STOCK PURCHASE AGREEMENT BETWEEN FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P.,
PEGASUS FUND, L.P. AND THE COMPANY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is effective as of November 1, 1997, by
and between WIRELESS CABLE & COMMUNICATIONS, INC., a Nevada corporation (the
"Company"), on the one hand, and FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P.,
a Delaware limited partnership, and PEGASUS FUND, L.P., a New York limited
partnership, (collectively the "Investor"), on the other hand; and for the
limited purposes of Section 13 hereof, ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇, and
▇▇▇▇ ▇'▇▇▇▇▇▇▇▇ (the "D'Ambrosios"). The Company and the Investor are referred
to collectively herein as the "Parties" and singularly as a "Party."
WHEREAS, the Company desires to sell the Shares, as set forth on
Exhibit "A," to the Investor, and the Investor desires to purchase such Shares
from the Company, on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions. When used in this Agreement, the following terms shall
have the meanings set forth in this Section 1:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, restraining
orders, judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" of a Person shall mean any other Person that, directly or
indirectly, Controls or is Controlled by that Person, or is Under Common Control
With that Person or any such other Person, or succeeds to all or substantially
all of the business or assets of such Person. The term "Control" (including,
with correlative meaning, the terms "Controlled by" or "Under Common Control
With"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person through the ownership of voting securities, by contract
or otherwise.
"Agreement" means this Stock Purchase Agreement, as amended,
supplemented or otherwise modified from time to time.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the reason or
catalyst for any specified consequence.
"Best Efforts" means the taking by a Party of such action as would be
in accordance with reasonable commercial practices as applied to the particular
matter in question to achieve the result as expeditiously as practicable;
provided, however, that such actions shall not include the incurrence of
unreasonable expense.
"Business" means the business and operations of the Company and its
Subsidiaries, as described in the Company's annual report on Form 10-KSB for
1996, as amended, and quarterly reports on Form 10-QSB for the periods ended
March 31, 1997, June 30, 1997, and September 30, 1997, as filed with the
Securities and Exchange Commission.
"Channel License" shall mean any license granted by any Local Authority
to operate a Channel with respect to the Business. The Channel Licenses are
identified on Section 4(e) of Annex I.
"Channels" means the classes of microwave frequencies licensed by any
Local Authority pursuant to the Channel Licenses used for the transmission or
delivery of instructional, cultural, educational and/or commercial audio, video
or data programming or transmission (including, without limitation, MDS, MVDS,
LMDS, Private Cable Channels and/or MMDS services), which Channels are set forth
on Section 4(e) of Annex I. "LMDS" means local multi-point distribution service,
a transmission service licensed by Local Authority typically using the
frequencies of 26 through 31 GHz and rendered on microwave frequencies from a
fixed transmitter location simultaneously to multiple receiving facilities or in
connection with a low-earth orbiting satellite distribution system for
commercial data and/or video and/or audio programming, or any equivalent Local
Law domestic transmission service. "MDS" means multi-point distribution service,
a transmission service licensed by Local Authority typically using the
frequencies of 2.15 through 2.165 GHz and rendered on microwave frequencies from
a primary fixed transmitter location simultaneously to multiple receiving
facilities and used primarily for the distribution of commercial data, and/or
video and/or audio programming, or any equivalent Local Law domestic
transmission service. "MMDS" means multi-channel multi-point distribution
service, a transmission service licensed by Local Authority typically using the
frequencies of 2.5 through 2.7 GHz and rendered on microwave frequencies from a
fixed transmitter location simultaneously to multiple receiving facilities, used
primarily for the distribution of commercial data, and/or video and/or audio
programming and any equivalent Local Law transmission service. "MVDS" means
multi-point video distribution service, a transmission service licensed by Local
Authority typically using the frequencies of 37.5 through 42.5 GHz and rendered
on microwave frequencies from a fixed transmitter location simultaneously to
multiple receiving facilities, used primarily for the distribution of commercial
data, and/or video and/or audio programming, or any equivalent Local Law
domestic transmission service. "Private Cable Channels" means multi-point video
distribution services, a transmission service licensed by Local Authority
typically using the frequencies of approximately 17.9 through 18.64 GHz and
rendered on microwave frequencies from a fixed transmitter location
simultaneously to multiple receiving facilities, used primarily for the
distribution of commercial data, and/or video and/or audio programming, or any
equivalent Local Law transmission service.
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Common Share Equivalent Basis" means, when calculating a person's
percentage ownership of the Company's outstanding securities, the percentage
determined assuming the conversion of all securities of the Company other than
common shares into shares of common stock based on the conversion rights of such
shares or, if none, based on the voting rights of such shares in relation to the
Company's common shares.
"Confidential Information" means any information concerning the
businesses and affairs of a Party that is not already known by or generally
available to the public.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an employee pension
benefit plan, (b) qualified defined contribution retirement plan or arrangement
within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or any similar Local Law (including any
Multiemployer Plan), or (c) any benefit plan within the meaning of ERISA Section
3(1), and any equivalent provision of Local Law, or material fringe benefit plan
or program.
"Environmental, Health, and Safety Laws" means all Local Laws
concerning pollution or protection of the environment, public health and safety,
or employee and/or workplace health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Financial Statements" has the meaning set forth in Section 4(g).
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 9(d).
"Indemnifying Party" has the meaning set forth in Section 9(d).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, logos, trade names, and corporate names, together
with all translations, adaptations, including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith, (c)
all copyrightable works, all copyrights, and all applications in connection
therewith, (d) all trade secrets and confidential business information
(including ideas, research and development, know-how, technical data, designs,
customer and supplier lists, pricing and cost information, and business and
marketing plans), (e) all other proprietary rights, and (f) all copies and
tangible embodiments thereof.
