EXHIBIT 10.1
LOAN PURCHASE AGREEMENT
AND TRANSFER AND ASSIGNMENT OF SHARES
THIS LOAN PURCHASE AGREEMENT AND TRANSFER AND ASSIGNMENT OF SHARES (the
"AGREEMENT") is entered into as of September 3, 2004 by and among MOBILEPRO
CORP. ("PARENT"), a Delaware corporation, its wholly-owned subsidiary, DAVEL
ACQUISITION CORP., a Delaware corporation (the "BUYER"), DAVEL COMMUNICATIONS,
INC., a Delaware corporation (the "COMPANY"), and certain stockholders of the
Company listed on Exhibit A hereto (collectively, the "SELLING LENDERS").
RECITALS
A. The Selling Lenders desire to sell, transfer and assign to the
Buyer, and the Buyer desires to purchase the loans of the Company held by the
Selling Lenders and enforceable against the Company in the outstanding principal
amounts and for the purchase price for each such loan set forth on Exhibit B
attached hereto (the "COMPANY DEBT").
B. Contemporaneously with the purchase of the Company Debt by the
Buyer, (i) the Selling Lenders shall transfer and assign to the Buyer on the
terms set forth in this Agreement all of the issued and outstanding shares of
capital stock of the Company held by the Selling Lenders and their affiliates as
set forth on Exhibit B attached hereto (the "SHARES") as such Exhibit shall be
updated at Closing regarding the number of Shares held by each Selling Lender
and its affiliates; and (ii) in consideration for the Buyer purchasing that
portion of the Company Debt held by Cerberus Partners, L.P. ("CERBERUS"),
Cerberus shall transfer and assign to the Buyer all of its right, title and
interest in and to the obligations of the Company evidenced by that certain
$1,000,000 Subordinated Promissory Note dated November 17, 1999, and that
certain Security Agreement related thereto also dated November 17, 1999, among
PhoneTel Technologies, Inc., Cherokee Communications, Inc. and Cerberus (the
"CERBERUS SUBORDINATED DEBT") and (iii) Styx Partners, L.P. ("Styx") shall
transfer and assign to the Buyer on the terms set forth in this Agreement all of
the Shares held by Styx.
C. To facilitate the transactions contemplated herein (the
"TRANSACTIONS") and as a condition to the consummation thereof, the Buyer and
the Selling Lenders require that the Company be a party to this Agreement, and
the Company is willing to participate in the Transactions on the terms set forth
in this Agreement for such purpose. Furthermore, as consideration for the
Transactions, the Buyer is willing to covenant and agree with the Company for
the benefit of stockholders of the Company who are not Selling Lenders or
affiliates of the Selling Lenders (collectively, the "MINORITY STOCKHOLDERS") to
purchase the remaining shares of capital stock of the Company held by the
Minority Stockholders on the terms set forth in this Agreement.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto hereby
agree as follows:
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1. SALE OF THE COMPANY DEBT; TRANSFER AND ASSIGNMENT OF THE SHARES;
CLOSING
1.1 SALE OF THE COMPANY DEBT. Subject to the terms and
conditions of this Agreement, at the Closing (as hereinafter defined), the
Selling Lenders will sell, transfer and assign the Company Debt and all
documents and instruments evidencing the Company Debt to the Buyer, and the
Buyer will purchase such Company Debt from the Selling Lenders. Without limiting
the foregoing, the Selling Lenders will transfer and assign to the Buyer all of
their right, title and interest in that certain Amended, Restated and
Consolidated Credit Agreement dated as of July 24, 2002 by and among Davel
Financing Company, L.L.C., PhoneTel Technologies, Inc., Cherokee Communications,
Inc., Davel Communications, Inc., the domestic subsidiaries of each of the
foregoing and Foothill Capital Corporation, as Agent, and the lenders set forth
therein, as amended by the First Amendment and Waiver to Amended, Restated, and
Consolidated Credit Agreement dated as of March 31, 2003 by and among Davel
Financing Company, L.L.C., PhoneTel Technologies, Inc., Cherokee Communications,
Inc., Davel Communications, Inc., the domestic subsidiaries of each of the
foregoing and Foothill Capital Corporation, as Agent, and the lenders set forth
therein, the Second Amendment and Waiver to Amended, Restated and Consolidated
Credit Agreement dated as of February 24, 2004 and the Third Amendment and
Waiver to Amended, Restated, and Consolidated Credit Agreement dated as of
August 11, 2004 (collectively, the "CREDIT AGREEMENT"), the Amended, Restated,
and Consolidated Security Agreement dated as of July 24, 2002 by and among Davel
Financing Company, L.L.C., PhoneTel Technologies, Inc., Cherokee Communications,
Inc., Davel Communications, Inc., the domestic subsidiaries of each of the
foregoing and Foothill Capital Corporation, as Agent, and the lenders set forth
therein (the "SECURITY AGREEMENT"), and all of the other documents, instruments
and agreements between the Company and the Selling Lenders or made by the
Company for the benefit of the Selling Lenders to evidence or secure the Company
Debt (collectively and with the Credit Agreement and Security Agreement, the
"LOAN DOCUMENTS"). Copies of each of the Credit Agreement and Security Agreement
are attached hereto as Exhibit C and Exhibit D, respectively.
1.2 TRANSFER AND ASSIGNMENT OF THE SHARES; SALE OF CERBERUS
SUBORDINATED DEBT.
(a) For no additional consideration, at the Closing, the
Selling Lenders will transfer and assign, or cause the transfer and assignment
of, the Shares that they hold to the Buyer, and the Buyer will take such
assignment of the Shares from the Selling Lenders.
(b) In consideration for the Buyer purchasing that portion of
the Company Debt that is held by Cerberus, and subject to the terms and
conditions of this Agreement, at the Closing, (i) Cerberus will transfer and
assign to the Buyer all of its right, title and interest in and to the Cerberus
Subordinated Debt, and the Buyer will take such assignment of the Cerberus
Subordinated Debt from Cerberus and (ii) Styx will transfer and assign to the
Buyer all of its right, title and interest in and to the Shares that it holds.
1.3 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE")
for the Company Debt will be $14,550,000 in the aggregate, plus the Additional
Adjustment Amount (as hereinafter defined) to be paid to each of the Selling
Lenders. The Purchase Price will be
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allocated among the Selling Lenders as set forth on Exhibit B to this Agreement
as such Exhibit shall be updated at Closing regarding the expenses and
outstanding Company Debt. The Purchase Price allocation and the percentage for
payment of the Additional Adjustment Amount correspond to each Selling Lender's
respective interest in the total outstanding principal amount of the Company
Debt, subject to an adjustment of the Purchase Price to compensate Xxxxx Fargo
Foothill, Inc. and Cerberus for certain expenses they have incurred on behalf of
the Selling Lenders.
1.4 BUYER DEPOSIT. Within one business day of the execution of
this Agreement, the Buyer will deposit $1,000,000 (the "BUYER DEPOSIT") into an
escrow account established with a third party escrow agent pursuant to the Buyer
Deposit Escrow Agreement in the form of Exhibit J attached hereto. In the event
that the Closing takes place, the Buyer Deposit shall be applied against the
Purchase Price and the amount of the Purchase Price required to be delivered
pursuant to Section 1.6.2(a) hereunder shall be so reduced by the amount of the
Buyer Deposit. In the event that the Buyer fails to consummate the Transactions
contemplated by this Agreement and this Agreement is terminated by the Selling
Lenders pursuant to Section 10.1(g) hereunder, the Buyer Deposit shall be paid
to each of the Selling Lenders in the same allocations set forth on Exhibit B to
this Agreement, subject to an adjustment of such allocation to compensate Xxxxx
Fargo Foothill, Inc. and Cerberus for certain expenses they have incurred on
behalf of the Selling Lenders. In the event that this Agreement is terminated
for any other reason, the Buyer Deposit shall be refunded to the Buyer.
1.5 CLOSING. The purchase and sale of the Company Debt and the
transfer and assignment of the Shares will take place at the offices of Xxxxxx
Xxxxxx LLP, 0000 Xxxxxxxxxxx Xxxxxx, XX, Xxxxx 000, Xxxxxxxxxx, XX 00000, at
10:00 a.m. Eastern Standard Time, on a date which shall be no later than fifteen
(15) days following the satisfaction or, if permissible, the waiver of the
conditions set forth in Sections 7, 8 and 9 hereof (the "CLOSING DATE") or at
such other time and place as the Buyer, the Company and the Selling Lenders
mutually agree upon (which time and place are referred to in this Agreement as
the "CLOSING").
1.6 CLOSING OBLIGATIONS. At the Closing:
1.6.1 Each Selling Lender will deliver to the Buyer:
(a) a duly executed Transfer and Assignment
of Debt Obligations, Credit Agreement and Security Agreement in the form of
Exhibit E attached hereto;
(b) certificates representing the number of
Shares that such Selling Lender has agreed to sell hereunder as shown on Exhibit
B attached hereto, duly endorsed (or accompanied by duly executed stock powers)
for transfer to the Buyer;
(c) a mutual release of claims in the form
of Exhibit F attached hereto (the "MUTUAL RELEASE") executed by such Selling
Lender explicitly releasing certain claims such Selling Lender may have against
the Company, which Mutual Release is not intended to release the Company or its
Subsidiaries from any of their respective (i) obligations created under this
Agreement or the Company Ancillary Agreements, (ii) obligations under the Loan
Documents, (iii) obligations under the Cerberus Subordinated Debt or (iv)
obligations
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under a certain Agreement to Exchange Indebtedness for Personal Property between
the Company and the Selling Lenders;
(d) a duly executed Registration Rights
Agreement in the form of Exhibit H attached hereto;
(e) a certificate executed by each Selling
Lender representing and warranting to the Buyer that each of such Selling
Lender's representations and warranties in this Agreement was accurate in all
material respects as of the date of this Agreement and is accurate in all
material respects as of the date of the Closing Date;
(f) a duly executed Resignation and
Appointment of Agent in the form of Exhibit L attached hereto; and
(g) a duly executed Stockholder Escrow
Agreement in the form of Exhibit I. attached hereto.
