EXHIBIT 99.5
ARCH COMMUNICATIONS GROUP, INC.
STOCK PURCHASE AGREEMENT
JUNE 29, 1998
EXHIBITS AND SCHEDULES
Exhibit A - Form of Certificate of Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of the Series C
Convertible Preferred Stock
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Legal Opinion of ▇▇▇▇ and ▇▇▇▇ LLP
Exhibit D - Form of Confidentiality Agreement
Schedule 1 Purchasers, Shares Purchased and Purchase Price
ARCH COMMUNICATIONS GROUP, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 29,
1998, by and among ARCH COMMUNICATIONS GROUP, INC., a Delaware corporation (the
"Company"), SANDLER CAPITAL PARTNERS IV, L.P., a Delaware limited partnership,
SANDLER CAPITAL PARTNERS IV FTE, L.P., a Delaware limited partnership, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, SOUTH FORK
PARTNERS, a Delaware general partnership, THE GEORGICA INTERNATIONAL FUND
LIMITED, a Bermuda corporation, ASPEN PARTNERS, a Delaware general partnership,
and CONSOLIDATED PRESS INTERNATIONAL LIMITED, a Bahamas corporation (each of the
foregoing persons or entities, other than the Company, being sometimes referred
to hereinafter individually as a "Purchaser" and collectively as the
"Purchasers").
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Purchasers, and the Purchasers desire
to purchase from the Company, a total of 250,000 shares of the Company's Series
C Convertible Preferred Stock, par value $0.01 per share (the "Convertible
Stock"), for an aggregate purchase price of $25,000,000;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK.
(a) The Company has, or before the Closing (as defined below)
will have, authorized the sale and issuance of up to 250,000 shares of
Convertible Stock. The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing the Certificate of
Designations, Preferences and Relative, Participating, Optional or Other Special
Rights of the Series C Convertible Preferred Stock in the form attached hereto
as EXHIBIT A (the "Certificate of Designations").
(b) Subject to the terms and conditions of this Agreement, each
Purchaser severally agrees to purchase at the Closing, and the Company agrees to
sell and issue to such Purchaser at the Closing, such number of shares of
Convertible Stock as set forth opposite such Purchaser's name and for the
purchase price indicated with respect to such Purchaser on SCHEDULE 1,
representing an aggregate purchase price of $25,000,000.
1.2 CLOSING; DELIVERY. The purchase and sale of the Convertible Stock
shall take place at the offices of ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10 a.m., on June 29, 1998, or at such other time and place as
the Company and the Purchasers mutually agree upon, orally or in writing (which
time and place are designated as the "Closing"). At the Closing, the Company
shall deliver to each Purchaser a certificate registered in the name of such
Purchaser representing the number of shares of Convertible Stock being purchased
thereby against payment of the purchase price therefor. Each Purchaser shall
deliver payment of the purchase price for the shares of Convertible Stock being
issued to such Purchaser by the wire transfer of immediately available federal
funds to such account as may be designated in writing by the Company. The
Company and each Purchaser shall take such additional actions and execute and
deliver such additional agreements and other instruments and documents as
necessary or appropriate to effect the transactions contemplated by this
Agreement in accordance with its terms.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents, warrants and covenants to the Purchasers that the statements
contained in this Section 2 are true and correct. As used herein, the
"Disclosure Schedule" refers to that certain disclosure schedule delivered by
the Company to the Purchasers prior to the execution of this Agreement. When
used in connection with the Company or any of its subsidiaries, the term
"Material Adverse Effect" means any change, event or effect that is materially
adverse to the business, assets, liabilities, financial condition, operations or
results of operations of the Company and its subsidiaries, taken as a whole.
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a Material Adverse Effect.
2.2 CAPITALIZATION. The authorized capital stock of the Company
immediately prior to the Closing will consist of:
(a) 10,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"), of which 31,874 shares have been designated as
Series A Preferred Stock, none of which are issued or outstanding, 100,000
shares have been designated as Series B Junior Participating Preferred Stock,
none of which are issued or outstanding, and 250,000 shares have been designated
as Series C Convertible Preferred Stock, none of which are issued or
outstanding. The rights, privileges and preferences of the Series C Convertible
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Preferred Stock are set forth on EXHIBIT A hereto.
(b) 75,000,000 shares of common stock, par value $0.01 per share
(the "Common Stock"), of which 20,958,570 shares were issued and outstanding on
June 1, 1998. All of the outstanding shares of Common Stock have been duly
authorized, are fully paid and nonassessable and have been issued in compliance
with all applicable federal and state securities laws. The Company has reserved
4,545,455 shares of Common Stock for issuance upon conversion of the Convertible
Stock.
(c) The Company has reserved 3,325,644 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to the stock option plans set forth in SECTION 2.2(C) of the Disclosure
Schedule, which have been duly adopted by the Company's Board of Directors and
approved by the Company's stockholders (collectively, the "Stock Plans") and
options to purchase Common Stock granted to executive officers of the Company
outside of the Stock Plans. Of such reserved shares of Common Stock, as of June
1, 1998, options to purchase 777,563 shares had been exercised, options to
purchase 2,033,137 were outstanding and 514,944 shares of Common Stock were
available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plans.
(d) The Company has also reserved (i) 797,850 shares of Common
Stock for issuance upon conversion of its 6-3/4% Convertible Subordinated
Debentures due 2003 at a conversion price of $16.75 per share, (ii) 300,840
shares of Common Stock for issuance under its 1996 Employee Stock Purchase Plan,
and (iii) 100,000 shares of Series B Junior Participating Preferred Stock for
issuance in connection with its Rights Agreement, dated October 13, 1995 (the
"Rights Plan"). Further, the Company is obligated to pay approximately $21.5
million in cash or Common Stock (at the Company's option) to the former
stockholders of Page Call, Inc. ("Page Call"), on or about April 8, 2000 arising
from Page Call's pending acquisition by ▇▇▇▇▇▇ PCS Ventures, Inc. ("▇▇▇▇▇▇").