"Knowledge" means actual knowledge after reasonable investigation. With
respect to an entity, "Knowledge" means actual knowledge after reasonable
investigation by the entity's executive officers and directors, partners or
control persons.
"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), whether based on contract, tort
or Local Law, including any liability for Taxes.
"License Conditions" means, with respect to any Channel License, that
(a) such license is in full force and effect under Local Law, (b) there are no
expired authorizations where the licensee is seeking reinstatement, nor are
there any pending term extension requests, (c) where required, the licensee has
built facilities pursuant to the licensee's initial authorization, and (d) there
are no violations of any Local Law with respect to such Channel License which
would have an Adverse Consequence upon the right or ability of the Company or
its Subsidiaries to operate thereunder.
"Local Authority" means any governmental agency, authority, division,
or service having authority, control or jurisdiction over a particular matter or
event.
"Local Law" means all applicable statutes, rules, regulations, orders,
decrees, codes, rulings, charges, injunctions, codes, judgments and laws of a
Local Authority.
"Material Contracts" means all Channel Licenses, Permits, Leases,
agreements, contracts, understandings, instruments, licenses, written or oral,
which are related to the continuing conduct and operation of the Business and
which, if not available to the Company or its Subsidiaries, would have a
material adverse effect upon the ability of the Company to operate the Business
in substantially the same manner as it is now conducted.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(g).
"Non-Dilutive Transactions" shall have the meaning ascribed to it by
the Stock Purchase Agreement by and between the Company and Petrolera Argentina
San Jorge S.A., dated the 1st day of August, 1997.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permits" means all rights, franchises, permits, authorities, licenses,
certificates of approval or authorizations (including licenses) issuable by
Local Authority, including Channel Licenses, and which, pursuant to Local Law,
authorize a Person lawfully to conduct and operate its business as currently
conducted and to own, and/or lease and use its assets.
"Permitted Stock" means the issuance to Petrolera Argentina San Jorge
S.A. ("Petrolera") of additional equity securities of the Company pursuant to
the terms of that certain Stock Purchase Agreement between the Company and
Petrolera dated August 1, 1997 and the Certificate of Contingent Interest
delivered in connection therewith.
"Person" means an individual, corporation, partnership, joint venture,
trust, association, unincorporated organization or any other entity or
governmental body or subdivision, agency, commission or authority thereof, or
any equivalent entity under Local law;
"Preemptive Right Exemptions" has the meaning set forth in Section
12(a).
"Purchase Price" has the meaning set forth in Section 2(b).
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Shares" means 1,487,067 of the authorized but unissued shares of the
common stock of the Company, par value $.01, and 250,049 of the authorized but
unissued shares of the Series A Preferred Stock of the Company, par value $.01,
to be acquired by Investor hereunder, as set forth on Exhibit "A".
"Subsidiary" or "Subsidiaries" means the entities described in Section
4(f) of Annex I.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and any Local Law equivalent thereof.
"Third Party Claim" has the meaning set forth in Section 9(d).
"Updated Financial Statements" has the meaning set forth in Section
8(a)(v).
2. Purchase and Sale of Shares
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, Investor agrees to purchase from the
Company, and the Company agrees to sell to the Investor, the Shares for
the consideration specified in Section 2(b).
(b) Purchase Price. Investor agrees to pay and contribute to
the Company, at the Closing, U.S. Five Million Two Hundred Forty-Eight
Thousand Seven Hundred Ninety-Five ($5,248,795) Dollars (the "Purchase
Price") by delivery of cash payable by wire transfer or delivery of
other immediately available funds. The investment shall be made as
follows:
i. Fondelec Essential Services Growth Fund, L.P. shall pay
Four Million Nine Hundred Forty-Eight Thousand Seven Hundred
Ninety-Five Dollars ($4,948,795);
ii. Pegasus Fund, L.P. shall pay Three Hundred Thousand
Dollars ($300,000).
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇ in Salt Lake City, Utah, or at such other location as the
Parties determine, commencing at 10:00 a.m. local time on the third business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Company and Investor may mutually
determine (the "Closing Date"); provided, however, that the Closing Date shall
be no later than February 23, 1998.
(d) Deliveries at the Closing At the Closing, (i) the Company
will deliver to the Investor one or more certificates representing the Shares
and the various certificates, instruments, and documents referred to in Section
8(a) below, and (ii) the Investor will deliver to the Company the Purchase Price
and the various certificates, instruments, and documents referred to in Section
8(b).
3. Representations and Warranties of Investor. Investor represents and
warrants to the Company that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3).
(a) Organization of the Investor. Investor is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware.
(b) Authorization of Transaction. Investor has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly authorized and executed by Investor and constitutes the valid and legally
binding obligation of Investor, enforceable in accordance with its terms and
conditions. Investor need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Local Authority in order
to consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Investor is subject or any provision of
its charter or other organization documents or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Investor is a party or by which it is bound or to
which any of its assets is subject and which, if conflicted with, breached,
defaulted, accelerated, terminated, modified or canceled, would have a material
adverse effect on the ability of Investor to perform hereunder.
(d) Brokers' Fees. Investor has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Company could become
liable or obligated.
(e) Investment Intent. Investor understands that the Shares
have not been registered under the Securities Act. Investor is acquiring the
Shares without a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act. The Shares will constitute "restricted
securities" under the Securities Act, and may not be resold without registration
under, or the availability of an exemption from, the registration requirements
of the Securities Act and similar Local Laws. The Investor represents that it is
familiar with Securities and Exchange Commission Rule 144, as presently in
effect, and understands the resell limitations imposed thereby and by the
Securities Act. Without limiting the representations set forth in this
paragraph, the Investor will make no disposition of all or any portion of the
Shares unless and until (i) there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or (ii) such Investor
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition and, if requested by the Company, the Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition does not require registration under the
Securities Act.