1.6.2 The Buyer will deliver to the Selling Lenders:
(a) The Purchase Price paid by wire
transfers of funds to each of the Selling Lenders (pursuant to their respective
wire transfer instructions set forth on Exhibit A to this Agreement) in
accordance with the allocations set forth on Exhibit B to this Agreement;
(b) a duly executed Transfer and Assignment
of Debt Obligations, Credit Agreement and Security Agreement in the form of
Exhibit E attached hereto for each Selling Lender;
(c) Warrants to purchase an aggregate of
5,000,000 shares of Parent's common stock at $0.30 (thirty cents) per share, in
the form of Exhibit G attached hereto, which Warrants shall be allocated among
the Selling Lenders as set forth in Exhibit B attached hereto;
(d) the Registration Rights Agreement in the
form attached hereto as Exhibit H duly executed by Parent;
(e) a certificate executed by the Buyer and
Parent representing and warranting to the Company and the Selling Lenders that
each of the Buyer's and Parent's representations and warranties in this
Agreement was accurate in all material respects as of the date of this Agreement
and is accurate in all material respects as of the date of the Closing Date
(giving full effect to any supplements to the Disclosure Letter that were
delivered by the Buyer and Parent to the Selling Lenders prior to the Closing
Date in accordance with Sections 8.1 and 8.2 hereof);
(f) a duly executed Resignation and
Appointment of Agent in the form of Exhibit L attached hereto; and
(g) the Stockholder Escrow Agreement in the
form attached hereto as Exhibit I duly executed by Parent.
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1.6.3 The Company will deliver to the Buyer or the
Selling Lenders as indicated:
(a) to the Selling Lenders, the Mutual
Release in the form of Exhibit F attached hereto executed by the Company
explicitly releasing certain claims against the Selling Lenders; which Mutual
Release is not intended to release any of the Selling Lenders or their
affiliates from obligations created under this Agreement or any of the Selling
Lender Ancillary Agreements (as hereinafter defined);
(b) to the Buyer and Parent, at the Buyer's
expense, opinions of counsel that no regulatory approvals or consents are
required in advance of the Closing in connection with the Transactions in the
following states: California, Florida, Georgia, Illinois, Mississippi, North
Carolina, New Mexico, New York and Virginia; and
(c) to the Buyer and Parent a certificate
executed by the Company representing and warranting to the Buyer and Parent that
each of the Company's representations and warranties in this Agreement was
accurate in all material respects as of the date of this Agreement and is
accurate in all material respects as of the date of the Closing (giving full
effect to any supplements to the Company Disclosure Letter that was delivered by
the Company to the Buyer and Parent prior to the Closing Date in accordance with
Sections 9.1 and 9.2 hereof).
1.7 PURCHASE OF REMAINING COMPANY SHARES. The Buyer covenants
and agrees with the Company for the benefit of the Minority Stockholders to
purchase all of the approximately 4.8% of the shares of capital stock of the
Company held by the Minority Stockholders (the "PUBLIC SHARES") according to the
following terms:
1.7.1 Not later than 180 days after the Closing Date,
the Buyer or Parent shall offer to purchase the Public Shares from the Minority
Stockholders by tender offer, short-form merger or such other transaction as
Parent elects (the "TENDER OFFER"). The purchase price offered to the Minority
Stockholders shall be an amount per share of not less than $0.015, which may be
paid in cash or securities of Parent.
1.7.2 Prior to making the Tender Offer, the Buyer or
Parent, at its sole expense, shall retain a reputable investment banker or other
financial advisor to render an opinion as to the fairness, from a financial
point of view, of the terms of the Tender Offer to the Minority Stockholders
(the "FAIRNESS OPINION"). In the event that such financial advisor declines to
render a Fairness Opinion for the reason that the price offered to the Minority
Stockholders for the Public Shares is insufficient, then the Buyer or Parent may
increase the price per Public Share offered to the Minority Stockholders.
1.7.3 At the Closing, the Buyer or Parent shall
deposit $450,000 (the "ESCROW AMOUNT") into an escrow account established with a
third-party escrow agent pursuant to the Escrow Agreement in the form of Exhibit
I attached hereto (the "STOCKHOLDER ESCROW AGREEMENT"). In the event the Buyer
or Parent complete the Tender Offer as described in this Section 1.7 and
purchase all Public Shares tendered by Minority Stockholders in connection with
such Tender Offer, then the Escrow Amount, together with any interest earned
thereon, shall be
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paid to the Selling Lenders. In the event the Tender Offer is not made within
180 days after the Closing Date, (a) the Escrow Amount, together with any
interest earned thereon, shall be paid to the Minority Stockholders in the same
proportion that the number of Public Shares held by each Minority Stockholder
bears to the total number of Public Shares then held by all Minority
Stockholders, and (b) the Buyer and Parent shall be jointly and severally
obligated to pay immediately $450,000 (the "ADDITIONAL ADJUSTMENT AMOUNT") to
the Selling Lenders by wire transfer (pursuant to their respective wire transfer
instructions set forth on Exhibit A to this Agreement) in accordance with the
allocations set forth on Exhibit B to this Agreement. The Buyer and Parent shall
bear the costs of establishing and maintaining the escrow account until the
Escrow Amount is distributed as provided in this Section 1.7.3.
1.7.4 The parties acknowledge and agree that the
obligations imposed by this Section 1.7 are for the benefit of the Minority
Stockholders. Accordingly, the Buyer and Parent agree that the Minority
Stockholders shall be entitled to enforce the provisions of this Section 1.7 as
third party beneficiaries.
1.8 CLOSING BALANCE SHEET. The Company covenants and agrees to
provide the Buyer within thirty (30) days after the end of the month in which
the Closing occurs a balance sheet reflecting the assets and liabilities of the
Company as of the last day of the month in which the Closing occurs (the
"CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be reasonably detailed
and shall (a) be prepared in accordance with the books and records of the
Company, (b) fairly present the financial condition of the Company as of the
date therein indicated consistent with past practice, and (c) be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis.
1.9 FURTHER ASSURANCES. The Selling Lenders agree that, if at
any time after the Closing, the Buyer considers or is advised that any further
deeds, assignments or assurances are reasonably necessary or desirable to vest,
perfect or confirm in the Buyer title to any property or rights of the Selling
Lenders, the Selling Lenders will execute and deliver any and all documents
(including without limitation, the execution, amendment or supplementation of
deeds, assignments, financing statements and continuation statements relating to
any collateral securing the Company Debt for filing under the provisions of the
Uniform Commercial Code or any similar statute of any applicable jurisdiction)
and do all other things necessary or desirable to vest, perfect or confirm title
to such property or rights in the Buyer and otherwise to carry out the purpose
of this Agreement.
1.10 Regulatory Receipts. With respect to the Agreement to
Exchange Indebtedness for Personal Property (the "EXCHANGE AGREEMENT") between
the Company and the Selling Lenders, among other parties, the parties hereto
agree as follows with respect to the payment of the Assigned Regulatory Receipts
(as defined in the Exchange Agreement) by the Credit Parties (as defined in the
Exchange Agreement) to the Selling Lenders, that:
1.10.1 Effective as of the Closing Date, in
consideration for the sale by the Selling Lenders of the Company Debt to the
Buyer, each of the Buyer and Parent shall take all commercially reasonable
action necessary to cause the Credit Parties to fully comply with the terms of
the Exchange Agreement.
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1.10.2 Each of the Buyer and Parent shall not take
any action that would materially adversely affect the Selling Lenders' right to
receive payment of the Assigned Regulatory Receipts under the Exchange
Agreement.
1.10.3 The obligations of the Buyer and Parent under
this Section 1.10 shall be binding on each of the Buyer and Parent's respective
successors and assigns.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants, except as set forth on the
Company Disclosure Letter delivered to the Buyer herewith, which may be updated
to reflect immaterial changes that occur after signing and prior to the Closing,
as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company and each of
its Subsidiaries (as hereinafter defined) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or a limited liability company duly formed, validly existing and
in good standing under the laws of the state of its formation, has the corporate
power and authority to own, operate and lease its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified as a
foreign corporation or limited liability company in each jurisdiction listed on
Section 2.1 of the Company Disclosure Letter. Except as listed on Section 2.1 of
the Company Disclosure Letter, the Company does not own or lease any real
property, has no employees and does not maintain a place of business in any
foreign country or in any state of the United States other than Ohio in which a
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect (as hereinafter defined) on its present or proposed operations or
financial condition.
For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT" when
used in connection with an entity means any change, event, occurrence,
development, circumstance or effect, whether or not such change, event,
occurrence, development, circumstance or effect is caused by or arises in
connection with a breach of a representation, warranty, covenant or agreement of
such entity in this Agreement, that is or is reasonably likely to be,
individually or in the aggregate, materially adverse to the business, assets
(including intangible assets), capitalization, financial condition, operations
or results of operations, employees or prospects of such entity taken as a whole
with its subsidiaries, except to the extent that any such change, event,
circumstance or effect is caused by results from (i) changes in general economic
conditions, (ii) changes affecting the industry generally in which such entity
operates (provided that such changes do not affect such entity in a
substantially disproportionate manner), (iii) changes in the trading price for
such entity's capital stock, (iv) changes caused by the taking of any action
required or permitted under this Agreement, or (v) any change in any law or in
generally accepted accounting principles or in the interpretation thereof.
For purposes of this Agreement, the term "KNOWLEDGE" means with respect
to a party hereto, with respect to any matter in question, that any of the
officers of such party has actual knowledge of such matter after reasonable
inquiry.
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2.2 POWER, AUTHORIZATION AND VALIDITY.
2.2.1 POWER AND CAPACITY. The Company has the right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement and the Transactions contemplated hereunder, and all
agreements to which the Company is or will be a party that are required to be
executed pursuant to this Agreement (the "COMPANY ANCILLARY AGREEMENTS"). The
execution, delivery and performance of this Agreement and the Company Ancillary
Agreements have been duly and validly approved and authorized by the Company's
Board of Directors and the Selling Lenders (who collectively hold approximately
95% of the voting Common Stock of the Company), as required by applicable law
and the Company's certificate of incorporation and bylaws.