(e) Except as set forth in SECTION 2.2(E) of the Disclosure
Schedule or as provided in this Agreement with respect to the Convertible Stock,
(i) no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
the Company or any of its subsidiaries is authorized or outstanding, (ii)
neither the Company nor any of its subsidiaries has any obligation (contingent
or otherwise) to issue any subscription, warrant, option, convertible security
or other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company or any of
its subsidiaries, and (iii) neither the Company nor any of its subsidiaries has
any obligation (contingent or otherwise) to purchase, redeem or otherwise
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acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
(f) The Company has previously delivered to the Purchasers a true
and correct copy of the Company's Restated Certificate of Incorporation and
Bylaws, each as amended and restated to date (including a true and correct copy
of each certificate of designation filed with respect to the Preferred Stock).
(g) Except as provided in this Agreement or as set forth in
SECTION 2.2(G) of the Disclosure Schedule, there are no agreements, written or
oral, between the Company and any holder of its capital stock, or, to the
Company's knowledge, among any holders of its capital stock, relating to the
acquisition (including, without limitation, rights of first refusal or
preemptive rights), disposition, registration under the Securities Act of 1933,
as amended (the "Securities Act"), or voting of the capital stock of the
Company.
2.3 SUBSIDIARIES. Except as set forth in the Company SEC Reports (as
defined in Section 2.23), the Company does not currently have any subsidiaries,
as defined in Item 601(21) of Regulation S-K ("Subsidiaries"), or own or
control, directly or indirectly, any interest in any other corporation,
partnership, limited liability company, trust, association, or other business
entity. Each of the Company's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted. Each of the Company's Subsidiaries is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a Material Adverse Effect.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement and the Registration Rights Agreement
in the form attached hereto as EXHIBIT B (the "Registration Rights Agreement"
and with this Agreement and the Certificate of Designations, collectively, the
"Investment Instruments"), the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance and delivery of the
Convertible Stock and the Common Stock issuable upon conversion of the
Convertible Stock has been taken or will be taken prior to the Closing, and the
Investment Instruments, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
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remedies, or (ii) to the extent the indemnification provisions contained in the
Registration Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF SECURITIES. The Convertible Stock that is being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable, free from all transfer or
similar taxes, liens and charges and free of restrictions on transfer other than
restrictions on transfer under this Agreement and applicable federal and state
securities laws, and, subject to the truth and accuracy of the Purchasers'
representations set forth in Section 3, will be issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Convertible Stock purchased hereunder has been duly and
validly reserved for issuance, and upon issuance in accordance with the terms of
the Certificate of Designations, will be duly and validly issued, fully paid and
nonassessable, free from all transfer or similar taxes, liens and charges and
free of restrictions on transfer other than restrictions on transfer under this
Agreement and applicable federal and state securities laws, and, subject to the
truth and accuracy of the Purchasers' representations set forth in Section 3,
will be issued in compliance with all applicable federal and state securities
laws.
2.6 CONSENTS. Except as set forth in SECTION 2.6 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, foreign,
state or local governmental authority or any other person or entity on the part
of the Company or any of its subsidiaries is required in connection with the
consummation of the transactions contemplated by the Investment Instruments,
except for filings pursuant to applicable state securities laws and Regulation D
of the Securities Act.
2.7 LITIGATION. Except as set forth in SECTION 2.7 of the Disclosure
Schedule, there is no action, suit, proceeding or investigation pending or, to
the Company's knowledge, threatened against the Company or any of its
subsidiaries which could reasonably be expected to result in a Material Adverse
Effect, nor, to the Company's knowledge, is there any reasonable basis for the
foregoing. Neither the Company nor any of its subsidiaries is a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality which has had, or could reasonably
be expected to result in, a Material Adverse Effect.
2.8 INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries
own, license or otherwise possess legally enforceable rights to use all patents,
pending patent applications, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, software source code and object code and
proprietary rights and processes (collectively, the "Intellectual Property
Rights") necessary for the Company's and its subsidiaries' business as now
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conducted. Neither the Company nor any of its subsidiaries has received any
communications alleging that the Company or any of its subsidiaries has violated
any of the patents, trademarks, service marks, trade names, copyrights, trade
secrets or other proprietary rights or processes of any other person or entity
which reasonably could be considered likely to result in a Material Adverse
Effect. To the Company's knowledge, neither the Company nor any of its
subsidiaries is infringing upon, or in conflict with, the right or claimed right
of any third party with respect to any of the Intellectual Property Rights.
Neither the Company nor any of its subsidiaries has licensed any of the
Intellectual Property Rights to any other person or entity, nor does any other
person or entity have an option or any other right to acquire any of the
Intellectual Property Rights. To its knowledge, both the Company and its
subsidiaries have avoided every condition, and have not performed any act, the
occurrence of which would result in the Company's or any subsidiary's loss of
any Intellectual Property Right, the loss of which would have a Material Adverse
Effect.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of
its subsidiaries is in violation or default of any provisions of their
respective charters, bylaws or other organizational documents or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of any federal or
state statute, rule or regulation applicable to the Company or any of its
subsidiaries which violations or defaults would, either alone or in the
aggregate, have a Material Adverse Effect. The execution, delivery and
performance of the Investment Instruments and the consummation of the
transactions contemplated hereby or thereby will not, with or without the
passage of time and/or the giving of notice, result in any such violation or be
in conflict with or constitute either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any material lien, charge or encumbrance upon any assets of
the Company or its subsidiaries; provided, however, that in the case of any
contract (other than contracts pursuant to which the Company has incurred
indebtedness or other liabilities in an amount in excess of $1,000,000), the
foregoing representation shall not be deemed to have been breached so long as
any such resulting violation of, conflict with or default under such contract
would not reasonably be considered likely to result in a Material Adverse
Effect.
2.10 ABSENCE OF LIABILITIES. Except as set forth in SECTION 2.10 of
the Disclosure Schedule or as disclosed in the Financial Statements (as defined
below), since December 31, 1997 neither the Company nor any of its subsidiaries
has (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or incurred any other liabilities
individually in excess of $500,000 or in excess of $2,000,000 in the aggregate,
(iii) made any loans or advances to any person or entity, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
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any of its assets or rights, other than in the ordinary course of business.
