions thereof, and there is no unfunded liability with
respect thereto.
4.14 No Adverse Change. Except as set forth in Exhibit
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4.14 hereto, since December 31, 1996, there has not been any
material adverse change in the earnings, net worth, assets,
revenues, operations or prospects of the Corporation and the
Subsidiaries taken as a whole, or any event that is likely to
result in such a material adverse change.
4.15 Intellectual Property. The Corporation or one of
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the Subsidiaries owns or has the right to use pursuant to
license, sub-license, agreement, or permission, all intellectual
property, including without limitation, all patents, trademarks,
copyrights, and trade secrets necessary for the operation of the
Business as presently conducted and as presently proposed to be
conducted. The Corporation or one of the Subsidiaries has taken
necessary or desirable action to protect each item of
intellectual property that it owns or uses. Neither of the
Corporation and the Subsidiaries has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, and has not
received any charge, complaint, claim, or notice alleging any
such interference, infringement, misappropriation, or violation.
To the knowledge of the Corporation and the Subsidiaries, no
third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any of the Corporation's or
the Subsidiaries' intellectual property rights.
4.16 Leases. Except as indicated on Exhibit 4.16 or
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4.17 hereto, all leases of real or personal property to which any
of the Corporation or the Subsidiaries is a party, and all
agreements listed in Exhibit 4.17, are valid, binding and
enforceable in accordance with their terms, and are in full force
and effect; there are no existing material defaults by the
Corporation or the Subsidiaries or any other party under any of
such leases or agreements; and all lessors (where the Corporation
or a Subsidiary is the lessee) under such leases and other
parties under such agreements have consented (where such consent
is necessary) to the consummation of the Contemplated
Transactions without requiring modification in the rights or
obligations of the Corporation or the Subsidiaries thereunder.
4.17 Contracts and Commitments. Except as set forth
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in Exhibit 4.17 hereto or otherwise in this Agreement neither the
Corporation nor the Subsidiaries has currently in effect:
(a) any material agreements, commitments or
restrictions outside the ordinary course of business ;
(b) any purchase agreements or commitments which are
in excess of the normal requirements of the Business or at any
price substantially in excess of fair market value and its prior
purchasing practices;
(c) any agreements or commitments with officers,
employees, consultants, advisors, distributors or dealers (A)
that are not cancelable by it on notice of not longer than 90
days and without liability or (B) providing for the payment of
any bonus or commission based on sales or earnings (except for
certain employee bonus arrangements approved by the Board of
Directors);
(d) any employment agreement or commitment, or any
other agreement or commitment that contains any severance or
termination pay liabilities or obligations;
(e) any indebtedness for borrowed money, or any
guarantee of any indebtedness or other obligations of others;
(f) any security agreement or other agreement or
commitment that creates any Encumbrance on any of its properties
or assets;
(g) any agreement or commitment to make any capital
expenditures or to acquire any property or assets other than in
the ordinary course of business;
(h) any agreement with a Shareholder; or
(i) any agreement otherwise material to the
Corporation's assets, liabilities or business.
4.18 Insurance. The Corporation and the Subsidiaries
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have all such insurance policies as would be maintained by
corporations of similar size engaged in the Business. All
policies of insurance covering the Corporation or the
Subsidiaries or all or any portion of their property and assets
are in full force and effect, all premiums covering all periods
up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for all
agreements to which the Corporation or any of the Subsidiaries is
a party and for the operation of the business, are valid and
enforceable, will remain in full force and effect through the
respective dates set forth in Exhibit 4.18 without the payment of
additional premiums, and will not be affected by the Contemplated
Transactions. In the last three years, no insurance company has
refused to provide at a commercially reasonable price any
coverage requested with respect to the Business.
4.19 Labor Relations. Each of the Corporation and the
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Subsidiaries has complied with all labor and social security laws
and regulations and performed its obligations under any
collective bargaining agreements. There is no labor strike
currently pending or threatened against or affecting the
Corporation or the Subsidiaries. No collective bargaining
agreement restricts the Corporation or the Subsidiaries from
relocating or closing any of its operations or requires prior
notice, consultation or bargaining in connection therewith.
Neither the Corporation nor the Subsidiaries has experienced any
work stoppage. No collective bargaining agreement is currently
being negotiated, and no union representation issue currently
exists.
4.20 Compliance with Law. The Corporation and the
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Subsidiaries are, and their operations have been conducted, in
compliance with all applicable federal and state laws, rules,
regulations and permits, including all federal and state
securities laws and regulations, the Federal Communications Act,
all rules, regulations and administrative orders of the FCC, and
those relating to environmental and occupational health and
safety, and no notice of liability for any environmental or
health and safety matter has been received from any public agency
or private party. The Corporation and the Subsidiaries are in
compliance with the Americans With Disabilities Act. Neither the
Corporation nor any of its Subsidiaries has received any
notification of any asserted present or past failure to comply
with any such law, rule, regulation, permit or order. Except as
previously disclosed to the Investors in writing, during the last
ten years, none of the directors, officers, or management of the
Corporation or the Subsidiaries has been arrested or convicted of
any material crime, including any felony (whether material or
not), has been indicted, has been bankrupt, or has been an
officer or director of a bankrupt company.