2.2.2 NO FILINGS. No filing, authorization or
approval, governmental or otherwise, is necessary to enable the Company to enter
into, and to perform its obligations under, this Agreement and the Company
Ancillary Agreements, except for (a) such filings as may be required to comply
with federal and state securities laws, (b) the approval of the Selling Lenders
of this Agreement and the Transactions contemplated hereby, which approval has
been obtained as of the date of this Agreement, and (c) the notices and
approvals listed on Section 2.2.2 to the Company Disclosure Letter.
2.2.3 BINDING OBLIGATION. This Agreement and the
Company Ancillary Agreements are, or when executed by the Company will be, valid
and binding obligations of the Company enforceable in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.3 VALIDITY OF COMPANY DEBT. The Company has not modified,
amended or altered the Credit Agreement or the Security Agreement, except as
expressly provided in the amendments and waivers identified in Section 1.1 of
this Agreement.
2.4 CAPITALIZATION. The authorized capital stock of Company
consists of (a) 1,000,000,000 shares of common stock, $0.01 par value per share
(the "COMMON STOCK"), of which (i) 615,018,963 shares are issued and
outstanding, and (ii) 472,263 shares are issuable upon exercise of outstanding
options and warrants, and (b) 1,000,000 shares of convertible preferred stock,
$0.01 par value per share (the "PREFERRED STOCK"), none of which are issued and
outstanding. No other shares of capital stock or other voting securities of the
Company are authorized, issued or outstanding. All issued and outstanding shares
of the Common Stock have been duly authorized and were validly issued, are fully
paid and nonassessable, are not subject to any right of rescission, are not
subject to preemptive rights by statute, the certificate of incorporation or
bylaws of the Company, or any agreement or document to which the Company is a
party or by which it is bound and have been offered, issued, sold and delivered
by the Company in compliance with all registration or qualification requirements
(or applicable exemptions therefrom) of applicable federal and state securities
laws. The Company is not under any obligation to register under the Securities
Act any of its presently outstanding securities or any securities that may be
subsequently issued. There is no liability for dividends accrued but unpaid with
respect to the Company's outstanding securities.
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2.5 SUBSIDIARIES. Except as listed on Section 2.5 of the
Company Disclosure Letter (collectively the "SUBSIDIARIES" and each a
"SUBSIDIARY"), the Company does not have any subsidiaries or any interest,
direct or indirect, in any corporation, partnership, joint venture or other
business entity. Each of the Subsidiaries is wholly owned by the Company. The
Company's interest in other business entities is listed in Section 2.5 of the
Company Disclosure Letter.
2.6 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution
and delivery of this Agreement nor any Company Ancillary Agreement, nor the
consummation of the Transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of (a) any provision of the certificate of
incorporation or bylaws of the Company or any Subsidiary, as currently in
effect, (b) in any material respect, any material instrument or contract to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound, or (c) any federal, state, local or foreign judgment, writ,
decree, order, statute, rule or regulation applicable to the Company or any
Subsidiary or their respective assets or properties. Except as set forth in
Section 2.6 of the Company Disclosure Letter, the consummation of the
Transactions and the resulting transfer to the Buyer of control of the Company
will not require the consent of any third party.
2.7 LITIGATION. Except for the matters listed in Section 2.7
of the Company Disclosure Letter, there is no action, proceeding, claim or
investigation pending against the Company or any Subsidiary before any court or
administrative agency that if determined adversely to the Company or any
Subsidiary may reasonably be expected to have a Material Adverse Effect on the
Company or any Subsidiary, nor, to the best of Company's knowledge, has any such
action, proceeding, claim or investigation been threatened. There is, to the
best of the Company's knowledge, no reasonable basis for any stockholder or
former stockholder of the Company, or any other person, firm, corporation, or
entity, to assert a claim against the Company or the Buyer based upon: (a)
ownership or rights to ownership of any shares of the Company's capital stock,
(b) any rights as a stockholder of the Company, including any option or
preemptive rights or rights to notice or to vote, or (c) any rights under any
agreement among the Company and its stockholders.
2.8 TAXES. The Company and each of its Subsidiaries has filed
all federal and state tax returns and, to the best knowledge of the Company, all
local and foreign tax returns required to be filed, has paid or established an
adequate accrual or reserve for the payment of all taxes known by the Company to
be due in respect of the periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, has made all necessary estimated tax payments known by
the Company to be required to be paid, and has no material liability for taxes
in excess of the amount so paid or accruals or reserves so established. Neither
the Company nor any Subsidiary is delinquent in the payment of any tax or is
delinquent in the filing of any tax returns known by the Company to be required
to be filed, and no deficiencies for any tax have been threatened, claimed,
proposed or assessed. Except for the matters listed in Section 2.8 of the
Company Disclosure Letter, no tax return of the Company or any Subsidiary has
ever been audited by the Internal Revenue Service or any state taxing agency or
authority. The tax basis for the pay phones owned by the Company and its
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Subsidiaries is set forth on Schedule 2.8 of the Company Disclosure Schedule.
For the purposes of this Section 2.8, the terms "TAX" and "TAXES" include all
federal, state, local and foreign income, gains, franchise, transaction, lease,
service, excise, property, sales, use, ad valorem, withholding, employment,
license, payroll, occupation, gross receipts, premium, recording, deed, value
added or transfer taxes, governmental charges, fees, levies or assessments
(whether payable directly or by withholding), and, with respect to such taxes,
any estimated tax, interest and penalties or additions to tax and interest on
such penalties and additions to tax.
2.9 FINANCIAL STATEMENTS. The Company has delivered to the
Buyer as Section 2.9 to the Company Disclosure Letter (i) the Company's audited
balance sheet as of December 31, 2003 (the "BASE BALANCE SHEET") and income
statement and statement of cash flows for the year then ended (collectively the
"BASE FINANCIAL STATEMENTS"), and (ii) an unaudited balance sheet of the Company
dated as of July 31, 2004 (the "INTERIM BALANCE SHEET") and the related
unaudited income statement and statement of cash flows for the seven month
period ended July 31, 2004 (the "INTERIM FINANCIAL STATEMENTS"). (The Base
Financial Statements and the Interim Financial Statements are collectively
referred to as the "FINANCIAL STATEMENTS.") The Financial Statements (a) are in
accordance with the books and records of the Company, (b) fairly present in all
material respects the financial condition of the Company as of the respective
dates therein indicated and the results of operations for the respective periods
therein specified, and (c) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. The Company has no
material debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against in the Financial Statements, except for those that may have
been incurred after the date of the Financial Statements in the ordinary course
of its business, consistent with past practice and that are not material in
amount either individually or collectively.
2.10 TITLE TO PROPERTIES. Except as listed on Schedule 2.10 of
the Company Disclosure Letter, the Company has good and marketable title to all
of its assets as shown on the Interim Balance Sheet, free and clear of all
liens, charges, restrictions or encumbrances (other than for (a) taxes not yet
due and payable and (b) the liens and security interests in favor of the Selling
Lenders under the Loan Documents and in favor of Cerberus in connection with the
Cerberus Subordinated Debt). All machinery and equipment included in such
properties is in good condition and repair, normal wear and tear excepted.
Except for the matters listed in Section 2.10 of the Company Disclosure Letter,
all leases of real or personal property to which the Company or any Subsidiary
is a party are fully effective and afford the Company or the Subsidiary peaceful
and undisturbed possession of the subject matter of the lease. Neither the
Company nor any Subsidiary is in violation of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties (the violation of
which would have a Material Adverse Effect on its business), or has received any
written notice of violation with which it has not complied.
2.11 ABSENCE OF CERTAIN CHANGES. Since the date of the Interim
Balance Sheet, there has not been with respect to the Company or any Subsidiary:
(a) any change in the financial condition,
properties, assets, liabilities, business or operations thereof which change, by
itself or in conjunction with all
10
other such changes, whether or not arising in the ordinary course of business,
has had or will have a Material Adverse Effect thereon;
(b) any contingent liability incurred
thereby as guarantor with respect to the obligations of others;
(c) any material mortgage, encumbrance or
lien placed on any of the material properties thereof (other than liens that may
arise for taxes not yet due and payable);
(d) any material obligation or liability
incurred thereby other than obligations and liabilities incurred in the ordinary
course of business;
(e) any purchase or sale or other
disposition, or any agreement or other arrangement for the purchase, sale or
other disposition, of any of the material properties or assets thereof other
than in the ordinary course of business;
(f) any damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting the properties,
assets or business thereof;
(g) any declaration, setting aside or
payment of any dividend on, or the making of any other distribution in respect
of, the capital stock thereof, any split, combination or recapitalization of the
capital stock thereof or any direct or indirect redemption, purchase or other
acquisition of the capital stock thereof;
(h) any labor dispute or claim of unfair
labor practices, or any change in the compensation payable or to become payable
to any of its officers, employees or agents, or bonus payment or arrangement
made to or with any of such officers, employees or agents, in either case,
except in the ordinary course of business, consistent with past practice;
(i) any material change with respect to the
management, supervisory or other key personnel thereof other than in the
ordinary course of business;
(j) any payment or discharge of a material
lien or liability thereof which lien or liability was not either reflected in
the Interim Balance Sheet or incurred in the ordinary course of business
thereafter; or
(k) any obligation or liability incurred
thereby to any of its officers, directors or stockholders or any loans or
advances made thereby to any of its officers, directors or stockholders except
normal compensation and expense allowances payable to officers.
2.12 CONTRACTS AND COMMITMENTS. Except as set forth in Section
2.12 of the Company Disclosure Letter, neither the Company nor any Subsidiary
has any contract, obligation or commitment (including any purchase agreement,
license, lease or franchise) which is material to the business of the Company or
any Subsidiary or which involves a potential commitment in excess of $50,000 or
any stock redemption or financing agreement. A copy of each agreement or
document listed in Section 2.12 of the Company Disclosure Letter has been
11
delivered to Buyer's counsel. Neither the Company nor any Subsidiary is a party
to or subject to any contract containing covenants purporting to limit the
Company's or any Subsidiary's freedom to compete in any line of business in any
geographic area. Neither the Company nor any Subsidiary is, nor, to the
knowledge of the Company is any other party thereto, in breach or default in any
material respect under any contract or document so listed in Section 2.12 of the
Company Disclosure Letter, which breach or default may reasonably be expected to
have a Material Adverse Effect on the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to any contract or arrangement which has
had or could reasonably be expected to have a Material Adverse Effect on its
business or prospects. Neither the Company nor any Subsidiary has any material
liability for renegotiation of government contracts or subcontracts, if any.