(f) Restrictive Legend. The certificate or certificates
evidencing the Shares may bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED
OR TRANSFERRED UNLESS THE SAME ARE REGISTERED UNDER
THE SECURITIES ACT OF 1933, OR THE COMPANY RECEIVES
AN OPINION FROM COUNSEL SATISFACTORY TO IT THAT SUCH
REGISTRATION IS NOT REQUIRED FOR SALE OR TRANSFER OR
THAT THE SHARES HAVE BEEN LEGALLY SOLD IN BROKER
TRANSACTIONS PURSUANT TO RULE 144 OF THE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION PROMULGATED UNDER THE SECURITIES ACT OF
1933.
(g) Information. The Investor has had the opportunity to
review the Company's Form 10-KSB for the year ended December 31, 1996, as
amended, and quarterly reports on Form 10-QSB for the periods ended March 31,
1997, June 30, 1997, and September 30, 1997, as filed with the Securities and
Exchange Commission pursuant to the Securities Act, and to ask questions of and
receive answers from the Company regarding the Business.
(h) Accredited Investor. The Investor is an "accredited
investor," as that term is defined in Regulation D promulgated under the
Securities Act, can bear the risk of its investment in the Shares, and has such
knowledge and experience in financial and/or business matters that it is capable
of evaluating the merits and risks of an investment in the Shares.
4. Representations and Warranties Concerning the Company and its
Subsidiaries The Company represents and warrants to Investor that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in Annex I attached.
(a) Organization, Qualification, and Corporate Power. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the place of its incorporation.
Each of the Company and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so qualified (i) would
not have a material adverse effect on the Company and its Subsidiaries on a
consolidated basis, (ii) can be remedied without material expense, and (iii)
will not render any Material Contract unenforceable.
(b) Authorization of Transaction. The Company has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
has been duly authorized and executed by the Company and constitutes the valid
and legally binding obligation of the Company, enforceable in accordance with
its terms and conditions. The Company need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any Local
Authority in order to consummate the transactions contemplated by this
Agreement.
(c) Capitalization. The entire authorized capital stock of the
Company consists of 15,000,000 shares of common stock, par value $.01, and
5,000,000 shares of preferred stock, par value $.01, of which 4,250,000 shall
have been designated Series A Preferred Shares and 750,000 shall have been
designated Series B Preferred Shares. Prior to the issuance of the Shares as
contemplated hereby (i) 6,659,018 shares of common stock will be issued and
outstanding, (ii) 2,590,627 Series A Preferred Shares will be issued and
outstanding; and (iii) 354,825 Series B Preferred Shares will be issued and
outstanding. All of the issued and outstanding shares of common stock, Series A
Preferred Stock and Series B Preferred Stock of the Company have been duly
authorized, are validly issued, fully paid, and are nonassessable, and are held
of record by the shareholders in the amounts reflected in Section 4(c) of Annex
I hereto. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company or any of its
Subsidiaries to issue, sell, or otherwise cause to become outstanding any
additional or other capital stock. Notwithstanding the preceding, the Investor
acknowledges that pursuant to the provisions of a Stock Purchase Agreement
between the Company and Petrolera Argentina San ▇▇▇▇▇, S.A. ("Petrolera"), dated
August 1, 1997, the consummation of the transactions contemplated herein shall
constitute a Non-Dilutive Transaction and shall obligate the Company to issue to
Petrolera the number of Series A Preferred Stock and Common Stock sufficient to
provide Petrolera, in the aggregate with its present holdings in the Company,
with eighteen percent (18%) of the outstanding capital securities of the
Company. Following the issuance of the Series A Preferred Stock and Common Stock
to Petrolera pursuant to the Non-Dilutive Transaction requirements, the Company
shall be under no further obligation to issue any shares under the non-dilution
transaction provisions, other than as otherwise disclosed herein. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company or any of its
Subsidiaries. To the Knowledge of the Company, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock of the Company or any of its Subsidiaries. The Shares, when
issued, sold and delivered by the Company in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and non-assessable shares
of the capital stock of the Company.
(d) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company or any of its Subsidiaries is
subject or any provision of the charter or organizational deed of the Company,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any Material Contract.
(e) Title to Assets. The Company and its Subsidiaries have
good and marketable title to, or a valid leasehold or license interests in, the
properties and assets used by them or shown on the balance sheet included in the
Most Recent Financial Statements or acquired after the date thereof, free and
clear of all Security Interests, except for Security Interests set forth on
Section 4(e) of Annex I and except for properties and assets disposed of in the
Ordinary Course of Business since the date of the balance sheet included as part
of the Most Recent Financial Statements. The Channel Licenses held by the
Company and its Subsidiaries and those under which it intends to conduct the
Business are described on Section 4(e) of Annex I. Those Channel Licenses meet
the License Conditions in all material respects. The Company and its
Subsidiaries are in substantial compliance with all of their respective material
obligations with respect to the Channel Licenses held by them and, to the
Knowledge of the Company, no action is pending, threatened or has been
recommended by any Local Authority to revoke, suspend, withdraw or terminate any
Channel Licenses, and no event has occurred which, upon the giving of notice or
lapse of time or otherwise would allow, or could be expected to cause, the
revocation, withdrawal, suspension or termination of any Channel Licenses.
(f) Subsidiaries. Section 4(f) of Annex I sets forth for each
Subsidiary (i) its name, jurisdiction of formation and where qualified, and (ii)
its authorized capitalization, the number of outstanding equity securities, the
names of the holders thereof, and the number of equity securities held by each
such holder.