4.21 Licenses. The Corporation and the Subsidiaries
________
have all authorizations, licenses, permits and approvals
("Licenses") from the FCC or any Governmental Agencies required
or advisable for the conduct of the Business, and neither the
Corporation nor either of the Subsidiaries is in violation of any
such Licenses. The Corporation or the Subsidiaries has filed or
will timely file any application for renewal of the Licenses when
required. Exhibit 4.21 lists all Licenses and such Licenses are
not subject to any restriction or condition not shown on the face
of the Licenses which would limit operation of the Business.
Each such License is in full force and effect, no suspension or
cancellation has been threatened, and the conduct of the Business
is in accordance with the Licenses in all material respects.
Neither the Corporation nor either of the Subsidiaries has any
reason to believe that any of the Licenses would not be renewed
for a full term, with no materially adverse conditions, by the
FCC or other granting authority in the ordinary course. On the
Closing Date, all FCC requirements for authority to operate the
Business will have been met, and there will be no uncorrected FCC
violations, notices or unsatisfied FCC inquiries known to the
Corporation or either of the Subsidiaries, except as disclosed on
Exhibit 4.21. All ownership reports and documents required to be
filed with the FCC with respect to the Business have been duly
and timely filed and are true, correct and complete. Without
limiting the generality of the foregoing, the Licenses are valid
for full terms and are subject to no material restrictions or
conditions not shown on their face.
4.22 Environmental Protection. Except as set forth in
________________________
Exhibit 4.22 hereto, the Corporation and the Subsidiaries have
obtained all permits, licenses and other authorizations which are
required under all applicable laws and regulations relating to
pollution or protection of the environment, including emissions,
discharges or releases of contaminants, or hazardous or toxic
materials or wastes into air, water or land, or otherwise
relating to the distribution, use, storage, disposal, transport
or handling of pollutants, contaminants or hazardous or toxic
material or wastes. Except as set forth in Exhibit 4.22, the
Corporation and the Subsidiaries are in full compliance with all
terms and conditions of the required permits, licenses and
authorizations. Except as set forth in Exhibit 4.22, neither the
Corporation nor any of the Subsidiaries is aware of, or has
received notice of, events, activities or incidents, which may
give rise to any legal liability in connection with environmental
laws or regulations.
4.23 Material Assets. The Corporation has no material
_______________
assets other than the stock of the Subsidiaries.
4.24 Other Transactions.
__________________
(a) The Corporation and the Subsidiaries have
delivered to the Investors all material documents related to the
AT&T Financing, including both the First AT&T Loan and the Second
AT&T Loan, the Citicorp Purchase, and the Radio Station
Acquisition (collectively, the "Other Transactions").
(b) The Other Transactions are closing
simultaneously with the closing of the Contemplated Transactions,
and neither the Corporation nor either of the Subsidiaries has
waived any provision under any agreement or document related to
the Other Transactions. No party to the Other Transactions is in
default under its obligations with respect to the Other
Transactions.
(c) No default (or event or condition which upon
notice or passage of time would become a default) exists and is
continuing under any agreement or document related to the Other
Transactions.
4.25 Disclosure. No representation by the Corporation
__________
or the Subsidiaries in this Agreement (including any Exhibit
attached hereto or any certificate delivered pursuant hereto),
contains or will contain any untrue statement of fact or omits or
will omit to state any fact necessary in order to make the
statements herein or therein not misleading. All documents
delivered to the Investors pursuant to this Agreement are true
and complete copies of what they purport to be.
5. Representations of Blue Chip. In order to induce the
____________________________
Corporation and the Subsidiaries to enter into this Agreement,
Blue Chip represents to each of them as follows:
5.1 Organization of Blue Chip; Authorization. Blue
________________________________________
Chip is a limited partnership duly organized and validly existing
under the laws of Ohio with full partnership power and authority
to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance
of this Agreement have been duly authorized by all necessary
partnership action of Blue Chip, and this Agreement constitutes
the legal, valid and binding obligation of Blue Chip, enforceable
against it in accordance with its terms.
5.2 No Conflict as to Blue Chip. Neither the
___________________________
execution and delivery of this Agreement nor the performance of
Blue Chip's obligations hereunder will violate (a) any provision
of the limited partnership agreement of Blue Chip, (b) any
agreement or commitment to which Blue Chip is party or (c) any
law or order of any court or other Governmental Agency applicable
to Blue Chip.
5.3 Acquisition for Investment. Blue Chip is
__________________________
acquiring the Notes, and will acquire any Conversion Shares, for
its own account for investment and without any intent to dispose
of them in violation of applicable securities laws. Blue Chip is
a sophisticated investor and has had an opportunity to
investigate the business and affairs of the Corporation and the
Subsidiaries and is an "accredited investor" as defined under
Rule 501(a)(8) under the Securities Act of 1933 (the "Act").
5.4 Approvals of Governmental Agencies. No approval
__________________________________
or authorization of, or filing with, any Governmental Agency is
required to be made or obtained by Blue Chip in connection with
this Agreement or the Contemplated Transactions.
5.5 Other Consents. No consent of any Person is
______________
required to be obtained by Blue Chip in connection with this
Agreement or the Contemplated Transactions.