2.13 INTELLECTUAL PROPERTY. The Company and its Subsidiaries
own, or have the right to use, sell or license all material Intellectual
Property Rights (as defined below) necessary or required for the conduct of
their respective businesses as presently conducted (such Intellectual Property
Rights being hereinafter collectively referred to as the "COMPANY IP RIGHTS")
and such rights to use, sell or license are reasonably sufficient for such
conduct of their respective businesses. The execution, delivery and performance
of this Agreement and the consummation of the Transactions contemplated hereby
will not constitute a material breach of any instrument or agreement governing
any Company IP Right (the "COMPANY IP RIGHTS AGREEMENTS"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Company IP Right or materially impair the right of the Company or any of
its Subsidiaries to use, sell or license any Company IP Right or portion thereof
(except where such breach, forfeiture or termination would not have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole). Except for
any Company IP Rights Agreements listed in Section 2.12 of the Company
Disclosure Letter, neither the Company nor any Subsidiary has any contract,
obligation or commitment to pay royalties, honoraria, fees or other payments to
any person by reason of the ownership, use, license, sale or disposition of the
Company IP Rights which involves a potential commitment in excess of $50,000. To
the knowledge of the Company, no Intellectual Property owned by the Company or
any Subsidiary infringes any Intellectual Property Right of any other party; and
there is no pending or, to the best knowledge of the Company, threatened claim
or litigation contesting the validity, ownership or right to use, sell, license
or dispose of any Company IP Right nor, to the best knowledge of the Company, is
there any basis for any such claim, nor has the Company received any notice
asserting that any Company IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the best knowledge of the Company, is there any basis for any
such assertion. The Company has taken reasonable and practicable steps designed
to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material Company IP Rights. As used herein, the term
"INTELLECTUAL PROPERTY RIGHTS" shall mean all worldwide industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyright, copyright applications,
franchises, licenses, inventories, know-how, trade secrets, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
architecture, structure, display screens, layouts, inventions, development tools
and all documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda and records.
12
2.14 COMPLIANCE WITH LAWS. The Company and each of its
Subsidiaries has complied, or prior to the Closing Date will have complied, and
is or will be at the Closing Date in full compliance, in all material respects
with all applicable laws, ordinances, regulations, and rules, and all orders,
writs, injunctions, awards, judgments, and decrees applicable to it or to the
assets, properties, and business thereof (the violation of which would have a
Material Adverse Effect upon its business), including, without limitation: (a)
all applicable federal and state securities laws and regulations, and (b) all
applicable federal, state, and local laws, ordinances, regulations, and all
orders, writs, injunctions, awards, judgments, and decrees pertaining to (i) the
sale, licensing, leasing, ownership, or management of its owned, leased or
licensed real or personal property, products and technical data, including,
without limitation, Section 276 of the Telecommunications Act of 1996, as
amended by the Federal Communications Commission ("FCC") to date, and (ii)
safety, health, fire prevention, environmental protection, toxic waste disposal,
building standards, zoning and other similar matters. Each of the Company and
its Subsidiaries has received all permits and approvals from, and has made all
filings with, third parties, including the FCC and other appropriate federal or
state government agencies and authorities, that are necessary in connection with
its present business and that if not obtained or filed would have a Material
Adverse Effect on the Company. To the best of the Company's knowledge, there are
no legal or administrative proceedings or investigations pending or threatened,
that, if enacted or determined adversely to the Company or any Subsidiary, would
result in any Material Adverse Effect to the Company or its Subsidiaries.
2.15 INTERESTED PARTY TRANSACTIONS. No current officer or
director of the Company or, to the best of Company's knowledge, any "affiliate"
or "associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to the Company or any Subsidiary any material goods,
property, technology or intellectual or other property rights or services; (ii)
any person or entity which competes with the Company or any Subsidiary; or (iii)
any contract or agreement to which the Company or any Subsidiary is a party or
by which it may be bound or affected (except for normal compensation for
services as an officer, director or employee thereof).
2.16 EMPLOYEES, ERISA AND OTHER COMPLIANCE.
2.16.1 Except as set forth in Section 2.16.1 of the
Company Disclosure Letter, the Company and its Subsidiaries do not have any
written employment contracts or consulting agreements currently in effect that
limits their ability to terminate any of their employees' employment or
consulting arrangements at will.
2.16.2 Neither the Company nor any Subsidiary (i) has
ever been or is now subject to a union organizing effort, (ii) is subject to any
collective bargaining agreement with respect to any of its employees, (iii) is
subject to any other contract, written or oral, with any trade or labor union or
similar organization, or (iv) to the Company's knowledge, has any current
material labor disputes. The Company and each of its Subsidiaries has generally
good labor relations, and has no knowledge that the consummation of the
Transactions contemplated hereby will have a Material Adverse Effect on such
labor relations, and has no knowledge that any of its key employees intends to
leave its employ within the sixty (60) days following the Closing.
13
2.16.3 Section 2.16.3 of the Company Disclosure
Letter identifies (i) each material written "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and (ii) all other material written plans or agreements
involving direct or indirect compensation or benefits (including any written
employment agreements entered into between the Company or any Subsidiary and any
employee of the Company or any Subsidiary, but excluding workers' compensation,
unemployment compensation and other government-mandated programs) currently
maintained or contributed to by the Company or any Subsidiary (collectively, the
"COMPANY EMPLOYEE PLANS"). For purposes of this Section 2.16.3, "ERISA
AFFILIATE" shall mean any entity which is a member of (A) a "controlled group of
corporations," as defined in Section 414(b) of the Code, (B) a group of entities
under "common control," as defined in Section 414(c) of the Code, or (C) an
"affiliated service group," as defined in Section 414(m) of the Code, any of
which includes Company or any Subsidiary. Copies of all Company Employee Plans
(and, if applicable, related trust agreements) and all amendments thereto and
written interpretations thereof (including summary plan descriptions) have been
made available to the Buyer or its counsel, together with the three most recent
annual reports (Form 5500, including, if applicable, Schedule B thereto), if
any, prepared in connection with any such Company Employee Plan. All Company
Employee Plans which individually or collectively would constitute an "employee
pension benefit plan," as defined in Section 3(2) of ERISA (collectively, the
"COMPANY PENSION PLANS"), are identified as such in Section 2.16.3 of the
Company Disclosure Letter. All contributions due from Company or any Subsidiary
with respect to any of the Company Employee Plans have been made as required
under ERISA or have been accrued on the Base Financial Statements. To the
Company's knowledge, each Company Employee Plan has been maintained
substantially in compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to such Company Employee
Plans, except as would not reasonably be expected to result in a Material
Adverse Effect.
2.16.4 To the Company's knowledge, no Company Pension
Plan constitutes, or has since the enactment of ERISA constituted, a
"multiemployer plan," as defined in Section 3(37) of ERISA. No Company Pension
Plans are subject to Title IV of ERISA. To the Company's knowledge, no
"prohibited transaction," as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any Company Employee Plan which is
covered by Title I of ERISA which would result in a material liability to the
Company and its Subsidiaries taken as a whole, excluding transactions effected
pursuant to a statutory or administrative exemption. To the Company's knowledge,
nothing has been done or omitted to be done and there has been no transaction or
holding of any asset under or in connection with any Company Employee Plan has
or that has made Company or any officer or director of Company subject to any
material liability under Title I of ERISA or liable for any material tax (as
defined in Section 2.8 hereunder) or penalty pursuant to Sections 4972, 4975,
4976 or 4979 of the Code or Section 502 of ERISA.
2.16.5 The Company has made available to the Buyer or
its counsel a complete and correct copy of the most recent Internal Revenue
Service determination letter with respect to each Company 401(a) Plan.
14
2.16.6 Section 2.16.6 of the Company Disclosure
Letter lists each written employment, severance or other similar written
contract, arrangement or policy and each written plan or arrangement providing
for insurance coverage (including any self-insured arrangements), vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors
which (A) is not a Company Employee Plan, (B) is entered into, maintained or
contributed to, as the case may be, by the Company or any Subsidiary and (C)
covers any employee or former employee of the Company or any Subsidiary except
for government mandated programs. Such contracts, plans and arrangements as are
described in this Section 2.16.6 are herein referred to collectively as the
"COMPANY BENEFIT ARRANGEMENTS." To the Company's knowledge, each Company Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Company Benefit Arrangement. The
Company has made available to the Buyer or its counsel a complete and correct
copy or description of each material written Company Benefit Arrangement.
2.16.7 No benefit payable or which may become payable
by the Company or any Subsidiary pursuant to any Company Employee Plan or any
Company Benefit Arrangement or as a result of or arising under this Agreement
shall constitute an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code) which is subject to the imposition of an excise tax under Section
4999 of the Code or which would not be deductible by reason of Section 280G of
the Code.
2.16.8 To the Company's knowledge, the Company and
each of its Subsidiaries is in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation matters, but not including ERISA, except
as would not reasonably be expected to result in a Material Adverse Effect.
2.16.9 A list of all current employees, officers and
consultants of the Company and the Subsidiaries and their current compensation
is set forth in Section 2.16.9 of the Company Disclosure Letter.
2.17 CORPORATE DOCUMENTS. The Company has made available to
the Buyer for examination all documents and information listed in the Company
Disclosure Letter or the Exhibits called for by this Agreement which has been
requested by Buyer's legal counsel, including, without limitation, the
following: (a) copies of the Company's certificate of incorporation and bylaws
as currently in effect; (b) its Minute Book containing all records of all
proceedings, consents, actions, and meetings of the stockholders, the board of
directors and any committees thereof; (c) its stock ledger and journal
reflecting all stock issuances and transfers; and (d) all permits, orders, and
consents issued by any regulatory agency with respect to the Company, or any
securities of the Company, and all applications for such permits, orders, and
consents.