(g) Financial Statements. Attached at Section 4(g) of Annex II
are the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated and audited consolidating balance sheets
and statements of income, changes in stockholders' equity, and cash flow as of
and for the fiscal year ended December 31, 1996 (the "Most Recent Fiscal Year
End") for the Company and, (ii) audited consolidated and audited consolidating
balance sheets and statements of income, changes in stockholders' equity, and
cash flow (the "Most Recent Financial Statements") as of and for the seven
months ended July 31, 1997 (the "Most Recent Fiscal Month End") for the Company.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis (except for the absence of
footnotes), present fairly the financial condition of the Company as of such
dates and the results of operations for such periods, and are correct and
complete in all material respects (except, in the case of the Most Recent
Financial Statements, for normal year-end adjustments). The Company is not aware
of any material modifications to the Financial Statements necessary to make
those statements not false or misleading. The Most Recent Financial Statements
reflect, as of the Most Recent Fiscal Month End, all debts, liabilities and
obligations of any nature of the Company, contingent or otherwise, and whether
due or to become due, including, but not limited to debts, liabilities or
obligations on account of Taxes or other governmental charges (or penalties,
interest, or fines thereon or with respect thereto) to the extent such items are
required to be reflected on such statements under GAAP.
(h) Events Subsequent to Dates of Most Recent Financial
Statements. Except as set forth at Section 4(h) of Annex I, since the date of
the Most Recent Financial Statements, there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Company or any of its Subsidiaries. Without limiting
the generality of the foregoing, since that date:
(i) neither the Company nor any of its Subsidiaries has sold,
leased, transferred, or assigned any of its respective assets, except for
transactions involving less than $25,000 in the aggregate.
(ii) neither the Company nor any of its Subsidiaries has
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than U.S.
$100,000 or outside the Ordinary Course of Business;
(iii) neither the Company nor any of its Subsidiaries has
canceled, compromised, or released any right or claim (or series of related
rights and claims) either involving more than U.S. $50,000 or outside the
Ordinary Course of Business;
(iv) neither the Company nor any of its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not covered by
insurance);
(v) neither the Company nor any of its Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such employment contract or
agreement (oral or written) by which it is, respectively, bound or granted any
increase in the base compensation of any of its respective directors, officers,
and employees outside the Ordinary Course of Business, or adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its respective
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(vi) neither the Company nor any of its Subsidiaries has paid,
discharged or satisfied any liability other than the payment, discharge or
satisfaction of liabilities incurred in the Ordinary Course of Business;
(vii) neither the Company nor any of its Subsidiaries has
mortgaged, pledged, or subjected (or agreed to subject) any of its assets,
tangible or intangible, to any lien, claim, Security Interest or other
encumbrance, except for liens for current personal and real property taxes not
yet due and payable; and
(viii) neither the Company nor any of its Subsidiaries has
committed to any of the foregoing.
(i) Undisclosed Financial Liabilities. Neither the Company nor
any of its Subsidiaries has any financial Liability (and, to the Knowledge of
the Company there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any financial Liability), except for (i) financial
Liabilities set forth on the face of the balance sheet included as part of the
Most Recent Financial Statements (rather than in any notes thereto) or set forth
on Section 4(i) of Annex I and (ii) financial Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business.
(j) Legal Compliance. Each of the Company and its Subsidiaries
has complied in all material respects with all Local Law and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply. The Company has adopted a strict policy that mandates compliance with
the U.S. Foreign Corrupt Practices Act and has no Knowledge of any violations
thereof by the Company, its Subsidiaries or their Affiliates or any Person
employed by, representing or acting for any of the foregoing.
(k) Tax Matters.
(i) All Taxes owed by the Company or any of its Subsidiaries
have been paid or reserved for on its Most Recent Financial Statement. There are
no Security Interests on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
(ii) The Company and each of its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) There is no dispute or claim concerning any Tax
Liability of the Company or any of its Subsidiaries either (A) claimed or raised
by any authority in writing or (B) as to which the Company has Knowledge based
upon personal contact with any agent of such authority.
(iv) The unpaid Taxes of the Company and its Subsidiaries (A)
did not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet included as part of the Most Recent Financial Statements (rather
than in any notes thereto) and (B) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company and its Subsidiaries in filing their Tax Returns.
(l) Leases and Property Interests. Section 4(l) of Annex I
identifies each lease, sublease, material easement, grant or similar instrument,
including site leases for transmission and receiving equipment (showing the
annual rental, expiration date, renewal and purchase options, if any, and the
location of the real property covered by such lease or other agreement) under
which the Company or any of its Subsidiaries has the right to use, hold or
operate any real property owned by a third party (collectively, the "Leases")
(the property covered by the agreements described in this Section 4(l) being
referred herein as the "Leased Property"). The Leases: (a) are each in full
force and effect and are each legal, valid and binding obligations of the
Company or its Subsidiaries, as the case may be; and (b) will continue in effect
after the Closing without the consent, approval or act of, or the making of any
filing with, any other party. Neither the Company nor any of its Subsidiaries
under any such Lease is in default in any material respect thereof or has
received a notice of default thereunder which has not been cured.
(m) Intellectual Property. The Company and its Subsidiaries
comply in all material respects with all Local Laws and regulations governing or
relating to the Intellectual Property. Each item of Intellectual Property owned
or used by the Company or any of its Subsidiaries immediately prior to the
Closing hereunder will be owned or available for use by the Company or its
Subsidiaries on substantially identical terms and conditions immediately
subsequent to the Closing hereunder.
(n) Material Contracts. Section 4(n) of Annex I lists the
following Material Contracts and other agreements to which the Company or any of
its Subsidiaries is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of U.S. $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products, or personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of more
than one year, result in a material loss to either of the Company or any of its
Subsidiaries, or involves consideration in excess of U.S. $50,000;
(iii) any agreement (or group of related agreements) under
which the Company or any of its Subsidiaries has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of U.S. $100,000 or under which any such party has imposed
a Security Interest on any of its assets, tangible or intangible;
(iv) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(v) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of U.S. $100,000 or providing severance benefits;
(vi) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees; or
(vii) any agreement not otherwise disclosed on Annex I under
which the consequences of a default or termination could have a material adverse
effect on the business, financial condition, operations, results of operations,
or future prospects of the Company or its Subsidiaries or any other agreement
(or group of related agreements) the performance of which involves consideration
in excess of U.S. $100,000, and all agreements relating to the Channels,
Permits, and Channel Licenses.