5.6 Litigation. There is no action, suit,
__________
investigation or proceeding before any court or Governmental
Agency pending or, to Blue Chip's knowledge, threatened against
Blue Chip or its general partner affecting this Agreement or the
Contemplated Transactions.
6. Representations of Miami Valley. In order to induce
_______________________________
the Corporation and the Subsidiaries to enter into this
Agreement, Miami Valley represents to each of them as follows:
6.1 Organization of Miami Valley; Authorization.
___________________________________________
Miami Valley is a limited partnership duly organized and validly
existing under the laws of Ohio with full partnership power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary partnership action of Miami Valley, and this Agreement
constitutes the legal, valid and binding obligation of Miami
Valley, enforceable against it in accordance with its terms.
6.2 No Conflict as to Miami Valley. Neither the
______________________________
execution and delivery of this Agreement nor the performance of
Miami Valley's obligations hereunder will violate (a) any
provision of the limited partnership agreement of Miami Valley,
(b) any agreement or commitment to which Miami Valley is party or
(c) any law or order of any court or other Governmental Agency
applicable to Miami Valley.
6.3 Acquisition for Investment. Miami Valley is
__________________________
acquiring the Notes, and will acquire any Conversion Shares, for
its own account for investment and without any intent to dispose
of them in violation of applicable securities laws. Miami Valley
is a sophisticated investor and has had an opportunity to
investigate the business and affairs of the Corporation and the
Subsidiaries and is an "accredited investor" as defined under
Rule 501(a)(8) under the Act.
6.4 Approvals of Governmental Agencies. No approval
__________________________________
or authorization of, or filing with, any Governmental Agency is
required to be made or obtained by Miami Valley in connection
with this Agreement or the Contemplated Transactions.
6.5 Other Consents. No consent of any Person is
______________
required to be obtained by Miami Valley in connection with this
Agreement or the Contemplated Transactions.
6.6 Litigation. There is no action, suit,
__________
investigation or proceeding before any court or Governmental
Agency pending or, to Miami Valley's knowledge, threatened
against Miami Valley or its general partner affecting this
Agreement or the Contemplated Transactions.
7. Covenants. In order to provide for the effective
_________
management of the Corporation and the Subsidiaries, so long as
the Investors own any of the Notes:
7.1 Access and Reports.
__________________
(a) As promptly as possible after the end of each
quarter and fiscal year, but not later than 50 days after the end
of each quarter and 95 days after the end of each fiscal year,
the Corporation and the Subsidiaries shall deliver to the
Investors consolidated financial statements for such periods
prepared in accordance with generally accepted United States
accounting practices. The annual financial statements of the
Corporation and the Subsidiaries shall be unqualified and
accompanied by an opinion thereon of an independent certified
public accounting firm reasonably acceptable to the Investors.
All financial statements shall be accompanied by a certificate of
the chief executive or financial officer of the Corporation to
the effect that (i) they are true and complete and accurately
reflect the financial condition of the Corporation and the
Subsidiaries and results of operations at the date and for the
periods indicated in accordance with generally accepted United
States accounting principles; and (ii) neither the Corporation
nor any Subsidiary is in default under any material agreement to
which it is a party.
(b) The Corporation and the Subsidiaries shall
provide the Investors with such other financial and business
information as the Investors may reasonably request.
(c) The Corporation and the Subsidiaries shall
provide the Investors and their representatives such access
during regular business hours to the Corporation's and the
Subsidiaries' facilities, personnel and business records as the
Investors may reasonably request.
7.2 Investor Approval Required. So long as at least
__________________________
$2,000,000 in aggregate principal amount is outstanding under the
Notes, neither the Corporation nor either of the Subsidiaries
shall take any of the following actions without the prior
approval of the Investors:
(a) make or agree to make aggregate capital
expenditures for property, plant or equipment in excess of the
amount set forth in the then current Budget (as defined in
Section 7.7(a) below);
(b) make any loans to employees which in the
aggregate exceed $10,000, other than customary expense advances;
(c) increase or agree to increase base or
incentive compensation to any of its executive officers or enter
into, amend or modify any written or other material employment
agreement;
(d) except for borrowing under previously
approved revolving lines of credit, the AT&T Financing, the
Subordinated Citicorp Note, or in connection with the payment of
obligations to the Investors, borrow or agree to borrow any
funds, grant a security interest in or lien, mortgage or other
encumbrance on any assets of the Corporation or any of the
Subsidiaries, or give any guaranty of indebtedness or obligations
of another;
(e) enter into or be a party to any lease
providing for annual rental payments in excess of the amount set
forth in the then current Budget;
(f) issue any securities of the Corporation or
any Subsidiary or any rights to acquire such securities,
including authorized stock options (other than stock options
approved by resolution of the Corporation as set forth in Exhibit
7.2(f), granted to Xxxx Xxxxxxx and Xxxx Xxxxxx in connection
with the Contemplated Transactions), or alter the capital
structure of the Corporation or the Subsidiaries in any fashion;
(g) engage in any business other than the
ownership and operation of radio stations;
(h) purchase or hold beneficially any stock,
other securities or evidences of Indebtedness in, or make any
investment in or provide any extension of credit to, or acquire
all or substantially all of the assets of, any other Person or
entity;
(i) be a party to any merger or consolidation, or
sell, lease, transfer, exchange or otherwise transfer all or a
material portion of its assets, or sell a controlling interest in
the Corporation or any Subsidiary, or agree to do any of the
foregoing;
(j) enter into any transaction with any
shareholder, director, officer, employee, agent or affiliate
other than transactions in the ordinary course of business and on
terms no less favorable to the Corporation or the Subsidiaries
than a similar transaction with an unaffiliated third party;
(k) engage in or agree to engage in any material
transaction outside the ordinary course of the Business;
(l) effect any voluntary dissolution;
(m) permit the Corporation to own any material
assets other than the stock of the Subsidiaries;
(n) cancel, amend, or otherwise modify the
Corporation's or the Subsidiaries' Certificate of Incorporation;
(o) pay any dividends to the holders of the
outstanding stock of the Corporation or the Subsidiaries, except
for dividends paid by the Subsidiaries to the Corporation to
service the Corporation's debt; or
(p) extend, or permit extension of, the term of
either the First AT&T Loan or the Second AT&T Loan, both of which
are due and payable on July 1, 2002.