15
2.18 NO BROKERS. Except as listed in Section 2.18 of the
Company Disclosure Letter, the Company is not obligated for the payment of fees
or expenses of any investment banker, broker or finder in connection with the
origination, negotiation or execution of this Agreement or in connection with
any Transaction contemplated hereby.
2.19 PROJECTIONS. The Company has delivered to the Buyer as
Section 2.19 of the Company Disclosure Letter financial projections of the
Company (the "Projections"). The Projections were prepared in good faith by the
Company and represent the Company's best estimates of the projected financial
condition and forecasted results of operations of the Company based on various
assumptions and estimates made by the Company. However, the Company makes no
assurance that the results contained in the Projections can be achieved or that
the assumptions underlying the Projections will prove to be accurate.
2.20 BOOKS AND RECORDS.
2.20.1 The books, records and accounts of the Company
and its Subsidiaries (a) are in all material respects true and complete, (b)
have been maintained in accordance with good business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect in all material respects the transactions and dispositions of
the assets of the Company, and (d) accurately and fairly reflect in all material
respects the basis for the Base Financial Statements.
2.20.2 The Company has devised and maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and
(ii) to maintain accountability for assets, and (c) the amount recorded for
assets on the books and records of the Company is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
2.21 INSURANCE. The Company and its Subsidiaries maintain, and
at all times during the prior three (3) years have maintained, fire and
casualty, general liability, business interruption, product liability, and
sprinkler and water damage insurance which it believes to be reasonably prudent
for similarly sized and similarly situated businesses.
2.22 SEC DOCUMENTS.
2.22.1 SEC Reports. The Company has furnished to the
Buyer a true and complete copy of each statement, report, registration statement
(together with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), if any), definitive
proxy statement and other filings filed with the SEC by the Company on or after
January 1, 2002 and, prior to the Closing Date, the Company will have furnished
the Buyer with true and complete copies of any additional documents filed with
the SEC by the Company prior to the Closing Date (collectively, the "COMPANY SEC
DOCUMENTS"), all to the extent the Company SEC Documents are not available on
XXXXX. In addition, the Company has made available to the Buyer all exhibits to
the Company SEC Documents filed
16
prior to the date hereof, and will promptly make available to the Buyer all
exhibits to any additional Company SEC Documents filed prior to the Closing
Date. All documents required to be filed as exhibits to the Company SEC
Documents have been so filed. As of their respective filing dates, or, with
respect to registration statements as of their effective dates, the Company SEC
Documents complied in all material respects with the applicable requirements of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
Securities Act, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the extent
corrected, modified or superseded by a subsequently filed Company SEC Document.
There is no requirement under the Securities Act or the Exchange Act, as the
case may be, to have amended any such filing, except to the extent such filing
has been amended, modified or superseded by a subsequently filed Company SEC
Document.
2.22.2 Company Financial Statements. The financial
statements of Company, including the notes thereto, included in the Company SEC
Documents (the "COMPANY FINANCIAL STATEMENTS"), complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto).
The Company Financial Statements fairly present in all material respects the
consolidated financial condition and operating results of Company and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
Since January 1, 2002, there has been no change in Company material accounting
policies except as described in the notes to the Company Financial Statements.
2.23 ENVIRONMENTAL MATTERS.
2.23.1 During the period that Company and Subsidiary
have leased or owned their respective properties or owned or operated any
facilities, to the best of Company's knowledge, there have been no disposals,
releases or threatened releases of Hazardous Materials (as defined below) on,
from or under such properties or facilities. The Company has no knowledge of any
presence, disposals, releases or threatened releases of Hazardous Materials on,
from or under any of such properties or facilities, which may have occurred
prior to the Company or any Subsidiary having taken possession of any of such
properties or facilities. For the purposes of this Agreement, the terms
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
For the purposes of this Agreement "HAZARDOUS MATERIALS" shall mean any
hazardous or toxic substance, material or waste which is or becomes prior to the
Closing regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance" or
"hazardous chemical" under (1) CERCLA; (2) any similar federal, state or local
law; or (3) regulations promulgated under any of the above laws or statutes.
2.23.2 None of the properties or facilities of the
Company or any Subsidiary is in violation of any federal, state or local law,
ordinance, regulation or order relating
17
to industrial hygiene or to the environmental conditions on, under or about such
properties or facilities, including, but not limited to, soil and ground water
condition, other than such violations which would not reasonably be expected to
have a Material Adverse Effect on the Company. During the time that the Company
or any Subsidiary have owned or leased their respective properties and
facilities, neither Company nor any Subsidiary nor, to the Company's knowledge,
any third party, has used, generated, manufactured or stored on, under or about
such properties or facilities or transported to or from such properties or
facilities any Hazardous Materials.
2.23.3 During the time that the Company or any
Subsidiary have owned or leased their respective properties and facilities, to
the best of Company's knowledge, there has been no litigation brought or
threatened against the Company or any Subsidiary by, or any settlement reached
by the Company or any Subsidiary with, any party or parties alleging the
presence, disposal, release or threatened release of any Hazardous Materials on,
from or under any of such properties or facilities.
2.24 DISCLOSURE. Neither this Agreement, its Exhibits and
schedules, nor any of the certificates or documents to be delivered by the
Company to the Buyer under this Agreement, taken together, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING LENDERS
Each of the Selling Lenders, for itself but not as to any other Selling
Lender, hereby represents and warrants as follows:
3.1 POWER, AUTHORIZATION AND VALIDITY.
3.1.1 POWER AND CAPACITY. The Selling Lender has the
right, power, legal capacity and authority to enter into and perform the Selling
Lender's obligations under this Agreement and the Transactions contemplated
hereunder, and all agreements to which the Selling Lender is or will be a party
that are required to be executed pursuant to this Agreement (the "SELLING LENDER
ANCILLARY AGREEMENTS"). The execution, delivery and performance of this
Agreement and the Selling Lender Ancillary Agreements have been duly and validly
approved and authorized by the Selling Lender.
3.1.2 NO FILINGS. No filing, authorization or
approval, governmental or otherwise, is necessary to enable the Selling Lender
to enter into, and to perform the Selling Lender's obligations under, this
Agreement and the Selling Lender Ancillary Agreements, except for such filings
as may be required to comply with federal and state securities laws.
18
3.1.3 BINDING OBLIGATION. This Agreement and the
Selling Lender Ancillary Agreements are, or when executed by the Selling Lender
will be, valid and binding obligations of the Selling Lender enforceable in
accordance with their respective terms, except as to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally, and (b) rules of law governing specific performance, injunctive
relief and other equitable remedies.
3.2 VALIDITY OF COMPANY DEBT. The Selling Lender has duly
executed each of the Loan Documents to which the Selling Lender is a party, and
the proceeds of loans made pursuant to the Loan Documents were distributed to
the Company or its Subsidiaries, and such Loan Documents are valid and binding
instruments enforceable by the Selling Lenders against the Company or its
Subsidiaries. The Selling Lender has the right, power and authority to sell the
Company Debt free and clear of any liens, mortgages, pledges, security
interests, encumbrances or charges of any kind. The Selling Lender has not
modified, amended or altered the Credit Agreement or the Security Agreement,
except as expressly provided in the amendments and waivers identified in Section
1.1 of this Agreement. The total outstanding balance owed by the Company to the
Selling Lender under the Credit Agreement and other Loan Documents as of the
date of this Agreement is set forth on Exhibit B attached hereto.
3.3 TITLE TO SHARES. As of the Closing Date, the Selling
Lender holds good and marketable title to the Shares listed opposite the Selling
Lender's name on Exhibit B to this Agreement, free and clear of all liens,
agreements, voting trusts, proxies and other arrangements or restrictions of any
kind whatsoever (other than normal restrictions on transfer under applicable
federal and state securities laws). The Selling Lender does not hold any
options, warrants, calls, conversion rights or commitments of any kind relating
to the capital stock of the Company.
3.4 NO BROKERS. The Selling Lender is not obligated to pay any
fees or expenses of any investment banker, broker or finder in connection with
the origination, negotiation or execution of this Agreement or in connection
with any Transaction contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT
The Buyer and Parent hereby represent and warrant, except as set forth
on the Buyer Disclosure Letter delivered to Company which may be updated to
reflect immaterial changes that occur after signing and prior to the Closing, as
follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer and Parent are
each corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware, and have the corporate power and authority to
own, operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted.
4.2 POWER, AUTHORIZATION AND VALIDITY.
4.2.1 The Buyer and Parent have the right, power,
legal capacity and authority to enter into and perform their obligations under
this Agreement, and all agreements to which the Buyer or the Parent is or will
be a party that are required to be executed pursuant to
19
this Agreement (the "BUYER ANCILLARY AGREEMENTS"). The execution, delivery and
performance of this Agreement and the Buyer Ancillary Agreements have been duly
and validly approved and authorized by the Buyer's and Parent's Board of
Directors in compliance with applicable law and the certificate of incorporation
and bylaws of the Buyer and Parent.
4.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable the Buyer or Parent to enter
into, and to perform its obligations under, this Agreement and the Buyer
Ancillary Agreements, except for such filings as may be required to comply with
federal and state securities laws.
4.2.3 This Agreement and the Buyer Ancillary
Agreements are, or when executed by the Buyer and Parent will be, valid and
binding obligations of the Buyer and Parent enforceable in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies.