The Company has delivered (or will deliver prior to Closing) to Investor a
correct and complete copy of each written agreement listed in Section 4(n) of
Annex I (as amended to date). With respect to each Material Contract (including,
but not limited to, those listed in Sections 4(n) of Annex I): (A) the agreement
is legal, valid, binding, enforceable, and in full force and effect with respect
to the Company or its respective Subsidiary; and will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (B) to the
Knowledge of the Company, no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (C) no party has repudiated any
provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts
receivable of the Company and its Subsidiaries are reflected properly on their
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the balance sheet included as part of the Most Recent
Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries.
(p) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
(q) Litigation. Section 4(q) of Annex I sets forth each
instance in which the Company or any of its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations set forth in Section
4(q) of Annex I could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
either of the Company or any of its Subsidiaries.
(r) Employees. To the Knowledge of the Company, no executive,
key employee, or group of employees of either the Company or any of its
Subsidiaries has any plans to terminate employment with the Company or any of
its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes.
(s) Employee Benefits. Section 4(s) of Annex I lists each
Employee Benefit Plan that the Company or any of its Subsidiaries maintains or
to which the Company or any of its Subsidiaries contributes. Each such Employee
Benefit Plan (and each related trust, insurance contract, or fund) complies in
form and in operation in all material respects with the applicable requirements
of Local Law, and has filed or distributed all required reports and descriptions
with respect to each such Employee Benefit Plan. All contributions (including
all employer contributions and employee salary reduction contributions) which
are due have been paid to each such Employee Benefit Plan which is an employee
pension benefit plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the Company and its Subsidiaries.
(t) Guaranties. Neither the Company nor any of its
Subsidiaries is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
(u) Environment, Health, and Safety. Each of the Company and
its Subsidiaries has complied in all material respects with all Environmental,
Health, and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, each of the Company and its
Subsidiaries has obtained and been in compliance in all material respects with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(v) Brokers' Fees. Neither the Company nor any of its
Subsidiaries has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
(w) Insurance. The Company has insurance coverages that it
believes are adequate to protect its assets and Business. All such policies are
listed on Section 4(w) of Annex I and are in full force and effect.
(x) Governmental Filings. To the Knowledge of the Company, all
material governmental reports required by Local Law to be filed by the Company
and its Subsidiaries or which include or should include the Company and/or its
Subsidiaries have been filed.
(y) Securities Filings. Attached as part of Section 4(y) to
Annex I is the Company's report on Form 10-KSB for the fiscal year ended
December 31, 1996, as amended and the Company's reports on Form 10-QSB for the
periods ended March 31, 1997, June 30, 1997, and September 30, 1997, all as
filed with the Securities and Exchange Commission. No such filing contains a
material misstatement or omits to state a material fact required to make the
statements therein not misleading.
(z) Annexes. The Annexes attached to this Agreement are true
and correct in all material respects as of the date of their preparation and,
after being updated, if necessary, will be true and correct in all material
respects as of the Closing Date.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its Best Efforts to
take all action and to do all things necessary in order to make effective the
transactions contemplated by this Agreement (including the satisfaction, but not
waiver, of the closing conditions set forth in Section 8 below).
(b) Notices and Consents. Each of the Parties will give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Local Authority in connection with
the matters referred to in Section 3 and Section 4 above.
(c) Operation of Business. Neither the Company nor or any of
its Subsidiaries will engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company or any of its Subsidiaries will not
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4(h) above.
(d) Preservation and Conduct of Business. The Company and each
of its Subsidiaries will keep its respective business and properties
substantially intact, including its respective present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees. Notwithstanding the generality of the
foregoing, the Company and each of its Subsidiaries shall operate and carry on
their businesses in the Ordinary Course of Business except as contemplated
herein.
(e) Full Access. The Company and its Subsidiaries will permit
representatives of Investor to have full and complete access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and its Subsidiaries, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to each of the Company and its Subsidiaries for the purpose of
enabling the Investor or its representatives to verify the accuracy of the
representations and warranties contained herein, to verify that the covenants of
the Company in this Agreement have been complied with and to determine whether
the conditions to Investor's performance set forth herein have been satisfied.
(f) Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Section 3 and Section
4 above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement any Annex hereto or prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
additional instruments and documents) as the other Party may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 9 below).
(b) Litigation Support. If and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or any of its Subsidiaries, the other
Party will cooperate with it or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 9 below).
7. Confidentiality. Each Party will treat as confidential and hold as
such all of the Confidential Information of the other Party, and refrain from
using any of the Confidential Information except in connection with this
Agreement and the ongoing operations of the Company and its Subsidiaries. If any
Party is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information of the
other Party, that Party will notify the other Party promptly of the request or
requirement so that such other Party (on its own behalf by or through the action
of the Company or its Subsidiaries) may seek an appropriate protective order or
waive compliance with the provisions of this Section 7. If, in the absence of a
protective order or the receipt of a waiver hereunder, any Party is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Party may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Party shall use its Best Efforts to obtain, at the request of the other Party
(on its own behalf by or through the action of the Company or its Subsidiaries,
or otherwise), an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as such other Party shall designate. The foregoing provisions shall
not apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of Investor. The obligation of
Investor to consummate the transactions to be performed by it in connection with
the Closing is subject to the satisfaction or waiver of the following
conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) The Company shall have performed and complied
with all of its covenants hereunder in all material respects through the Closing
Date;
(iii) The Company and its Subsidiaries shall have
procured any third party consents specified in Section 5(b) above and shall
deliver to the Investor the following documents, each of which shall be
appropriately executed other than by the Investor: (A) a Voting Agreement in the
form of Exhibit "B" hereto, and (B) an opinion of the Company's legal counsel,
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇, in the form of Exhibit "C" hereto;
(iv) no action, suit, or proceeding shall have been
instituted before any court or quasi-judicial or administrative agency of any
national, federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would (A) prevent consummation of any of the transactions contemplated
by this Agreement, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(v) The Company shall have delivered to Investor a
certificate to the effect that (A) each of the conditions specified above in
Section 8(a)(i)-(iv) (other than the deliveries under Section 8(a)(iii)) are
satisfied in all respects, and (B) the Company is not aware of any material
modifications to the Most Recent Financial Statements necessary to make those
statements not false or misleading; and
(vi) all applicable waiting periods (and any
extensions thereof) under applicable law shall have expired or otherwise been
terminated and the Company and its Subsidiaries shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 5(b) relating to the Company and its Subsidiaries.