7.3 Pre-Emptive Rights. If the Corporation proposes
__________________
to issue or sell any Common Stock, or any other class of capital
stock, or any warrants, options or rights to acquire, convertible
into or exchangeable for any shares of capital stock of the
Corporation, or any security having a direct or indirect equity
participation in the Corporation (for purposes hereof, "New
Securities"), then the Corporation shall deliver written notice
thereof to each of the Investors setting forth the number, terms
and the purchase consideration (or if such purchase consideration
is not expressed in cash, the fair market value cash equivalent
thereof) of the New Securities which the Corporation proposes to
issue. Each such Investor shall thereupon have the right, unless
otherwise agreed in advance, to elect to purchase on the same
terms and conditions (including consideration or the cash
equivalent thereof) as those offered to any third party that
number of New Securities proposed to be issued as would maintain
such Investor's relative proportional equity interest in the
Corporation (calculated to give effect to the issuance of the
Conversion Shares). Such Investor may make such election by
written notice to the Corporation within thirty (30) days of
receipt of notice of any proposed issuance of New Securities. If
an Investor does not elect to purchase its pro rata portion of
New Securities within thirty (30) days of the date of the
foregoing notice, this pro rata purchase right shall terminate
with respect to the New Securities described in the written
notice delivered to that party, and the Corporation may, in its
sole discretion, sell to third parties within sixty (60) days
after such Investor's receipt of the notice of the proposed
issuance of New Securities any or all of the New Securities
described in such written notice with respect to which the
purchase right was not exercised.
7.4 Legend.
______
Each Certificate representing each Note and Conversion
Share (unless registered as provided herein), now or hereafter
owned by the Investors shall be marked with a legend
substantially in the following form:
The [Note][shares] represented by this certificate have
not been registered under the Securities Act of 1933.
[These shares][This Note] may not be offered, sold,
transferred, pledged or hypothecated in the absence of
registration under the Securities Act of 1933 except in
a transaction exempt from the registration requirements
of such Act. The issuer shall not be required to
register the transfer of [these shares][this Note]
unless and until [these shares have][this Note has]
been registered under the Securities Act of 1933 or the
issuer has been advised by counsel satisfactory to it
that an exemption from the registration requirements of
such Act is available for such transfer.
7.5 Board of Directors. The Corporation shall use its
__________________
best efforts to cause the shareholders of the Corporation to
elect to its Board of Directors two nominees proposed by the
Investors. The Corporation shall also cause two nominees
proposed by the Investors to be elected to the Board of Directors
of each of the Subsidiaries. The Corporation shall reimburse
the Investors for all reasonable travel costs incurred by their
designees in connection with attending Board of Directors
meetings of the Corporation and the Subsidiaries.
7.6 Chief Executive Officer. The Corporation shall
_______________________
use its best efforts to cause the Board of Directors to not
designate any successor to Xxxx X. Xxxxxxx as President without
the prior written approval of the Investors.
7.7 Other Affirmative Covenants. The Corporation
___________________________
shall:
(a) prepare an annual fiscal year operating
budget and submit it for approval to its Board of Directors by
December 31 of the preceding fiscal year (each such budget, as
approved by the Board of Directors, a "Budget");
(b) pay and cause the Subsidiaries to pay when
due all Taxes and file any Tax Returns when due;
(c) comply and cause each of the Subsidiaries to
comply with all laws, rules and regulations applicable to it;
(d) maintain and cause each of the Subsidiaries
to maintain all of its properties in good working order, ordinary
wear and tear excluded;
(e) maintain and cause each of the Subsidiaries
to maintain its corporate existence;
(f) maintain and cause each of the Subsidiaries
to maintain with credit-worthy insurers insurance in such amounts
and of such types as are maintained by prudent firms of similar
size engaged in businesses similar to the Business;
(g) use its best efforts to obtain, as promptly as
practicable, the approval of the FCC and, if required, the
Corporation's shareholders for the Investors to convert the Notes
for shares of Common Stock; and
(h) provide the Investors with copies of all
reports when such reports are provided to AT&T.