2.11 NO CONFLICT OF INTEREST. Except as disclosed in the Company SEC
Reports, the Company is not a party to any transaction which would be required
to be disclosed pursuant to Item 404 of Regulation S-K ("Regulation S-K")
promulgated by the Securities and Exchange Commission (the "SEC").
2.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as set forth in
Section 2.12 of the Disclosure Schedule and as contemplated in the Registration
Rights Agreement, neither the Company nor any of its subsidiaries has granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity. To the Company's knowledge, no stockholders of the Company
have entered into any agreements with respect to the voting of capital stock of
the Company.
2.13 PRIVATE PLACEMENT. Subject in part to the truth and accuracy of
the Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Convertible Stock as contemplated by this Agreement is exempt
from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.14 TITLE TO PROPERTY AND ASSETS. Each of the Company and its
subsidiaries owns or leases its properties and assets free and clear of all
mortgages, liens, loans and encumbrances, except such encumbrances and liens
which are disclosed in the financial statements included in the Company SEC
Reports or which arise in the ordinary course of business and do not materially
impair the Company's ownership or use of such properties or assets. With respect
to the properties and assets it leases, each of the Company and its subsidiaries
is in compliance with such leases, except for such instances of non-compliance
which, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect and, to its knowledge, holds a valid
leasehold interest free of any material liens, claims or encumbrances.
2.15 TAX RETURNS AND AUDITS. Each of the Company and its subsidiaries
has accurately prepared and timely filed all foreign, federal, state, local and
other tax returns required by law to be filed by it, has paid or made provision
for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been made and are reflected in the Financial Statements
to the extent required by U.S. generally accepted accounting principles ("GAAP")
for all current taxes and other charges to which the Company or any of its
subsidiaries are subject and which are not currently due and payable. Neither
the Company nor any of its subsidiaries has filed or has been required to file
foreign income tax returns. The Company does not know of any additional
assessments or adjustments pending or threatened against the Company or any of
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its subsidiaries for any period which could reasonably be expected to result in
a Material Adverse Effect, nor of any reasonable basis for any such assessment
or adjustment.
2.16 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and since January 1, 1995 no labor union has requested or, to
the knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company or any of its subsidiaries. There is no
strike or other labor dispute involving the Company and any of its subsidiaries
pending, or to the knowledge of the Company threatened, which would have a
Material Adverse Effect, nor is the Company aware of any labor organization
activity involving its employees. To the Company's knowledge, the Company has
complied with all applicable federal and state equal employment opportunity laws
and with all other laws related to employment, except for such acts of
non-compliance which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
2.17 PERMITS. The Company and each of its subsidiaries has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which would
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
is in default in any material respect under any of such franchises, permits,
licenses or other similar authority , except for such defaults which,
individually or in the aggregate, would not result in a Material Adverse Effect.
2.18 REAL PROPERTY HOLDING CORPORATION. Neither the Company nor any of
its subsidiaries is a United States real property holding corporation within the
meaning of Internal Revenue Code Section 897(c)(2) and Section 1.897-2(c) of the
Treasury Regulations promulgated thereunder.
2.19 FINANCIAL STATEMENTS. The Company has made available to the
Purchasers its audited consolidated financial statements (including balance
sheet and income statement) as of, and for the year ended December 31, 1997 and
its unaudited consolidated financial statements (including balance sheet and
income statement) as of, and for the three-month period ended March 31, 1998
(collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and fairly present the
consolidated financial condition and operating results of the Company and its
subsidiaries as of the dates thereof. Except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or otherwise,
other than (i) liabilities paid or incurred in the ordinary course of business
subsequent to the dates thereof and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, which, in both cases,
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individually or in the aggregate, are not material to the financial condition or
operating results of the Company and its subsidiaries, taken as a whole.
2.2 CHANGES. Except as set forth in SECTION 2.20 of the Disclosure
Schedule, since March 31, 1998, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company and its subsidiaries from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not resulted in a Material Adverse Effect.
(b) any waiver or compromise by the Company or its subsidiaries
of a valuable right or of a material debt owed to it;
(c) any satisfaction or discharge of any material lien, claim or
encumbrance or payment of any obligation by the Company or its subsidiaries,
except in the ordinary course of business;
(d) any material change to a material contract or agreement (as
defined in Item 601(b)(10) of Regulation S-K) by which the Company, any of its
subsidiaries or any of their respective assets is bound or subject;
(e) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the Company or
any of its subsidiaries;
(f) any sale, assignment or transfer of any material patents,
trademarks, copyrights, trade secrets or other intangible assets of the Company
or any of its subsidiaries, other than in the ordinary course of business;
(g) any resignation or termination of employment of any executive
officer or key employee of the Company or any of its subsidiaries; and the
Company does not know of any impending resignation or termination of employment
of any such executive officer or key employee;
(h) receipt of notice that there has been a loss of, or order
cancellation by, any major customer of the Company or any of its subsidiaries,
which loss or cancellation would result in a Material Adverse Effect;
(i) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or any of its subsidiaries, with respect to any
material portion of its properties or assets, except liens which are not,
individually or in the aggregate, material to the Company and its subsidiaries,
taken as a whole;
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(j) any loans or guarantees made by the Company or any of its
subsidiaries to or for the benefit of its employees, officers or directors, or
any members of their immediate families, other than travel advances and other
advances made in the ordinary course of its business;
(k) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company; or
(l) any arrangement or commitment by the Company or any of its
subsidiaries to do anything described in this Section 2.20.
2.21 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor any of its
subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety where such
violation, either individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect and, to the Company's knowledge, no material
expenditures are required in order to comply with any such existing statute, law
or regulation.