The Investor may waive any condition specified in this Section 8(a) if it
executes a writing so stating at or prior to the Closing. At the Closing,
assuming the satisfaction, or waiver by the Investor, of the conditions set
forth in this Section 8(a), the Investor shall deliver to the Company the
Purchase Price.
(b) Conditions to Obligation of the Company. The obligation of
the Company to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction or waiver of the following
conditions:
(i) the representations and warranties set forth in
Section 3 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Investor shall have performed and complied
with all of its covenants hereunder in all material respects through the Closing
Date;
(iii) no action, suit, or proceeding shall have been
instituted before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(iv) Investor shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Section
8(b)(i)-(iii) are satisfied in all respects, and deliver an opinion of counsel
for the Investor, in the form of Exhibit "D"; and
(v) all applicable waiting periods (and any
extensions thereof) under applicable law shall have expired or otherwise been
terminated and the Investor shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to in
Sections 5(b) relating to the Investor.
The Company may waive any condition specified in this Section 8(b) if it
executes a writing so stating at or prior to the Closing. At the Closing,
assuming the satisfaction, or waiver by the Company, of the Conditions set forth
in this Section 8(b), the Company shall deliver to the Investor one or more
certificates representing the Shares.
9. Indemnification.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties shall survive the Closing
hereunder and continue in full force and effect for three years, subject to
earlier termination by applicable statute of limitations.
(b) Indemnification Provisions for Benefit of Investor. If the
Company breaches (or if any third party alleges facts that, if true, would mean
the Company has breached) any of its representations, warranties, agreements and
covenants contained herein and, if there is an applicable survival period
pursuant to Section 9(a) above, provided that Investor makes a written claim for
indemnification against the Company within 30 days of the expiration of such
survival period, then the Company agrees to indemnify Investor from and against
the entirety of any Adverse Consequences Investor may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
Investor may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach); provided, however, that the Company shall not have any
obligation to indemnify Investor from and against any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or alleged breach) of any representation, warranty, agreement or
covenant of the Company contained herein until Investor has suffered Adverse
Consequences by reason of all such breaches (or alleged breaches) in excess of a
$175,000 aggregate threshold, provided, further, that the Company's obligation
to indemnify Investor shall not exceed the Purchase Price.
(c) Indemnification Provisions for Benefit of the Company. If
Investor breaches (or if any third party alleges facts that, if true, would mean
Investor has breached) any of its representations, warranties, agreements and
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 9(a) above, provided that the Company makes a written claim
for indemnification against Investor within 30 days of the expiration of such
survival period, then Investor agrees to indemnify the Company from and against
the entirety of any Adverse Consequences the Company may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Company may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach (or the alleged breach); provided, however, that the Investor
shall not have any obligation to indemnify the Company from and against any
Adverse Consequences resulting from, or arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach) of any representation,
warranty, agreement or covenant of the Investor contained herein until the
Company has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $175,000 aggregate threshold.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 9, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party is thereby prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section 9(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section
9(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 9.
(v) A claim by a Party for indemnification is the
Party's only right to recover damages for breach of any provision of this
Agreement.
10. Tax Matters. The following provisions shall govern the
allocation of responsibility for certain tax matters following the Closing Date:
(i) the parties agree to use their Best Efforts to obtain any certificate or
other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby); (ii) each of the parties will provide the other party with all tax
information that either party may be required to report pursuant to applicable
law; (iii) all transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any gains tax, transfer tax and any
similar tax imposed by state, local or municipal governments or their
subdivisions), shall be paid by Investor when due, and Investor will, at its own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law (but only if so required), Investor
will, and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
11. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) Investor and the Company may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) Investor may terminate this Agreement by giving
written notice to the Company at any time prior to the Closing (A) if the
Company has breached any material representation, warranty, or covenant
contained in this Agreement applicable to it in any material respect, Investor
has notified the Company of the breach, and the breach has continued without
cure for a period of 5 days after the notice of breach or (B) if the Closing
shall not have occurred on or before February 23, 1998, by reason of the failure
of any condition precedent under Section 8(a) hereof (unless the failure results
primarily from Investor itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(iii) The Company may terminate this Agreement by
giving written notice to Investor at any time prior to the Closing (A) if
Investor has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Company has notified
Investor of the breach, and the breach has continued without cure for a period
of 5 days after the notice of breach or (B) if the Closing shall not have
occurred on or before February 23, 1998, by reason of the failure of any
condition precedent under Section 8(b) hereof (unless the failure results
primarily from the Company itself breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates
this Agreement pursuant to Section 11(a) above, all rights and obligations of
the Parties hereunder (other than their obligations under Section 7) shall
terminate without any Liability of any Party to any other Party, except for any
Liability of any Party resulting from a breach that occurs prior to the
termination.