7.8 Liquidation in Event of No Merger. If the
_________________________________
Corporation does not, on or before January 1, 1998, consummate a
merger of the Corporation with another corporation on terms
acceptable to the Investors, then upon notice from the Investors,
the Corporation shall take all action necessary to liquidate the
Corporation and each of the Subsidiaries on terms and conditions
acceptable to the Investors, such approval not to be unreasonably
withheld. Any such liquidation shall provide for the payment in
full of both all senior debt to be issued in connection with the
AT&T Financing and the Notes (if not converted pursuant to their
terms).
7.9 Relief. The parties hereto agree that it is
______
impossible to measure in money the damages which would accrue to
a party hereto by a failure to perform any of the obligations
under this Section 7, Section 8 hereof or under Section 3 of any
of the Notes, and that the remedy at law for any breach thereof
will be inadequate. In addition to any other available relief,
the parties hereto shall be entitled to temporary restraining
orders and temporary and permanent injunctive relief or other
equitable relief (without the requirement of bond) without the
necessity of proving actual damage so as to prevent a breach of
such provisions of this Agreement or the Notes and secure the
enforcement thereof.
8. Registration.
____________
(a)(i) Proposed Registration. If the Corporation
_____________________
should propose to register any Common Stock or other equity
securities of the Corporation or any successor thereto for sale
under the Act or to carry out an offer of any such Common Stock
or other equity securities pursuant to Regulation A of the Act,
the Corporation shall give written notice to each of the
Investors of such intention and, upon the written request of the
Investors given within twenty (20) calendar days after such
notice, the Corporation shall use its best efforts to cause the
Common Stock held by such Investor and purchased by such Investor
from the Corporation (including upon conversion of the Notes), or
any other equity securities issued by the Corporation or any
successor thereto which are owned by such Investor and purchased
by such Investor from the Corporation (including upon conversion
of the Notes) for which such Investor has requested registration,
to be included under the proposed registration in accordance with
the proposed method thereof stated in such Investor's request;
provided, however, that the Corporation may, in lieu of including
any or all of such shares or such other securities under the
proposed registration, elect to effect a separate registration
thereof if its proposed registration relates to an underwritten
public offering and the underwriters thereof object to the
inclusion of any or all of such shares or such other securities
under such registration. If the Corporation shall elect to
effect a separate registration in accordance with the provisions
of the preceding sentence, the Corporation shall use its best
efforts to cause such separate registration to become effective
not later than one hundred eighty (180) days after the
effectiveness of the originally proposed registration. If the
Corporation determines, prior to the effectiveness of its
originally proposed registration, not to proceed with such
registration, the Corporation shall have no further obligation
under this Section 8(a) to register any such shares or other
equity securities under that registration statement.
(ii) Demand Registration. At any time, the
___________________
Investors together may give notice to the Corporation requesting
the registration under the Act of any or all of the Common Stock
held by them or to be held by them upon conversion of the Notes.
Upon receipt of such notice, the Corporation shall use its best
efforts to effect as promptly as possible the registration under
the Act of the Common Stock that the Corporation has been
requested to register pursuant to this Section 8(a)(ii). The
Corporation shall not be obligated to file more than two
registration statements under this Section 8(a)(ii) or to keep
such registration statement effective for more than 90 days. The
Corporation shall not be obligated to effect any registration
pursuant to this Section 8(a)(ii) if such registration would
require an audit of the Corporation as of a date other than its
fiscal year end. The Corporation may defer the filing of a
registration statement under this Section 8(a)(ii) for a period
of up to 90 days based on the good faith judgment of the Board of
Directors that such delay is needed (x) to avoid premature
disclosure of a matter if the Board has determined that such
disclosure would not be in the best interests of the Corporation
or (y) to avoid conflict with another public offering by the
Corporation. Any registration statement prepared pursuant to
this Section 8 shall be subject to such restrictions or
limitations as may be applicable by law to the sales price or
sales method of the proposed offering of the Common Stock.
(iii) Other Registration Rights. If the
_________________________
Corporation grants any registration rights (whether "demand" or
"piggyback") to any other Person, this Section 8 shall be deemed
amended, at the option of the Investors, to grant to the
Investors rights equivalent to the most favorable rights granted
to any other Person.
(b) Registration Procedures. If and whenever the
_______________________
Corporation is required by the provisions of this Section 8 to
effect the registration of any of the Investors' shares of Common
Stock or other securities under the Act, the Corporation shall,
as expeditiously as possible:
(i) Prepare and file with the Securities and
Exchange Commission (the "Commission") a registration statement
with respect to such shares or other securities and use all
reasonable efforts to cause such registration statement to become
effective as promptly as possible;
(ii) Prepare and file with the Commission
such amendments and supplements to such registration statement as
may be necessary to keep such registration statement effective
for three (3) months from the date of its effectiveness;
(iii) Furnish to such Investor such number of
copies of the prospectus forming a part of such registration
statement (including each preliminary prospectus) as such
Investor may reasonably request;
(iv) Use its best efforts to register or
qualify such shares or other securities covered by such
registration statement under the securities or blue sky laws of
such jurisdictions as such Investor shall reasonably request, and
do any and all other acts and things which may be necessary or
advisable to enable such Investor to consummate the disposition
of such shares or such other securities during the period
provided in Section 8(b)(ii) above; and
(v) Notify such Investor during the period
when a prospectus relating thereto is required to be delivered
under the Act, of the happening of any event which causes the
prospectus forming a part of such registration statement to
include an untrue statement of a material fact or to omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances under which they were made, and at the
request of such Investor, prepare and furnish such Investor with
a reasonable number of copies of the supplement to or any
amendment of such prospectus necessary so as to render such
prospectus, as amended or supplemented, in compliance with the
provisions of the Act.