2.22 FCPA. The Company and its subsidiaries have complied in all
material respects with the United States Foreign Corrupt Practices Act of 1977,
as amended (the "FCPA"), in obtaining any consents, licenses, approvals,
authorizations, rights, and privileges in connection with the conduct of their
business and, have otherwise conducted their business in compliance with all
material respects with the FCPA. Their internal management and accounting
practices and controls are adequate to ensure compliance in all material
respects with the FCPA.
2.23 REPORTS. Since January 1, 1995, the Company has filed all reports
(including proxy statements) and registration statements required to be filed
with the SEC (collectively, the "Company SEC Reports"). The Company has
previously furnished or made available to the Purchasers true and complete
copies of all of the Company SEC Reports filed prior to the date hereof. None of
the Company SEC Reports, as of their respective dates, contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets (including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries as of the respective dates thereof, and the
other related statements (including the related notes) included in the Company
SEC Reports present fairly, in all material respects, the results of operations
and the changes in financial position of the Company and its subsidiaries for
the respective periods or as of the respective dates set forth therein, all in
conformity with GAAP consistently applied during the periods involved, except as
otherwise noted therein and subject, in the case of unaudited interim financial
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statements, to the absence of footnotes and normal year-end adjustments. All of
the Company SEC Reports, as of their respective dates, complied as to form in
all material respects with the requirements of the Securities Exchange Act of
1934, as amended, the Securities Act and the applicable rules and regulations
thereunder.
2.24 DISCLOSURE. No representation or warranty of the Company
contained in this Agreement and the Disclosure Schedule and other exhibits
attached hereto, or in any certificate furnished or to be furnished by the
Company to the Purchasers at the Closing (when read together), contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser hereby,
severally and not jointly, represents and warrants to the Company, with respect
to itself only, that:
3.1 ACCREDITED INVESTOR; AUTHORIZATION. Such Purchaser is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act and has the individual, partnership or corporate, as the case may
be, power and authority to enter into and perform this Agreement and to purchase
the Convertible Stock (and the Common Stock issuable upon conversion thereof).
This Agreement has been duly authorized, executed and delivered by such
Purchaser and constitutes the legal, valid and binding obligation of such
Purchaser, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies.
3.2 NO CONFLICT WITH OTHER AGREEMENTS. The execution, delivery and
performance of the Investment Instruments and the consummation of the
transactions contemplated hereby and thereby will not, with or without the
passage of time and/or the giving of notice, result in a violation or default of
any provisions of such Purchaser's limited partnership agreement, certificate of
limited partnership, certificate of incorporation, bylaws or other charter
document or of any instrument, judgment, order, writ, decree or contract to
which it is a party or by which it is bound or, to its knowledge, of any
provision of federal or state statute, rule or regulation.
3.3 INVESTMENT KNOWLEDGE. Such Purchaser has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in the Company and is capable of bearing
the economic risks of such investment, including a complete loss of its
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investment. Such Purchaser acknowledges that the Convertible Stock and the
shares of Common Stock issuable upon conversion thereof have not been registered
under the Securities Act and, except as provided in the Registration Rights
Agreement, the Company is under no obligation to file a registration statement
with the SEC with respect to the Convertible Stock or the shares of Common Stock
issuable upon conversion of the Convertible Stock.
3.4 DISTRIBUTION. The Convertible Stock (and the Common Stock issuable
upon conversion thereof) is being acquired for such Purchaser's own account for
the purpose of investment and not with a view to or for resale in connection
with any distribution thereof.
4. CONDITIONS OF PURCHASERS' OBLIGATIONS AT CLOSING. The obligations of the
Purchasers to the Company under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions, unless otherwise
waived in writing by Purchasers purchasing a majority of the shares of
Convertible Stock, which waiver shall be binding upon all Purchasers:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true and correct in all material
respects on and as of the date of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing, except for those representations and warranties made as of a specific
date other than the date of this Agreement, which shall be true and correct in
all material respects as of such date.
4.2 PERFORMANCE. The Company shall have performed and complied in all
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by the Company on or before the Closing.
4.3 COMPLIANCE CERTIFICATE. A duly authorized executive officer of the
Company shall have delivered to the Purchasers at the Closing a certificate
certifying that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
4.4 QUALIFICATIONS. All authorizations, approvals or permits of any
governmental authority or regulatory body of the United States or of any state
that are set forth in SECTION 4.4 of the Disclosure Schedule shall have been
obtained and be effective as of the Closing.
4.5 OPINION OF COMPANY COUNSEL. The Purchasers shall have received
from ▇▇▇▇ and ▇▇▇▇ LLP, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of EXHIBIT E.
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4.6 SUPPORTING DOCUMENTS. The Purchasers shall have received the
following:
(a) A copy of resolutions of the Board of Directors of the
Company authorizing and approving the Investment Instruments and copies of
resolutions of the Board of Directors of the Company authorizing and approving
the adoption of the Certificate of Designations, the issuance of the Convertible
Stock and the other matters contemplated by this Agreement, all such resolutions
to be certified by the Secretary of the Company;
(b) A long-form certificate as to the existence and good standing
of the Company issued by the Secretary of State of the State of Delaware, dated
not more than five (5) days before the date of Closing; and
(c) Such additional documentation as legal counsel for the
Purchasers may reasonably request.
4.7 CREDIT AGREEMENT; LENDER APPROVAL. The Company and its bank
lenders shall have entered into a Second Amended and Restated Credit Agreement,
substantially in accordance with the terms of the Summary of Principal Terms and
Conditions, dated as of April 10, 1998.
4.8 SENIOR NOTES. The Company's wholly-owned subsidiary, Arch
Communications, Inc., a Delaware corporation formerly known as USA Mobile
Communications, Inc. II, shall have issued new senior notes in an aggregate
principal amount of not less than $125,000,000, with an interest rate and other
per annum cost of capital of not greater than 15% and otherwise pursuant to an
indenture in form and substance substantially similar to that described in the
Private Offering Memorandum of Arch Communications, Inc., dated June 8, 1998, a
copy of which has previously been furnished to the Purchasers.