4.3 CAPITALIZATION. The authorized capital stock of Parent
consists of (a) 600,000,000 shares of common stock, $0.001 par value per share
(the "PARENT COMMON STOCK"), 5,000,000 shares of preferred stock, $0.001 par
value per share (the "PARENT PREFERRED STOCK") and 35,425 shares of Series A
Convertible Preferred Stock, $0.001 par value per share (the "SERIES A PREFERRED
STOCK"). As of August 20, 2004, (i) 258,014,196 shares of Parent Common Stock
were issued and outstanding and 35,425 shares of Series A Preferred Stock were
issued and outstanding, (ii) options to purchase 8,471,037 shares of Parent
Common Stock have been granted, and (iii) warrants to purchase 30,603,537 shares
of Parent Common Stock have been granted. No other shares of capital stock or
other equity securities (as defined in Section 3(11) of the Securities Exchange
Act of 1934, as amended) of Parent are authorized, issued or outstanding. Except
as set forth in Section 4.3 of the Buyer Disclosure Letter, all issued and
outstanding shares of the Parent Common Stock have been duly authorized and were
validly issued, are fully paid and nonassessable, are not subject to any right
of rescission, are not subject to preemptive rights by statute, the certificate
of incorporation or bylaws of Parent, or any agreement or document to which
Parent is a party or by which it is bound and have been offered, issued, sold
and delivered by Parent in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws. Parent is not under any obligation to register under the
Securities Act any of its presently outstanding securities or any securities
that may be subsequently issued. There is no liability for dividends accrued but
unpaid with respect to Parent's outstanding securities.
4.4 WARRANTS. All shares of Parent Common Stock issuable upon
the exercise of any Warrants granted to the Selling Lenders hereunder (i) are
duly authorized by Parent's certificate of incorporation, (ii) have been duly
authorized by Parent's Board of Directors, and, if necessary, Parent's
stockholders, (iii) have been duly and validly reserved for issuance pursuant to
the terms of the Warrant, and (iv) will, upon payment therefor in accordance
with the terms of the Warrant, be duly and validly issued, fully paid and
nonassessable, free of preemptive or similar rights, taxes, security interests,
adverse claims or encumbrances of any nature whatsoever.
20
4.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution
and delivery of this Agreement nor any Buyer Ancillary Agreement, nor the
consummation of the Transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of (a) any provision of the certificate of
incorporation or bylaws of the Buyer or Parent, as currently in effect, (b) in
any material respect, any material instrument or contract to which the Buyer or
Parent is a party or by which the Buyer or Parent is bound, or (c) any federal,
state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to the Buyer or Parent or their assets or properties.
4.6 ABSENCE OF CERTAIN CHANGES. Since the fiscal year ended
December 31, 2003, there has not been any change in the financial condition,
properties, assets, liabilities, business or operations of the Buyer or Parent
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or will have a Material
Adverse Effect on the ability of the Buyer to perform its obligations under this
Agreement.
4.7 NO BROKERS. Neither the Buyer nor Parent is obligated for
the payment of fees or expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of this Agreement or in
connection with any Transaction contemplated hereby.
5. COMPANY PRECLOSING COVENANTS
During the period from the date of this Agreement until the Closing
Date, the Company covenants and agrees as follows:
5.1 ADVICE OF CHANGES. The Company will promptly advise the
Buyer in writing (a) of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of the Company
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (b) of any
Material Adverse Effect suffered by the Company or its Subsidiaries subsequent
to the date of this Agreement but prior to the Closing Date. To ensure
compliance with this Section 5.1, the Company shall deliver to the Buyer within
thirty (30) days after the end of each monthly accounting period ending after
the date of this Agreement and before the Closing Date an unaudited balance
sheet and statement of operations for such monthly accounting period, which
financial statements shall be prepared in the ordinary course of business, in
accordance with the Company's books and records and generally accepted
accounting principles and shall fairly present the financial position of Company
as of their respective dates and the results of the Company's operations for the
periods then ended.
5.2 MAINTENANCE OF BUSINESS. The Company will use its
commercially reasonable efforts to carry on and preserve its business and its
relationships with customers, suppliers, employees and others in substantially
the same manner as it has prior to the date hereof. If the Company becomes aware
of a material deterioration in the relationship with any customer, supplier or
key employee, it will promptly bring such information to the attention of
21
the Buyer in writing and, if requested by the Buyer, will exert its commercially
reasonable efforts to restore the relationship.
5.3 CONDUCT OF BUSINESS. Except as provided below and except
as contemplated by the Exchange Agreement, each of the Company and each of its
Subsidiaries will continue to conduct its business and maintain its business
relationships in the ordinary and usual course and will not, and the Selling
Lenders will not cause the Company or its Subsidiaries to, without the prior
written consent of the Buyer:
(a) borrow any money other than trade credit
incurred in the ordinary course of business;
(b) enter into any transaction not in the
ordinary course of business;
(c) encumber or permit to be encumbered any
of its material assets except in the ordinary course of its business consistent
with past practice and to an extent which is not material;
(d) dispose of any of its material assets
except in the ordinary course of business consistent with past practice;
(e) enter into any material lease or
contract for the purchase or sale of any property, real or personal, except in
the ordinary course of business consistent with past practice;
(f) fail to maintain its equipment and other
material assets in good working condition and repair according to the standards
it has maintained to the date of this Agreement, subject only to ordinary wear
and tear;
(g) pay any bonus, increased salary or
special remuneration to any officer, employee or consultant (except for (i)
normal salary increases consistent with past practice not to exceed 10% per year
and pursuant to existing arrangements previously disclosed to and approved in
writing by the Buyer and (ii) bonuses that have been accrued on the Company
Interim Financial Statements) or enter into any new employment or consulting
agreement with any such person;
(h) change accounting methods;
(i) declare, set aside or pay any cash or
stock dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock;
(j) amend or terminate in any respect the
Loan Documents;
(k) amend or terminate any other contract,
agreement or license to which it is a party except those amended or terminated
in the ordinary course of business, consistent with past practice, and which are
not material in amount or effect;
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(l) lend any amount to any person or entity,
other than (i) advances for travel and expenses which are incurred in the
ordinary course of business consistent with past practice, not material in
amount and documented by receipts for the claimed amounts or (ii) any loans
pursuant to the Company 401(k) Plan;
(m) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable instruments
in the ordinary course of business, consistent with past practice, which are not
material in amount;
(n) waive or release any material right or
claim except in the ordinary course of business, consistent with past practice;
(o) issue or sell any shares of its capital
stock of any class (except upon the exercise of an option or warrant currently
outstanding), or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, or other
commitments to issue shares of capital stock, or accelerate the vesting of any
outstanding option or other security;
(p) split or combine the outstanding shares
of its capital stock of any class or enter into any recapitalization affecting
the number of outstanding shares of its capital stock of any class or affecting
any other of its securities;
(q) merge, consolidate or reorganize with,
or acquire any entity;
(r) amend its certificate of incorporation
or bylaws;
(s) license any of its technology or
intellectual property except in the ordinary course of business consistent with
past practice;
(t) agree to any audit assessment by any tax
authority;
(u) change any insurance coverage or issue
any certificates of insurance; or
(v) agree to do, or permit any Subsidiary to
do or agree to do, any of the things described in the preceding clauses 5.3(a)
through 5.3(u).
5.4 NO SOLICITATION.
(a) From and after the date of this
Agreement until the Closing Date or termination of this Agreement pursuant to
Section 10, the Company and the Selling Lenders will not, nor will they
authorize or permit any of their respective officers, directors, affiliates or
employees or any investment banker, attorney or other advisor or representative
retained by any of them to, directly or indirectly, (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal (as hereinafter defined), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of
23
any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal, or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal,
except in each case to the extent any such action is undertaken to comply with
any applicable legal requirement. The Company and the Selling Lenders will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal
to the extent prohibited by the preceding sentence. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding two sentences by any officer, director or employee of the Company
or the Selling Lenders or any investment banker, attorney or other advisor or
representative of the Company or the Selling Lenders shall be deemed to be a
breach of this Section 5.4 by the Company or the Selling Lenders.
Notwithstanding the foregoing, the Company may, in response to an unsolicited,
written Acquisition Proposal (as defined below) which the Board of Directors of
the Company determines, in good faith, would reasonably be expected to lead to a
Superior Proposal (as hereinafter defined) and pursuant to an executed
confidentiality agreement with customary terms and conditions at least as
restrictive as the confidentiality provisions of the agreement entered into
among the parties hereto, (A) furnish information with respect to the Company to
the person who made such unsolicited proposal and afford such person access to
the properties, books, records, officers, and employees of the Company and its
Subsidiaries, and (B) participate in discussions with, or accept a Superior
Proposal from, such person regarding such Superior Proposal.
(b) For purposes of this Agreement,
"ACQUISITION PROPOSAL" shall mean any offer or proposal from a third party
relating to: (A) any acquisition or purchase from the Company by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 20% interest in the total outstanding
voting securities of the Company or any of its Subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 20% or more of the total outstanding voting
securities of the Company or any of its Subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 80% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of more than 50% of
the assets of the Company; (C) any sale, transfer or disposition of the Company
Debt by the Selling Lenders; or (D) any liquidation or dissolution of the
Company.
(c) In addition to the obligations of the
Company and the Selling Lenders set forth in paragraph (a) of this Section 5.4,
the Company and the Selling Lenders as promptly as practicable shall advise the
Buyer orally and in writing of any request for non-public information which the
Company or the Selling Lenders reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal, or any inquiry with respect to or which
the Company or the Selling Lenders reasonably believe would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and
24
the identity of the person or group making any such request, Acquisition
Proposal or inquiry. The Company and the Selling Lenders will keep the Buyer
informed as promptly as practicable in all material respects of the status and
details (including material amendments or proposed amendments and the results of
any required meetings, consents or approvals) of any such request, Acquisition
Proposal or inquiry.
5.5 REGULATORY APPROVALS. The Company will execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
the governmental authorities listed in Schedule 2.2.2 of the Company Disclosure
Schedule. In addition, the Company will obtain, at the Buyer's expense, opinions
of counsel satisfactory to the Buyer that no regulatory approvals or consents
are required in advance of the Closing in connection with the Transactions in
the following states: California, Florida, Georgia, Illinois, Mississippi, North
Carolina, New Mexico, New York and Virginia;
5.6 NECESSARY CONSENTS. The Company will use its best efforts
to obtain such written consents and take such other actions as may be necessary
or appropriate to allow the consummation of the Transactions contemplated hereby
and to allow the Buyer to carry on the Company's business after the Closing.