(c) Specific Performance. Nothing in this Agreement
shall be interpreted to preclude either Party's right to seek and obtain
specific performance of the terms of this Agreement.
(d) Other Remedy. In lieu of pursuing any other
remedy set forth herein, if either Party shall have satisfied each of the
conditions to Closing required of it under the provisions of Section 8 above and
the other Party shall fail or refuse to proceed to Closing, then, in addition to
its right to terminate this Agreement, the non-breaching Party shall be entitled
to elect to recover from the breaching Party, and the breaching Party shall pay
and reimburse the non-breaching Party upon written demand therefor as liquidated
damages, for the costs and expenses incurred by the non-breaching Party
(including, but not limited to, the expenses of travel and lodging, attorney
fees and the fees and expenses of accountants and auditors) in negotiating the
terms of this Agreement and its related and ancillary agreements, not to exceed,
in the aggregate, $100,000.
12. Affirmative Covenants. Unless waived in writing by the Investor,
the Company covenants and agrees with the Investor that the Company will do and
perform as provided in the following subsections. These covenants will expire
immediately preceding the closing of the first firm commitment underwritten
public offering pursuant to an effective registration statement on Form S-1 (or
its small business issuer equivalent or their successors forms) filed with the
Securities and Exchange Commission under the Securities Act, pursuant to which
the net proceeds to the Company are at least $15 million.
(a) Future Issuances of Securities. Unless approved by
two-thirds of the members of the Company's Board of Directors, the Company shall
not issue any of its securities (other than securities with no equity feature)
except for securities issued (i) as a stock dividend or upon any subdivision of
shares of the Company's equity securities; provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of such equity security, (ii) pursuant to subscriptions, warrants, options,
convertible securities or other rights which are listed on Annex II as being
outstanding on the Closing Date, or (iii) pursuant to the exercise of options,
approved and granted by the Compensation Committee of the Board of Directors, a
majority of whom are outside directors, to purchase equity securities of the
Company granted to employees of the Company, not to exceed in the aggregate 10%
of the issued and outstanding securities of the Company on a Common Share
Equivalent Basis assuming the exercise of all outstanding options and warrants,
the issuance of the Shares contemplated hereunder and the issuances of the
Company's securities under the Permitted Stock Transactions, or (iv) pursuant to
the Permitted Stock Transactions (such exempt securities and transactions
hereafter being referred to as "Preemptive Right Exemptions").
In the event of any approved issuance of securities, the Investor shall have a
preemptive right to acquire the number of shares of such equity securities
proposed to be issued in an amount proportional to its then percentage ownership
of the Company's outstanding securities, on the same date and on the same terms
and conditions with which the proposed issuance shall occur. The Investor shall
have no preemptive right with respect to the Preemptive Right Exemptions, with
respect to (i) shares issued as compensation to directors, officers, agents or
employees of the Company, its subsidiaries or affiliates; (ii) shares issued to
satisfy rights of conversion or options created to provide compensation to
directors, officers, agents or employees of the Company, its subsidiaries or
affiliates; or (iii) shares sold otherwise than for money. The Investor's
preemptive right shall be voluntary, not mandatory, and is waivable in writing.
Any waiver evidenced by a writing shall be irrevocable, even though it is not
supported by consideration.
(b) Use of Proceeds. Prior to June 30, 1998, the Company shall
use and expend the proceeds from the sale of the Shares hereunder only for such
purposes as shall be set forth on the proposed budget attached hereto as Annex
III, or in the event of any modification thereto approved by two-thirds or more
of the Company's Board of Directors, in accordance with such modified budget.
(c) Restrictions. Unless approved by two-thirds or more of the
members of the Company's Board of Directors, the Company shall not: (i) declare
or set aside any portion of the Company's funds or securities for a distribution
as dividends, (ii) set, determine or establish fees payable to members of the
Company's Board of Directors for services rendered to the Company in that
capacity, (iii) materially change remunerations in money and/or benefits for its
executive officers, (iv) modify, in any material respect, the Business, (v)
incur or enter into any financial indebtedness in excess of $500,000 in any
single instance, or pledge a substantial portion of its assets or shares, (vi)
merge, consolidate or liquidate the Company, (vii) sell all or substantially all
of the Company's assets or properties, or (viii) vote to amend the Company's
articles of incorporation or its bylaws.
(d) Holding Company Board Membership. In the event of the
formation by the Company and/or its shareholders of a corporation which is held
100% by the Company and/or its shareholders (a "Holding Company"), the Company
shall vote its interest in the Holding Company at any meeting relating to the
election of a Board of Directors for the Holding Company in such a manner as to
insure that the Holding Company does not have a different board member
constitution than the Company and in a manner which will require the same voting
requirements and other business limitations to be applicable to the operation
and conduct of the business of the Holding Company as are set forth in Sections
12(a) and 12(b).
(e) Interested Party Transactions. No contract or transaction
between the Company and any one or more of its directors or officers (or any
corporation, firm or entity in which one or more of its directors or officers
are employees or directors or are financially interested) shall be authorized by
the Company's Board of Directors unless a majority of the disinterested
directors authorize, approve or ratify that contract or transaction, except as
is or has been otherwise disclosed in the Company's Form 10-KSB filed with the
Securities and Exchange Commission, the Financial Statements and the notes
thereto, or the Disclosure Annexes.
13. Sale by D'Ambrosios.
(a) If any or all of the D'Ambrosios shall determine to effect
a sale of more than fifty percent (50%) of their collective holdings in the
Company to one or more parties other than the D'Ambrosios, the Investor shall be
entitled to sell its shares to such third parties, in accordance with the
provisions of this Section (such a sale by the D'Ambrosios being herein referred
to as a "Disposition").