4.9 RESTRUCTURING. The Company shall have implemented, or publicly
announced its intention to implement, a corporate restructuring in accordance
with the restructuring plan previously disclosed to the Purchasers.
4.10 BOARD OF DIRECTORS. As of the Closing, the Company's Board of
Directors shall consist of seven members, of which one member shall be elected
by the holders of a majority of the Convertible Stock (who the Purchasers agree
shall initially be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇).
4.11 REGISTRATION RIGHTS AGREEMENT. The Company, each Purchaser that
is a party thereto and the other parties thereto shall have executed and
delivered the Registration Rights Agreement.
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4.12 CERTIFICATE OF DESIGNATIONS. The Company shall have filed the
Certificate of Designations with the Secretary of State of the State of Delaware
on or prior to the date of the Closing, which shall continue to be in full force
and effect as of the date of the Closing.
4.13 HSR ACT. Any applicable waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR Act"),
with respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
4.14 PAYMENT OF EXPENSES. The Company shall have paid the reasonable
legal expenses and disbursements of the Purchasers, in an amount which, when
combined with the other reimbursable out-of-pocket expenses of the Purchasers as
provided in Section 9.6, shall not exceed $100,000.
4.15 NASDAQ APPROVAL. The Company shall have delivered to the
Purchasers evidence, in form and substance reasonably satisfactory to the
Purchasers and their counsel, to establish that the issuance and sale of the
Convertible Stock does not require consent of the Company's stockholders under
the applicable rules of the Nasdaq National Market.
4.16 NO LITIGATION. On the Closing Date, there shall be no effective
injunction or other pending or threatened proceeding, legal restraint or
prohibition which would prevent the consummation of the transactions
contemplated hereby.
4.17 AMENDMENT TO RIGHTS PLAN. The Company shall have amended its
Rights Plan, in a manner reasonably satisfactory to the Purchasers, to provide
that none of the Purchasers shall be deemed to be "Acquiring Persons" under the
Rights Plan in connection with the consummation of the transactions contemplated
under this Agreement.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived by the Company in writing; PROVIDED, HOWEVER, that the
non-fulfillment of a condition by a Purchaser (a "Defaulting Purchaser") will
not relieve the Company of its obligation to each other fulfilling Purchaser so
long as such other fulfilling Purchaser(s) are willing to purchase from the
Company the Convertible Stock that was to have been purchased by the Defaulting
Purchaser.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of such Purchaser contained in Section 3 shall be true and correct in all
material respects on and as of the date of the Closing with the same effect as
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though such representations and warranties had been made on and as of the date
of the Closing, except for those representations and warranties made as of a
specific date other than the date of this Agreement, which shall be true and
correct in all material respects as of such date.
5.2 PERFORMANCE. Such Purchaser shall have performed and complied in
all material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by such Purchaser on or before the Closing.
5.3 REGISTRATION RIGHTS AGREEMENT. Such Purchaser shall have executed
and delivered the Registration Rights Agreement.
5.4 COMPLIANCE CERTIFICATE. A duly authorized executive officer of the
Purchaser shall have delivered to the Company at the Closing a certificate
certifying that the conditions specified in Sections 5.1 and 5.2 have been
fulfilled.
5.5 HSR ACT. Any applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have expired or
been terminated.
5.6 NO LITIGATION. On the Closing Date, there shall be no effective
injunction or other pending or threatened proceeding, legal restraint or
prohibition which would prevent the consummation of the transactions
contemplated hereby.
6. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees
as follows:
6.1 CORPORATE EXISTENCE. The Company and each of its subsidiaries will
maintain its corporate existence in good standing and comply with all applicable
laws and regulations of the United States or of any state or political
subdivision thereof and of any foreign jurisdiction, and of any government
authority of any of the foregoing, where the failure to so comply would have a
Material Adverse Effect.
6.2 BOOKS OF ACCOUNT AND RESERVES. The Company will keep books of
record and account in which full, true and correct entries are made of all of
its material dealings, business and affairs, in accordance with GAAP. The
Company will employ certified public accountants of established national
reputation selected by the Board of Directors of the Company who are
"independent" within the meaning of the accounting regulations of the SEC (the
"Accountants"). The Company will have annual audits made by such Accountants in
the course of which such Accountants shall make such examinations, in accordance
with generally accepted auditing standards, as will enable them to give such
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reports or opinions with respect to the financial statements of the Company as
will satisfy the requirements of the SEC in effect at such time with respect to
reports or opinions of accountants.
6.3 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. So long as at
least 50% of the shares of Convertible Stock issued hereunder remains
outstanding at any time after the date of this Agreement, the Company shall
deliver to each Purchaser who continues to hold, together with its affiliates,
at least 75,000 shares of Convertible Stock and who is not a competitor of the
Company (as determined in good faith by the Company's Board of Directors):
(a) annually, as soon as available, but in any event by the end
of each fiscal year, an operating plan and budget for the following year, and
quarterly updates of the Company's performance in comparison with such plan and
budget, which quarterly updates shall be provided as soon as available, but in
any event within forty-five (45) days of the close of each quarter;
(b) as soon as available, but in any event within 45 days after
the end of each quarter of each fiscal year of the Company, an unaudited balance
sheet of the Company, together with the related statements of operations,
retained earnings and cash flow for such quarter, prepared in accordance with
GAAP (provided, however, that such statements need not comply with the footnote
disclosure requirements of GAAP);
(c) as soon as available, but in any event within 90 days after
the end of each fiscal year, a balance sheet of the Company, as of the end of
such fiscal year, together with the related statements of operations, retained
earnings and cash flow statements for such fiscal year, all in reasonable detail
and duly certified by the Accountants, who shall have given the Company an
opinion, unqualified as to the scope of the audit, regarding such statements;
(d) with reasonable promptness after the Company learns of the
commencement or written threats of the commencement of any material lawsuit,
legal or equitable, or of any material administrative, arbitration or other
proceeding against the Company or its business, assets or properties, which, in
either event, could reasonably be considered likely to result in a Material
Adverse Effect, written notice of the nature and extent of such suit or
proceeding;
(e) promptly upon transmission thereof, copies of all reports,
proxy statements, registration statements and notifications filed by it with the
SEC pursuant to any act administered by the SEC or furnished to stockholders of
the Company or to Nasdaq or any national securities exchange;
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(f) with reasonable promptness, notice of any default in any
material agreement of the Company or its subsidiaries which could reasonably be
considered likely to result in a Material Adverse Effect; and
(g) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of the Company and its
subsidiaries as is available to the Company and as from time to time the
Purchasers may reasonably request.