(c) Expenses. All expenses incurred by the
________
Corporation in complying with this Section 8, including without
limitation all registration and filing fees, printing expenses,
expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Corporation and counsel for any
underwriters of the offering and any accountants' fees and
expenses incident to or required by any such registration and all
reasonable fees and disbursements of any counsel retained by the
Investors, shall be borne by the Corporation to the maximum
extent permitted by law. All underwriting fees and commissions
incurred by the Investors shall be borne by the Investors.
(d) Indemnification.
_______________
(i) By the Corporation. In the event of any
__________________
registration of an Investor's shares of Common Stock or other
securities under this Section 8, the Corporation shall defend,
indemnify and hold harmless such Investor, its officers,
directors, partners, affiliates, each underwriter thereof and
each person which controls such Investor or such underwriter
within the meaning of the Act, against any losses, claims,
damages or liabilities and any action in respect thereof, joint
or several, to which such Investor or any such officer, director,
underwriter or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue or alleged untrue statement of any material
fact contained in any registration statement under which such
securities were registered under the Act, any preliminary
prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, other than that which is based upon information
supplied by such Investor in writing, and the Corporation shall
reimburse each of such Investor and such officers, directors,
underwriters and controlling persons for any legal or other
expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation
shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is
based upon information provided in writing to the Corporation by
such Investor or any such officer, director, underwriter or
controlling person. This indemnity shall be in addition to any
liability which the Corporation may otherwise have.
(ii) By the Investors. In the event of any
________________
registration of such shares or other securities under this
Section 8, such Investor shall indemnify the Corporation against
any losses, claims, damages or liabilities and any action in
respect thereof, joint or several, to which the Corporation may
become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in any
registration statement under which such securities were
registered under the Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, which is based upon
information supplied by such Investor in writing, and such
Investor shall reimburse the Corporation for any legal or other
expenses reasonably incurred by the Corporation in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that such Investor shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon
information provided to the Corporation by the Corporation or any
of the Shareholders. This indemnity shall be in addition to any
liability which such Investor may otherwise have.
(iii) Contribution. If for any reason any
____________
indemnification described in Section 8(d)(i) or 8(d)(ii) above
may not be provided by the party or parties required therein to
provide such indemnification (the "Indemnifying Parties"), in
lieu of providing such indemnification, the Indemnifying Parties
shall contribute to the amount paid or payable by the party or
parties to be provided such indemnification (the "Indemnified
Parties") as a result of such losses, claims, damages,
liabilities or actions, in such proportion as is appropriate to
reflect the relative fault of the parties in connection with any
statement or omission which resulted in such losses, claims,
damages, liabilities or actions, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying
Parties and the Indemnified Parties shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a
material fact relates to information supplied by one of the
Indemnifying Parties or by one of the Indemnified Parties, and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or
defending any action or claim. The parties agree that it would
not be just and equitable if contribution pursuant hereto were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to herein. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
9. Representations to Continue in Effect After the
_______________________________________________
Closing; Indemnification.
________________________
9.1 Continued Effect. All representations contained
________________
in this Agreement shall be true as of the date of this Agreement
and shall continue in effect as of such date after the Closing
notwithstanding any investigation conducted, or knowledge
acquired, with respect thereto.
9.2 Indemnification by the Corporation and the
__________________________________________
Subsidiaries. The Corporation and the Subsidiaries shall jointly
____________
and severally indemnify and hold harmless and reimburse each of
the Investors for any loss, liability, claim, damage, cost,
expense (including, but not limited to, costs of investigation
and defense and reasonable attorneys' fees incurred in the
defense of third party claims) or diminution of value
(collectively, "Damages") arising from (a) any inaccuracy in any
of the representations of the Corporation or any of the
Subsidiaries in this Agreement, (b) any failure by the
Corporation or the Subsidiaries to comply with any obligation in
this Agreement, (c) any claim by any Person for brokerage fees,
commissions or similar payments based upon any agreement or
understanding made by the Corporation or the Subsidiaries or (d)
any liability incurred by the Corporation or the Subsidiaries
prior to the date hereof and not reflected on the Balance Sheet
or otherwise disclosed in this Agreement or any Exhibit hereto.
9.3 Indemnification by the Investors. Each of the
________________________________
Investors shall indemnify and hold harmless and reimburse the
Corporation and the Subsidiaries for any Damages arising from (a)
any inaccuracy in any of the representations and warranties of
such Investor in this Agreement, (b) any failure by such Investor
to comply with any obligation in this Agreement or (c) any claim
by any Person for brokerage fees, commissions or similar payments
based upon any agreement or understanding made by such Investor
in connection with any of the Contemplated Transactions.
9.4 Procedure for Indemnification. Promptly after
_____________________________
receipt by an indemnified party under Section 8(d)(i), 8(d)(ii),
9.2 or 9.3 of notice of the commencement of any action, such
indemnified party shall notify the indemnifying party of the
commencement thereof. If any such action shall be brought
against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and to assume the
defense thereof with counsel satisfactory to such indemnified
party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party under such Section for any fees of other
counsel or any other expenses, in each case subsequently incurred
by such indemnified party in connection with the defense thereof.