(b) At least 20 days prior to a Disposition, the D'Ambrosios
shall provide the Investor notice setting forth a description of the terms of
such Disposition in reasonable detail. The Investor may, by notice to the
D'Ambrosios within 10 days of its receipt of the D'Ambrosios' notice, require
the D'Ambrosios to include, in such Disposition, shares owned by the Investor.
The number of Shares owned by the Investor to be included in any such
Disposition shall be equal to the product of (i) the quotient determined by
dividing the percentage of Shares owned by the Investor (on a fully diluted
basis) by the aggregate percentage of shares owned by the D'Ambrosios and the
Investor, multiplied by (ii) the number of shares to be sold in the Disposition.
All Shares included in a Disposition shall be sold and disposed of at the same
price per share and upon the same terms and conditions.
(c) In connection with a Disposition in which Shares of the
Investor are to be sold, the D'Ambrosios may require the Investor to enter into
agreements with the purchase or purchaser containing (i) terms and conditions
relating to the sale that are substantially similar to the terms and conditions
of the agreement that the D'Ambrosios have executed or will execute in
connection with such Disposition, and (ii) representations and warranties to the
effect that, except as specifically disclosed to the purchaser or purchasers in
writing, the Investor does not have knowledge that any representation or
warranty made by the Company or the D'Ambrosios in connection with such
Disposition was untrue in any material respect when made or is untrue in any
material respect as of the closing.
The provisions of this Section 13 shall terminate immediately preceding an
initial public offering described in Section 12.
14. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of Investor and the Company; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its Best Efforts to advise the other Party
and afford such Party an opportunity to comment prior to making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral (including, specifically, any letter of intent or
letter or understanding between the Parties), to the extent they related in any
way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Investor and Sellers; provided, however, that Investor may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Investor nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. For purposes of this
Agreement, the delivery of a counterpart signature by telephonic facsimile
transmission shall be deemed the equivalent of the delivery of an original
counterpart signature.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when actually
received, if personally delivered or sent by reputable air courier (such as
Federal Express or DHL) and addressed to the intended recipient as set forth
below:
If to the Company:
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
Wireless Cable & Communications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. or
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Investor:
Fondelec Essential Services Growth Fund, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇
Sheriff, ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth. Any notice to Fondelec Essential Services Growth Fund, L.P.
hereunder shall constitute notice to the Investor and ▇▇▇▇▇ Management Corp.
(h) Governing Law. EXCEPT FOR ISSUES AND DISPUTES RELATING TO
THE INTELLECTUAL PROPERTY, WHICH SHALL BE GOVERNED BY LOCAL LAW, THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
STATE OF DELAWARE, UNITED STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(i) Amendments and Waivers. This Agreement may be amended,
extended or modified by a writing signed by Investor and the Company. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Incorporation of Exhibits and Annexes. The Exhibits and
Annexes identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Disputes.
(i) The provisions of this Section 14(n) shall be the sole and
exclusive remedy for any default under or breach by any Party of any term or
provision of this Agreement, and no claim may be brought under this Agreement
except in accordance with and pursuant to these terms. In the event there is a
dispute under this Agreement, the Parties shall meet with one another and
diligently attempt to resolve their disagreements. If they are unable to do so,
then upon request of either Party to the dispute, they will mediate the dispute,
utilizing an impartial mediator pursuant to the rules of the American
Arbitration Association ("AAA") or any other reputable organization that
sponsors mediation upon which the Parties shall mutually agree. If, after 30
days, the mediation is not successful, then either Party to the dispute may
bring arbitration to resolve the dispute as contemplated in this Section 14(n).
(ii) Assuming negotiations and mediation are unsuccessful, any
Party to the dispute may submit the disagreement to binding arbitration by
making a written demand for arbitration. The arbitration shall occur before a
single arbitrator in Miami, Florida, and shall be governed by the commercial
arbitration rules of the AAA. To assure predictability, the arbitrator shall be
an attorney at law selected by the Parties (with the assistance of the AAA if
necessary) with experience in telecommunication issues and commercial
transactions. The arbitrator shall base the decision on applicable principles of
law and equity and judicial precedent and, on request of a Party, will include
in the award findings of fact and conclusions of law upon which the award is
based. The arbitrator may grant such legal or equitable relief as he or she
deems to be appropriate, including money damages, specific performance and
injunctive relief.
(iii) Questions of whether the dispute is subject to
arbitration shall also be decided by the arbitrator. Within 10 days after the
appointment of the arbitrator, each Party to the dispute shall present to the
arbitrator a written statement of the issues in dispute. Within 5 days
thereafter, the arbitrator shall give notice to the Parties of a preliminary
hearing to discuss the issues, which hearing will occur approximately 10 days
thereafter. The final arbitration hearing will occur within 90 days after the
arbitration is initiated. Prior thereto, there will be limited discovery as
approved by the arbitrator at the preliminary hearing, including no more than
two depositions per Party.
(iv) Any Party may request and obtain from a court of competent
jurisdiction provisional or ancillary remedies for relief such as an injunction
or the appointment of a receiver, but the institution of a judicial proceeding
will not constitute a waiver of the right of a Party to submit a dispute to
arbitration. Judgment upon an arbitration award may be entered in any court
having jurisdiction. Subject to the award of the arbitrator, each Party shall
pay an equal share of the arbitrator's fees, except the arbitrator shall have
the power to award all expenses (including attorney's fees and costs) to the
prevailing Party, as determined by the arbitrator. All matters relative to the
arbitration, including the result thereof, shall be maintained as confidential
by all Parties to this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written. COMPANY:
Wireless Cable & Communications, Inc.
By: /s/ ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
Its: CEO
For the limited purposes
of Section 13 hereof:
/s/ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
INVESTOR:
Fondelec Essential Services Growth Fund, L.P.
By: Fondelec E.S.G.P. Corp.,
Its Director
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
Its: Director
Pegasus Fund, L.P.
By: Pegasus Management Corporation
Its: General Partner
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
Its President