The foregoing information rights of the Purchasers are conditioned upon
each Purchaser's execution of a confidentiality agreement with the Company
substantially in the form of EXHIBIT D attached hereto.
6.4 RESERVE FOR CONVERSION SHARES; NASDAQ LISTING.
(a) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, for the purpose of
effecting the conversion of the Convertible Stock and otherwise complying with
the terms of this Agreement, such number of its authorized shares of Common
Stock as shall be sufficient to effect the conversion of the Convertible Stock
from time to time outstanding or otherwise to comply with the terms of this
Agreement. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of the Convertible Stock
or otherwise to comply with the terms of this Agreement, the Company will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes. The Company will obtain any authorization,
consent, approval or other action by or make any filing with any court or
administrative body that may be required under applicable state securities laws
in connection with the issuance of shares of Common Stock upon conversion of the
Convertible Stock.
(b) The Company shall, if permitted by the rules of the Nasdaq
Stock Market, list and keep listed on the Nasdaq National Market, all Common
Stock issuable upon conversion of the Convertible Stock.
6.5 SEC REPORTING. The Company shall properly report the consummation
of the transactions contemplated hereby with the SEC.
6.6 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Convertible Stock for general corporate purposes relating to the business
and operations of the Company.
6.7 NOTICE OF TRANSACTIONS OR LIQUIDATION. The Company shall give at
least twenty (20) days' prior written notice to the Purchasers of any merger or
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consolidation in which the Company's outstanding securities are converted into
securities, cash or other property, any sale of all or substantially all of its
assets or any liquidation, dissolution or winding up of the Company.
6.8 INSPECTION. So long as at least 50% of the shares of Convertible
Stock issued hereunder remains outstanding at any time after the date of this
Agreement, the Company shall permit and cause each of its subsidiaries to permit
each Purchaser who continues to hold, together with its affiliates, at least
75,000 shares of Convertible Stock and who is not a competitor of the Company
(as determined in good faith by the Company's Board of Directors), and such
persons as it may reasonably designate, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and discuss
the affairs, finances and accounts of the Company and its subsidiaries with
their officers, employees and Accountants (and the Company hereby authorizes
said Accountants to discuss with such Purchaser and such designees such affairs,
finances and accounts provided that the Company shall be entitled to have a
representative of the Company be present), all at such reasonable times as shall
be requested by such Purchaser; provided, however, that such Purchaser and any
such designee shall, as a condition to the exercise of this inspection right,
execute a confidentiality agreement with the Company, containing customary
provisions, in form and substance reasonably acceptable to the Company and such
Purchaser.
6.9 REPRESENTATION ON BOARD OF DIRECTORS, DIRECTORS' AND SHAREHOLDERS'
MEETINGS. The Company shall maintain its Board of Directors in accordance with
the terms of its Restated Certificate of Incorporation and the Certificate of
Designations. The Company shall maintain a provision in its Bylaws or charter
providing for the indemnification of its directors to the fullest extent
permitted by the laws of Delaware.
6.10 AMENDMENT TO RIGHTS PLAN. The Company shall cause its Rights Plan
to be amended, on or prior to July 31, 1998, to provide that the Purchasers
shall be issued Rights in respect of their shares of Convertible Stock on or
prior to a Distribution Date (as defined in the Rights Plan) equivalent to those
Rights the Purchasers would otherwise have had under the Rights Plan on an "as
converted" basis.
7. NEGATIVE COVENANTS OF THE COMPANY. So long as any of the shares of
Convertible Stock issued hereunder remain outstanding, the Company will be
limited and restricted as follows:
7.1 PROTECTIVE PROVISIONS. The Company will not amend the Restated
Certificate of Incorporation or the Certificate of Designations in any manner
other than in compliance with the provisions for amendment set forth therein.
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7.2 RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any of
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of the Investment Instruments or its
obligations under the Restated Certificate without the prior consent of the
holders of a majority of the shares of Convertible Stock outstanding at such
time.
7.3 LIMITATION ON DEBT. Capitalized terms used in this Section 7.3 and
in Section 7.4 but not defined herein shall have the meanings given such terms
in the Company's Indenture for the 10-7/8% Senior Discount Notes due 2008 in the
form as of the date of this Agreement (the "Senior Notes Indenture").
So long as at least 50% of the Convertible Stock issued hereunder
remains outstanding, the Company will not, and will not permit any Restricted
Subsidiary to, Incur any Debt without the prior consent of the holders of a
majority of the shares of Convertible Stock outstanding at such time; PROVIDED,
HOWEVER, that the Company may Incur Debt and may permit a Restricted Subsidiary
to Incur Debt if at the time of such Incurrence and after giving effect thereto
the Consolidated Cash Flow Ratio would be less than 6.5 to 1.0.
In making the foregoing calculation, there shall be excluded from Debt
for purposes of calculating the Consolidated Cash Flow Ratio all Debt of the
Company and its Restricted Subsidiaries incurred pursuant to clause (i) of the
definition of Permitted Debt, and pro forma effect will be given to (i) the
Incurrence of the Debt to be incurred and the application of the net proceeds
therefrom to refinance other Debt and (ii) the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business acquired or disposed of by the Company or its
Restricted Subsidiaries, as the case may be, since the first day of the most
recent full fiscal quarter, as if such acquisition or disposition occurred at
the beginning of the most recent full fiscal quarter.