If an indemnifying party assumes the defense of such an action,
(a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent and
(b) the indemnifying party shall have no liability with respect
to any compromise or settlement thereof effected without its
consent. If notice is given to an indemnifying party of the
commencement of any action and it does not, within ten days after
the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense thereof,
the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected
by the indemnified party.
10. Events of Default. Each of the following events shall
_________________
constitute an Event of Default (whether any such event shall be
voluntary or involuntary or arise or be effected by operation of
law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule, or regulation of any
Governmental Agency):
(a) An Event of Default occurs and is continuing under
either of the Notes or a default occurs and is continuing under
either Guaranty;
(b) The Corporation or either of the Subsidiaries
shall have failed to perform or observe (or cause to be performed
or observed) any covenant, condition or agreement to be performed
or observed by it under this Agreement, the Notes, the Guaranty,
or any loan or other financing arrangement to which the
Corporation or either of the Subsidiaries is a party, and such
failure shall continue unremedied for a period of thirty (30)
days after written notice thereof;
(c) Any representation or warranty made by the
Corporation or either of the Subsidiaries herein, or in either of
the Notes or the Guaranty, shall prove to have been incorrect at
the time made;
(d) The Corporation or either of the Subsidiaries (A)
admits in writing its inability to pay its debts as they come
due, or makes a general assignment for the benefit of creditors,
or (B) commences any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
property;
(e) Any case, proceeding or other action against the
Corporation or either of the Subsidiaries has been commenced
seeking to have an order for relief entered against the
Corporation or either of the Subsidiaries as debtor, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of the Corporation or the Subsidiaries or its
debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property, or the
exercising of control rights by any secured lender to the
Corporation or either of the Subsidiaries, and such case,
proceeding or other action remains undismissed for a period of
sixty (60) days; or
(f) The obligations of any guarantor of the Notes
under the Guaranty shall cease to be in full force and effect for
any reason whatsoever, including the determination by any
Governmental Agency or court that the Guaranty is invalid, void,
or unenforceable, or any guarantor shall contest or deny in
writing the validity or enforceability of the Guaranty.
11. Remedies. Upon the occurrence of any Event of Default
________
and at any time thereafter so long as the same shall be
continuing, and subject to the terms of the Intercreditor and
Subordination Agreement of even date herewith between the
Corporation, AT&T, the Subsidiaries and the Investors, the
Investors may, at their option, declare by written notice to the
Corporation or either of the Subsidiaries this Agreement to be in
default, and do one or more of the following:
(a) Declare the entire aggregate principal amount of
the Notes immediately due and payable, together with all accrued
interest thereon, which shall occur without presentment, demand,
or protest, all of which are hereby expressly waived by the
Corporation and the Subsidiaries; or
(b) Demand that the securities of the Corporation held
at that time by the Investors be immediately redeemed by the
Corporation or the Subsidiaries, as applicable, whereupon the
Corporation and the Subsidiaries shall redeem all Common Stock
held by the Investors and purchased by the Investors from the
Corporation (including upon conversion of the Notes) at a price
equal to the greater of the purchase price paid by the Investors
plus any accrued but unpaid dividends thereon and the fair market
value thereof. For a period of thirty (30) days after the date
of the demand (the "Negotiation Period"), each party hereto shall
negotiate in good faith to reach agreement upon the fair market
value of the Common Stock. If the parties are unable to agree
upon such fair market value by the end of the Negotiation Period,
the fair market value of the Common Stock shall be determined for
purposes hereof by three appraisers, one selected by the
Corporation (the "Corporation Appraiser"), one selected by the
Investors (the "Investor Appraiser") and one (the "Third
Appraiser") selected by the Corporation Appraiser and the
Investor Appraiser within ten (10) days after the end of the
Negotiation Period. The fair market value shall then be
determined by each such Appraiser within thirty (30) days after
selection of the Third Appraiser, and the determination of the
two Appraisers whose determinations are closest shall be
averaged. Such average shall be the fair market value and shall
be conclusive and binding upon the Corporation and the Investors.
Fair market value shall in all cases be the amount obtained by
determining the fair market value of the Common Stock taken as a
whole, without premium for control or discounts for minority
interests or restrictions on transfer. The fees and expenses of
the Corporation Appraiser and the Investor Appraiser shall be
paid by the Corporation and the Investors, respectively, and the
fees and expenses of the Third Appraiser shall be paid in equal
shares by the Corporation and the Investors.
(c) The Corporation and the Subsidiaries shall pay on
demand all costs and expenses, including reasonable attorneys'
fees, incurred or paid by Investors in enforcing or collecting
any of the obligations of the Corporation and the Subsidiaries
hereunder.
12. Notices.
_______
All notices, consents and other communications under this
agreement shall be in writing and shall be deemed to have been
duly given when (a) delivered by hand or (b) sent by telecopier
(with receipt confirmed), provided that a copy is mailed by
Federal Express or other express delivery service, in each case
to the appropriate addresses and telecopier numbers set forth
below (or to such other addresses, and telecopier numbers as a
party may designate as to itself by notice to the other parties).