5.7 LITIGATION. The Company will notify the Buyer in writing
promptly after learning of any material actions, suits, proceedings or
investigations by or before any court, board or governmental agency, initiated
by or against it or any Subsidiary, or known by it to be threatened against it
or any Subsidiary.
5.8 ACCESS TO INFORMATION. Until the Closing, the Company will
allow Buyer and its agents reasonable access upon prior notice and at all
reasonable times during normal business hours to the files, books, records and
offices of the Company and each Subsidiary, including, without limitation, any
and all information relating to the Company Debt and the Company's taxes,
commitments, contracts, leases, licenses, and real, personal and intangible
property and financial condition; provided that Buyer's review of such
information shall be conducted in a manner not to interfere with the normal
business operations of the Company and its Subsidiaries. The Company will cause
its accountants to cooperate with the Buyer and its agents in making available
all financial information reasonably requested, including without limitation the
right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.
5.9 SATISFACTION OF CONDITIONS PRECEDENT. The Company and the
Selling Lenders will use their reasonable best efforts to satisfy or cause to be
satisfied all the conditions precedent which are set forth in Section 9
hereunder, and the Company and the Selling Lenders will each use their
reasonable best efforts to cause the Transactions contemplated by this Agreement
to be consummated.
5.10 BLUE SKY LAWS. The Company shall use its best efforts to
assist the Buyer to the extent necessary to comply with the securities and Blue
Sky laws of all jurisdictions which are applicable in connection with the
Transactions.
25
6. BUYER AND PARENT PRE-CLOSING AND POST-CLOSING COVENANTS
During the period from the date of this Agreement until the Closing
Date, the Buyer and Parent covenant and agree as follows:
6.1 ADVICE OF CHANGES. The Buyer will promptly advise Company
in writing (a) of any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of the Buyer or Parent
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (b) of any
Material Adverse Effect.
6.2 SATISFACTION OF CONDITIONS PRECEDENT. The Buyer and Parent
will use its best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and the Buyer and Parent will use
its best efforts to cause the Transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the Transactions contemplated hereby.
6.3 BLUE SKY LAWS. The Buyer shall take such steps as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
which are applicable in connection with the Transactions.
6.4 BANKRUPTCY. Neither Buyer nor Parent will cause the
Company to file a voluntarily petition in bankruptcy or other similar insolvency
proceeding within one hundred twenty (120) days after the Closing, and the
Company agrees that it will not file a voluntarily petition in bankruptcy or
other similar insolvency proceeding within one hundred twenty (120) days after
the Closing.
7. CONDITIONS TO EACH PARTY'S OBLIGATIONS
The obligations of each party hereunder are subject to the fulfillment
or satisfaction, on or prior to the Closing Date, of each of the following
conditions (any one or more of which may be waived by each party only in a
writing signed by each party):
7.1 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the Transactions
contemplated by this Agreement.
7.2 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations as may be required by
the States of Louisiana, South Carolina and Tennessee, and there shall have been
taken such other action, as may be required to consummate the Transactions by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements under
applicable federal and state securities laws.
26
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SELLING LENDERS
The Company's and the Selling Lenders' obligations hereunder are
subject to the fulfillment or satisfaction, on and as of the Closing Date, of
each of the following conditions (any one or more of which may be waived by the
Company and the Selling Lenders, but only in a writing signed by the Company and
all of the Selling Lenders):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Buyer and Parent set forth in Section 4
(as qualified by the Buyer Disclosure Letter) shall be true and accurate in
every material respect on and as of the Closing with the same force and effect
as if they had been made at the Closing, except for changes contemplated by this
Agreement and except for those representations and warranties that address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if they had been made
at the Closing, and the Company and the Selling Lenders shall receive a
certificate to such effect executed by the President of the Buyer and Parent.
8.2 COVENANTS. The Buyer and Parent shall have performed and
complied in all material respects with all of its covenants contained in Section
6 on or before the Closing, and the Company shall receive a certificate to such
effect signed by the President of Buyer and Parent.
8.3 CONSENTS. The Company shall have received duly executed
copies of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or
reasonably deemed necessary by the Company's legal counsel for the Buyer to
consummate the Transactions contemplated hereby in form and substance reasonably
satisfactory to the Company.
8.4 CLOSING DELIVERIES. The Selling Lenders shall have
received the documents and items to be delivered by the Buyer pursuant to
Section 1.6.2, including but not limited to, receipt of the Purchase Price on or
before November 30, 2004.
8.5 EXCHANGE. The Selling Lenders and the Company and its
Subsidiaries shall have entered into the Agreement to Exchange Indebtedness for
Personal Property in the form of Exhibit K attached hereto.
9. CONDITIONS TO OBLIGATIONS OF THE BUYER AND PARENT
The obligations of the Buyer and Parent hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing Date, of each of the
following conditions (any one or more of which may be waived by the Buyer and
Parent, but only in a writing signed by the Buyer and Parent):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in Section 2 (as
qualified by the Company Disclosure Letter) and of the Selling Lenders as set
forth in Section 3 shall be true and accurate in every material respect on and
as of the Closing Date with the same force and effect as if they had been
27
made at the Closing, except for changes contemplated by this Agreement and
except for those representations and warranties that address matters only as of
a particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if they had been made at the Closing,
and the Buyer shall receive a certificate to such effect executed by the
President of the Company and each of the Selling Lenders.
9.2 COVENANTS. The Company shall have performed and complied
in all material respects with all of its covenants contained in Section 5 on or
before the Closing Date, and the Buyer shall receive a certificate to such
effect signed by the President of the Company and each of the Selling Lenders.
9.3 ABSENCE OF MATERIAL ADVERSE EFFECT. Since the date hereof,
there shall not have been, in the reasonable judgment of the Board of Directors
of the Buyer or Parent, any Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
9.4 CONSENTS. The Buyer shall have received duly executed
copies of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or
reasonably deemed necessary by Buyer's legal counsel to provide for the
continuation in full force and effect of any and all material contracts and
leases of the Company and for the Buyer to consummate the Transactions
contemplated hereby in form and substance reasonably satisfactory to the Buyer.
9.5 CLOSING DELIVERIES. The Buyer shall have received the
documents and items to be delivered by the Selling Lenders pursuant to Section
1.6.1.
9.6 EXCHANGE. The Selling Lenders and the Company and its
Subsidiaries shall have entered into the Agreement to Exchange Indebtedness for
Personal Property in the form of Exhibit K attached hereto.
10. TERMINATION OF AGREEMENT
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by written consent of each of the
parties;
(b) by any party if the Transactions shall
not have been consummated by November 30, 2004 for any reason; provided,
however, that the right to terminate this Agreement under this Section 10.1(b)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Transactions to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) by any party if a governmental entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Transactions, which order, decree, ruling or other action is
final and nonappealable;
28
(d) by Buyer if a Company Triggering Event
(as defined below) shall have occurred; for the purposes of this Agreement, a
"COMPANY TRIGGERING EVENT" shall be deemed to have occurred if: (i) the Board of
Directors of the Company or any committee thereof fails to reaffirm its
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Transactions within five business days after the Buyer requests
in writing that such recommendation be reaffirmed at any time following the
public announcement of an Acquisition Proposal; (ii) the Board of Directors of
the Company or any committee thereof shall have approved or publicly recommended
any Acquisition Proposal; (iii) the Company shall have entered into any letter
of intent or similar document or any agreement, contract or commitment accepting
any Acquisition Proposal; and (iv) a tender or exchange offer relating to
securities of the Company shall have been commenced by a person unaffiliated
with the Buyer, and the Company shall not have sent to its security holders
pursuant to Rule 14e-2 promulgated under the Securities Act, within 10 business
days after such tender or exchange offer is first published sent or given, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer;
(e) by Buyer if a Selling Lender Triggering
Event (as defined below) shall have occurred; for the purposes of this
Agreement, a "SELLING LENDER TRIGGERING EVENT" shall be deemed to have occurred
if: (i) the Selling Lenders shall have approved or publicly recommended any
Acquisition Proposal; or (ii) the Selling Lenders shall have entered into any
letter of intent or similar document or any agreement, contract or commitment
accepting any Acquisition Proposal;
(f) by the Company if the Board of Directors
of the Company determines, in good faith, after consultation with an independent
financial advisor, that (i) an Acquisition Proposal in which 100% of the
outstanding capital stock of the Company is being acquired in a single
transaction by a third party and (A) the compensation to the Minority
Stockholders on a per share basis is more favorable, from a financial point of
view, than the price per share to be offered pursuant to Section 1.7.1 hereof,
or (B) the amount of total consideration to be received in such Acquisition
Proposal will result in the unsecured creditors of the Company receiving
immediate cash benefits ("SUPERIOR PROPOSAL"), (ii) if accepted, such Superior
Proposal is reasonably likely to be consummated taking into consideration, to
the extent deemed reasonably appropriate, the legal, financial, regulatory and
other aspects of the Superior Proposal, (iii) the Company satisfied the notice
requirements in Section 5.4(c) hereof and the Buyer did not make a counteroffer
for an amount per share payable to the Minority Stockholders in excess of the
Superior Proposal within five business days of receiving notice of the Superior
Proposal, and (iv) the Selling Lenders approved the Superior Proposal.
(g) by the Company or the Selling Lenders,
upon a material breach of any representation, warranty, covenant or agreement on
the part of the Buyer or Parent set forth in this Agreement, which breach (i)
would give rise to a failure of the conditions set forth in Section 8, and (ii)
cannot be or has not been cured within 15 days of the date of notice of such
breach; provided, in each case, that neither the Company nor any of the Selling
Lenders are then in material breach of any representations, warranties,
covenants or agreements contained in this Agreement (after the expiration of
applicable cure periods);
29
(h) by the Buyer or Parent, upon a material
breach of any representation, warranty, covenant or agreement on the part of the
Company or any Selling Lender set forth in this Agreement, which breach (i)
would give rise to a failure of the conditions set forth in Section 9, and (ii)
cannot be or has not been cured within 15 days of the date of notice of such
breach; provided, in each case, that neither the Buyer nor Parent are then in
material breach of any representations, warranties, covenants or agreements
contained in this Agreement (after the expiration of applicable cure periods);
10.2 NOTICE OF TERMINATION. Any proper termination of this
Agreement under Section 10.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 10.1,
this Agreement shall be of no further force or effect, without any liability on
the part of any party hereto or its directors, officers, members, managers,
partners, stockholders or affiliates, except (i) as set forth in this Section
10.2, Section 1.4, Section 10.3 and Section 12, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement.