Notwithstanding the foregoing limitation, the Company may, and may
permit its Restricted Subsidiaries to, Incur the following additional Debt
("Permitted Debt"):
(i) Debt under Bank Credit Facilities in an aggregate amount not
to exceed $150.0 million at any one time outstanding, less any amounts by which
the commitments thereunder are permanently reduced pursuant to the provisions
thereof as described under the "Limitation on Certain Asset Sales" covenant in
the Company's Senior Notes Indenture;
(ii) other Debt of the Company or any Restricted Subsidiary
outstanding on the date of the Senior Notes Indenture and listed on Schedule A
thereto;
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(iii) Debt owed by the Company to any wholly owned Restricted
Subsidiary or owed by any wholly owned Restricted Subsidiary to the Company or
any other wholly owned Restricted Subsidiary (provided that such Debt is held by
the Company or such wholly owned Restricted Subsidiary);
(iv) Debt represented by the Notes;
(v) Debt Incurred or Incurrable in respect of letters of credit,
bankers' acceptances or similar facilities not to exceed $5.0 million at any one
time outstanding;
(vi) Capital Lease Obligations whose Attributable Value does not
exceed $5.0 million at any one time outstanding;
(vii) Debt of the Company or any Restricted Subsidiary consisting
of guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(viii) Debt of the Company or any Restricted Subsidiary
(including trade letters of credit) in respect of purchase money obligations,
provided that the aggregate amount of such Debt outstanding at any time does not
exceed $5.0 million;
(ix) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Debt is
extinguished within two Business Days of its Incurrence; and
(x) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Debt, other than Debt Incurred pursuant to clause (i), (vii) or (ix)
of this definition, including any successive refinancings thereof, so long as
(A) any such new Debt is in a principal amount that does not exceed the
principal amount (or, if such Debt being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination) so
refinanced, plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Debt refinanced or the amount
of any premium reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated repurchase,
plus the amount of expenses Incurred by the Company in connection with such
refinancing, and (B) such refinancing Debt does not have an Average Life less
than the Average Life of the Debt being refinanced and does not have a final
scheduled maturity earlier than the final scheduled maturity of the Debt being
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refinanced, or permit redemption at the option of the holder earlier than the
earliest date of redemption at the option of the holder of the Debt being
refinanced.
7.4 RESTRICTED PAYMENTS. So long as 50% of the shares of Convertible
Stock issued hereunder remain outstanding, the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions (such payments or any other actions described in (but not
excluded from) clauses (a) through (d) being referred to as "Restricted
Payments"):
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any Restricted
Subsidiary (other than dividends or distributions payable solely in Common Stock
and other than dividends or distributions by a Restricted Subsidiary payable to
the Company or a wholly owned Restricted Subsidiary);
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (other than any such Capital
Stock owned by the Company or any of its wholly owned Restricted Subsidiaries);
(c) make any loan, advance, capital contribution to or other
Investment in, or guarantee any obligation of, any Affiliate of the Company,
other than a Permitted Investment; and
(d) make any other Investment (other than a Permitted Investment)
in any person or entity;
unless at the time of, and immediately after giving effect to, the proposed
Restricted Payment:
(i) no Default or Event of Default has occurred and is
continuing;
(ii) the Company could Incur at least $1.00 of additional
Debt (other than Permitted Debt) in accordance with Section 7.3; and
(iii) the aggregate amount of all Restricted Payments
declared or made after the issue date of the Notes does not exceed the sum of:
(A) the remainder of (x) 100% of the aggregate
Consolidated Cash Flow of the Company (excluding, for purposes other than
determining whether the Company may, or may permit a Restricted Subsidiary to,
make Investments in any Person, the net income (but not the net loss) of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary is at the date of
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determination restricted, directly or indirectly, except to the extent that such
net income could be paid to the Company or a Restricted Subsidiary thereof by
loans, advances, intercompany transfers, principal repayments or otherwise)
measured on a cumulative basis during the period beginning on the first day of
the Company's fiscal quarter during which the Notes were originally issued and
ending on the last day of the Company's most recent fiscal quarter for which
internal financial statements are available ending prior to the date of such
proposed Restricted Payment, minus (y) the product of 2.0 times Consolidated
Interest Expense accrued on a cumulative basis during the period beginning on
the first day of the Company's fiscal quarter during which the Notes were
originally issued] and ending on the last day of the Company's most recent
fiscal quarter for which internal financial statements are available ending
prior to the date of such proposed Restricted Payment; plus
(B) the aggregate net proceeds received by the Company
after the initial issuance of the Notes (including the fair market value of the
property other than cash as determined by the Company's Board of Directors,
whose good faith determination will be conclusive) from the issuance or sale
(other than to a Restricted Subsidiary) of Common Stock of the Company (which
shall not be deemed to include the issuance of the Convertible Stock); plus
(C) the aggregate net cash proceeds received by the
Company after the initial issuance of the Notes (including the fair market value
of the property other than cash as determined by the Company's Board of
Directors, whose good faith determination will be conclusive) from the issuance
or sale (other than to a Restricted Subsidiary) of debt securities or
convertible securities (which shall not be deemed to include the issuance of the
Convertible Stock) that have been converted into or exchanged for Common Stock
of the Company, together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange; plus
(D) without duplication, the Net Cash Proceeds received
by the Company or a wholly owned Restricted Subsidiary of the Company upon the
sale of any Unrestricted Subsidiary.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take any one or more of the following actions, whether singly or in
combination, so long as (with respect to clauses (b) through (f) below) no
Default or Event of Default has occurred and is continuing:
(a) the payment of any dividend within 60 days after the date of
declaration thereof if at the declaration date such payment would not have been
prohibited by the foregoing provisions;
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(b) payments (whether made in cash, property or securities) by the Company
or any Subsidiary of the Company to any employee of the Company or any
Subsidiary of the Company in connection with the issuance or redemption of stock
of any such company pursuant to any employee stock option plan or board
resolution to the extent that such payments do not exceed $500,000 in the
aggregate during any fiscal year or $2.0 million in the aggregate;
(c) Investments in Persons made with, or out of the net cash proceeds of a
substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of, shares of Common Stock of the Company;
(d) Investments in Persons all or substantially all of whose operations
are in the telecommunications business, provided that the aggregate amount of
Investments pursuant to this clause (d) in all such persons or entities does not
exceed $50.0 million;
(e) Debt Investments in ▇▇▇▇▇▇ in an aggregate amount of up to $75.0
million; and
(f) make any other payment or payments of up to $5.0 million in the
aggregate which would otherwise constitute a Restricted Payment.