(a) If to the Investors:
c/o Blue Chip Venture Company, Ltd.
2000 PNC Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxxx X. Xxxxx
with a copy to:
Xxxx, Stettinius & Hollister
1800 Star Bank Center
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
(b) If to the Corporation or the Subsidiaries:
Faircom Inc.
000 Xxxx Xxxx Xxxx
Xxx Xxxxxxxxxx, Xxx Xxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxxx X. Xxxxxxx
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier No.: 000-000-0000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
13. Miscellaneous.
_____________
13.1 Expenses. Each party shall bear its own expenses
________
incident to the preparation, negotiation, execution and delivery
of this Agreement and the performance of its obligations
hereunder; except that the Corporation shall reimburse the
Investors for up to $30,000 of the legal, accounting and other
out-of-pocket expenses incurred by them in connection with the
preparation and negotiation of this Agreement, the Notes, the
Guaranty, and the Contemplated Transactions.
13.2 Payment. A wire transfer or check shall not
_______
discharge any obligation of payment under this Agreement and is
accepted subject to collection.
13.3 Captions. The captions in this Agreement are for
________
convenience of reference only and shall not be given any effect
in the interpretation of this agreement.
13.4 No Waiver. The failure of a party to insist upon
_________
strict adherence to any obligation of this Agreement shall not be
considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of
this Agreement. Any waiver must be in writing.
13.5 Exclusive Agreement; Amendment. This Agreement
______________________________
supersedes all prior agreements among the parties with respect to
its subject matter, is intended (together with the documents
referred to herein) as a complete and exclusive statement of the
terms of the agreement among the parties with respect thereto,
and cannot be changed or terminated orally.
13.6 Counterparts. This Agreement may be executed in
____________
two (2) or more counterparts each of which shall be considered an
original.
13.7 Governing Law. This Agreement shall be governed
_____________
by the internal law of the State of Ohio, without regard to the
conflicts of law principles thereof.
13.8 Attorney's Fees. In any action or proceeding
_______________
brought by a party to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover the reasonable
costs and expenses incurred by it in connection with that action
or proceeding (including, but not limited to, attorney's fees).
13.9 Designation of Forum and Consent to Jurisdiction.
________________________________________________
The parties hereto (a) designate the United States District Court
for the Southern District of Ohio, Western Division, or the Court
of Common Pleas, Xxxxxxxx County, Ohio, as the forum where all
matters pertaining to this Agreement may be adjudicated, and
(b) by the foregoing designation, consent to the exclusive
jurisdiction and venue of such court for the purpose of
adjudicating all matters pertaining to this Agreement.
13.10 Waiver of Jury Trial. As a specifically
____________________
bargained inducement for each other party to enter into this
Agreement, each of the parties hereto waives any right it may
have to have a jury participate in resolving any dispute arising
out of or related to this Agreement, the Notes, the Guaranty, or
any of the Contemplated Transactions. Instead, any such disputes
resolved in court shall be resolved in a bench trial without a
jury.
13.11 Binding Agreement. This Agreement shall be
_________________
binding upon all parties hereto, their successors and assigns,
and shall inure to the benefit of the parties hereto, their
successors and assigns.
INVESTORS:
BLUE CHIP CAPITAL FUND II LIMITED
PARTNERSHIP
By: BLUE CHIP VENTURE COMPANY, LTD.
its General Partner
By: /s/Xxxx X. Xxxxx
Its: Manager
MIAMI VALLEY VENTURE FUND L.P.
By: BLUE CHIP VENTURE COMPANY OF
DAYTON, LTD.
its Special Limited Partner
By: /s/Xxxx X. Xxxxx
Its: Manager
CORPORATION:
FAIRCOM INC.
By: /s/Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx, President
SUBSIDIARIES:
FAIRCOM FLINT INC.
By: /s/Xxxx X. Xxxxxxx
Its: Chairman
FAIRCOM MANSFIELD INC.
By: /s/Xxxx X. Xxxxxxx
Its: President
BCFAIR.13D
LIST OF EXHIBITS
Exhibit 2.1(a)(i) Form of Note
Exhibit 2.1(a)(ii) Form of Guaranty
Exhibit 3.1(b)(iii) Form of Fulbright & Xxxxxxxx Opinion
Exhibit 3.1(b)(iv) Form of Xxxxx Xxxxx & Xxxxx Opinion
Exhibit 4.3(c) Commitments to Issue Stock
Exhibit 4.4(a)(iii) Certificate of Incorporation and By-laws
of Faircom Mansfield
Exhibit 4.4(b) Subsidiaries
Exhibit 4.5 Governmental Consents
Exhibit 4.6 Other Consents
Exhibit 4.8 Encumbrances
Exhibit 4.12 Litigation, Suits, Proceedings and
Judgments
Exhibit 4.13 Tax Matters
Exhibit 4.14 Adverse Changes
Exhibit 4.15 Intellectual Property
Exhibit 4.16 Leases
Exhibit 4.17 Contracts
Exhibit 4.18 Insurance
Exhibit 4.21 Licenses
Exhibit 4.22 Environmental Permits and Matters
Exhibit 7.2(f) Faircom resolutions regarding stock
options (delivered pursuant to Section
3.1(b)(ii))