10.3 FEES AND EXPENSES.
(a) General. Except as set forth in Section
1.3, Section 1.4 and this Section 10.3, all fees and expenses incurred in
connection with this Agreement and the Transactions contemplated hereby shall be
paid by the party incurring such expenses whether or not the Transactions are
consummated; provided, however, the Company Transaction expenses listed on
Schedule 10.3 ("COMPANY TRANSACTION EXPENSES") shall be paid in the following
manner: (i) first, from a certain deposit account held by Xxxxx Fargo Foothill,
Inc. originally funded with proceeds of the sale of a claim of the Company
against MCI WorldCom (the "MCI ACCOUNT"), until the MCI Account balance is
exhausted; and (ii) the remaining Company Transaction Expenses shall be paid (A)
by the Company in an amount equal to $50,000, and (B) the remainder from certain
regulatory receipts currently held by the Company.
(b) Termination Fees. In the event that this
Agreement is terminated by the Buyer pursuant to Section 10.1(d), the Company
shall pay the Buyer a fee equal to $1,000,000 in immediately available funds
(the "COMPANY TERMINATION FEE"). In the event that this Agreement is terminated
by the Buyer pursuant to Section 10.1(e), the Selling Lenders shall, jointly and
severally, pay the Buyer a fee equal to $1,000,000 in immediately available
funds (the "SELLING LENDER TERMINATION FEE"). In the event that this Agreement
is terminated by the Company pursuant to Section 10.1(f), (i) the Company shall
pay the Buyer a fee equal to $150,000 in immediately available funds, and (ii)
the Selling Lenders shall, jointly and severally, pay the Buyer a fee equal to
$850,000 in immediately available funds (the "JOINT TERMINATION FEE"). The
Company Termination Fee, the Selling Lender Termination Fee and the Joint
Termination Fee, as applicable, shall be payable to the Buyer promptly, but in
no event later than two business days after the date of the termination. The
Company and Selling Lenders each acknowledge and agree that the agreements
contained in this Section 10.3(b) are an integral part of the Transactions
contemplated by this Agreement, and that, without these agreements, the Buyer
would not enter into this Agreement. Accordingly, if the Company or the Selling
Lenders or both, as applicable, fail to pay in a timely manner the amounts due
pursuant to this Section 10.3(b), and, in order to obtain such payment, the
Buyer makes a claim that results in a judgment
30
against either the Company or the Selling Lenders, as applicable, for the
amounts set forth in this Section 10.3(b), the Company or the Selling Lenders,
as applicable, shall pay to the Buyer its reasonable costs and expenses
(including reasonable attorneys' fees and expenses) in connection with such
suit; provided, however, in no event shall the Selling Lenders be obligated or
liable to pay any portion of the Company Termination Fee, nor shall the Company
be obligated or liable to pay any portion of the Selling Lender Termination Fee.
Payment of the fees described in this Section 10.3(b) shall not be in lieu of
damages incurred in the event of willful breach of this Agreement. To the extent
that the Company Termination Fee, the Selling Lender Termination Fee or the
Joint Termination Fee shall be payable hereunder, only one such fee shall be
paid to the Buyer.
11. SURVIVAL OF REPRESENTATIONS All representations, warranties and
covenants of the parties contained in this Agreement will remain operative and
in full force and effect, regardless of any investigation made by or on behalf
of the parties to this Agreement, until the earlier of the termination of this
Agreement or the Closing Date, whereupon such representations, warranties and
covenants will expire (except for covenants that by their terms survive for a
longer period).
12. MISCELLANEOUS
12.1 GOVERNING LAW. The internal laws of the State of Delaware
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
12.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument.
12.5 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party or parties to be bound
thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
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12.6 NO WAIVER. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. This provision shall survive the
closing of the Transactions contemplated by this Agreement.
12.7 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
nonappealable judgment.
12.8 NOTICES. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
(i) upon receipt, when delivered personally, (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party), or (iii) one
(1) business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same, to
the following addresses (or to such other address as a party may have furnished
to the other parties in writing pursuant to this Section 12.8):
(a) If to the Buyer:
Mobilepro Corp.
0000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx, President
and CEO
Facsimile: (000) 000-0000
With a copy (which will not constitute notice) to:
Xxxxxx Xxxxxx LLP
0000 Xxxxxxxxxxx Xxx., X.X., Xxxxx
000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Company:
Davel Communications
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
32
With a copy (which will not constitute notice) to:
Xxxx Xxxxxx & Parks LLP
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: F. Xxxxxx X'Xxxxx, Esq.
Facsimile: (000) 000-0000
(c) If to the Selling Lenders, to the names
and addresses for each Selling Lender as set forth in Exhibit A to this
Agreement or as subsequently provided by such Selling Lender to the other
parties in writing.
12.9 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against any party. A reference to a Section
or an Exhibit will mean a Section in, or Exhibit to, this Agreement unless
otherwise explicitly set forth. The titles and headings herein are for reference
purposes only and will not in any manner limit the construction of this
Agreement which will be considered as a whole.
12.10 NO JOINT VENTURE. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party will
have the power to control the activities and operations of any other and their
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
12.11 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights or remedies of any kind
in any client, customer, affiliate, stockholder, partner or any party hereto or
any other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties that are signatories to this Agreement.
12.12 PUBLIC ANNOUNCEMENT. Upon execution of this Agreement,
the Buyer and the Company will issue a joint press release approved by both
parties announcing the Transactions; provided that in the event the parties are
unable to agree on the text of a joint press release, each party may make such
public announcement regarding the execution of this Agreement and the
Transactions as such party may be required by applicable law to make.
12.13 CONFIDENTIALITY. Each party hereto recognizes that they
have received and will receive confidential information concerning the other
parties during the course of the negotiations and preparations. Accordingly,
each party agrees (a) to use its respective reasonable best efforts to prevent
the unauthorized disclosure of any confidential information concerning the other
that was or is disclosed during the course of such negotiations and preparations
and (b) to
33
not make use of or permit to be used any such confidential information other
than for the purpose of effectuating the Transactions. The obligations of this
section will not apply to information that (i) is or becomes part of the public
domain, (ii) is disclosed by the disclosing party to third parties without
restrictions on disclosure, (iii) is received by the receiving party from a
third party without breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law. If this Agreement is terminated, all
copies of documents containing confidential information shall be returned by the
receiving party to the disclosing party. The obligations of the parties under
this Section 12.13 shall survive the Closing or the termination of this
Agreement for a period of two years from the date of this Agreement. The
Company, the Buyer and Parent acknowledge and agree that this Section 12.13 is
not intended and shall not be construed to limit the respective rights and
obligations of each of them under that certain Mutual Confidentiality Agreement
dated June 3, 2004.
[Signatures begin on next page.]
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE BUYER:
MOBILEPRO ACQUISITION CORP.
By: /S/ XXXXX XXXXXXXXXX
-----------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: President
PARENT:
MOBILEPRO CORP.
By: /S/ XXX X. XXXXXX
-----------------------------------------
Name: Xxx X. Xxxxxx
Title: President & CEO
THE COMPANY:
DAVEL COMMUNICATIONS, INC.
By: /S/ XXXXX X. XXXXX
-----------------------------------------
Name: Xxxxx X. XxXxx
Title: CEO
35
THE SELLING STOCKHOLDERS:
XXXXX FARGO FOOTHILL, INC.
By: /S/ XXX XXX
-----------------------------------------
Name: Xxx Xxx
Title: Vice President
FOOTHILL PARTNERS III, L.P.
By: /S/ XXXXXX X. XXXXXX
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing General Partner
ABLECO FINANCE LLC
By: /S/ XXXXX XXXXX
-----------------------------------------
Name: Xxxxx Xxxxx
Title: SVP
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC, as General
Partner
By: /S/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
36
ARK CLO 2000-1, LIMITED
By: Patriarch Partners, LLC, its Collateral
Manager
By: /S/ XXXX XXXXXX
------------------------------------
Name: Xxxx Xxxxxx
Title: Manager
PNC BANK, NATIONAL ASSOCIATION
By: /S/ XXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /S/ XXXXX X. XXXXX
-----------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
BNP PARIBAS
By: /S/ XXXXX X. XXXXXX /S/ XXXXXXXX XXXX
-----------------------------------------
Name: Xxxxx X. Xxxxxx Xxxxxxxx Xxxx
Title: Director Director
XXXXXX XXXXXXX PRIME INCOME TRUST
By: /S/ XXXXX XXXX
-----------------------------------------
Name: Xxxxx Xxxx
Title: Vice President
37
AVENUE SPECIAL SITUATIONS FUND II, LP
By: /S/ XXXX XXXXX
--------------------------------------------
Name: Xxxx Xxxxx
Title: Managing Member
By: Avenue Capital Partners II, LLC, General
Partner
By: GL Partners II, LLC, Managing Member of
the General Partner
38
LIST OF EXHIBITS
Exhibit A: Selling Lenders, Notice Addresses, and Wire Transfer
Instructions
Exhibit B: Company Debt and Shares; Purchase Price Allocation; Warrants
Allocation; Additional Adjustment Amount Allocation
Exhibit C: Credit Agreement
Exhibit D: Security Agreement
Exhibit E: Form of Transfer and Assignment of Assumption of Debt
Obligations, Credit Agreement and Security Agreement
Exhibit F: Form of Mutual Release of Claims
Exhibit G: Form of Warrant
Exhibit H: Form of Registration Rights Agreement
Exhibit I: Stockholder Escrow Agreement
Exhibit J: Buyer Deposit Escrow Agreement
Exhibit K: Agreement to Exchange Indebtedness for Personal Property
Exhibit L: Resignation and Appointment of Agent
39