The Restricted Payments described in clauses (b) through (f) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with the preceding paragraph but will reduce the amount that would
otherwise be available for Restricted Payments under clause (iii) of the first
paragraph of this Section 7.4 and the Restricted Payments described in clause
(a) of the preceding paragraph will be Restricted Payments that will be
permitted to be taken in accordance with the preceding paragraph and will not
reduce the amount that would otherwise be available for Restricted Payments
under clause (iii) of the first paragraph of this Section 7.4.
For the purpose of making any calculations pursuant to this Section 7.4,
(i) an Investment will include the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and will, for the purpose of this covenant, exclude
the fair market value of the net assets of any Unrestricted Subsidiary that is
designated as a Restricted Subsidiary, (ii) any property transferred to or from
an Unrestricted Subsidiary will be valued at fair market value at the time of
such transfer, provided that, in each case, the fair market value of an asset or
property is as determined by the Board of Directors of the Company in good faith
and (iii) subject to the foregoing, the amount of any Restricted Payment, if
other than cash, will be determined by the Board of Directors of the Company,
whose good faith determination will be conclusive.
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If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, such Investment
will no longer be counted as a Restricted Payment for purposes of calculating
the aggregate amount of Restricted Payments.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividend, loan repayment, transfer of
assets or otherwise) to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing Consolidated Cash Flow of the Company under the first
paragraph of this Section 7.4, (i) the Company may use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (ii) the Company will
be permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment, would in
the good faith determination of the Company be permitted under the requirements
of the Senior Notes Indenture, such Restricted Payment will be deemed to have
been made in compliance with the Senior Notes Indenture notwithstanding any
subsequent adjustments made in good faith to the Company's financial statements
affecting Consolidated Adjusted Net Income of the Company for any period.
8. NEGATIVE COVENANT OF THE PURCHASERS.
8.1 STANDSTILL AGREEMENT. The Purchasers and their affiliates shall
not acquire, directly or indirectly, beneficial ownership of more than 24.99% of
the outstanding securities of the Company entitled to vote in the election of
directors ("Voting Securities"); provided, that the Purchasers shall not be
deemed to be in breach of this covenant solely as a result of the acquisition of
Voting Securities issued in payment of dividends on the Convertible Stock
pursuant to the Certificate of Designations.
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9. MISCELLANEOUS.
9.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties and representations of the Company and the Purchasers
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing until thirty (30) days after the
filing with the SEC of the Company's financial statements for the quarter ending
June 30, 1999 as part of the Company's Form 10-Q report for such quarter.
9.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.3 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed given upon delivery, when delivered personally
or by overnight courier or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, addressed to the party to be notified at such party's address
as set forth below or on SCHEDULE 1 hereto, or as subsequently modified by
written notice, and
(a) if to the Company, to:
Arch Communications Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
or (b) if to the Purchasers:
c/o Sandler Capital Management
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▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇, Esq.
9.5 FINDER'S FEE. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this transaction
except as disclosed in SECTION 9.5 of the Disclosure Schedule. Each Purchaser
agrees to indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless the Purchasers
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
9.6 EXPENSES. Each party shall bear its own costs on expenses;
PROVIDED, HOWEVER, that the Company shall pay and be responsible for all
reasonable out-of-pocket expenses of the Purchasers including, but not limited
to, travel, accounting and other miscellaneous expenses and the reasonable legal
fees of the counsel for the Purchasers, incurred with respect to this Agreement,
the documents referred to herein and the transactions contemplated hereby and
thereby, up to a maximum of One Hundred Thousand Dollars ($100,000) in the
aggregate; and provided further, and in addition to the foregoing, that the
Company also shall pay all filing fees associated with HSR Act approval of the
transactions contemplated by this Agreement.
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9.7 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Investment Instruments, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
9.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
with the written consent of the Company and the holders of at least a majority
of the shares of Convertible Stock then outstanding. Any amendment or waiver
effected in accordance with this Section 9.8 shall be binding upon the
Purchasers and each transferee of the Convertible Stock (or the Common Stock
issuable upon conversion thereof), each future holder of all such securities and
the Company.
9.9 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
9.10 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any of the Convertible Stock (or the
Common Stock issuable upon conversion thereof), upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
9.11 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule and the
documents referred to herein constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and any and all other written or
oral agreements existing between the parties hereto are expressly canceled.
9.12 GOVERNING LAW. THIS AGREEMENT AND ALL ACTS AND TRANSACTIONS
PURSUANT HERETO AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE
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GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
9.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
[Signature Pages Follow]
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The parties have executed this Agreement as of the date first written
above.
COMPANY:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ ▇.▇. ▇▇▇▇▇, ▇▇.
Name: ▇.▇. ▇▇▇▇▇, ▇▇.
Title: Chairman of the Board
and Chief Executive Officer
PURCHASERS:
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P., General Partner
By: Sandler Capital Management, General Partner
By: MJDM Corp., a General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
SANDLER CAPITAL PARTNERS IV FTE, L.P.
By: Sandler Investment Partners, L.P., General Partner
By: Sandler Capital Management, General Partner
By: MJDM Corp., a General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SOUTH FORK PARTNERS
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
▇▇▇▇▇ Capital Management LLC
General Partner of South Fork Partners
THE GEORGICA INTERNATIONAL FUND LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Georgica Advisors LLC
Investment Advisor to The
Georgica International Fund
Limited
ASPEN PARTNERS
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Capital Management LLC
General Partner of Aspen Partners
CONSOLIDATED PRESS INTERNATIONAL LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
Georgica Advisors LLC
Investment Advisor to
Consolidated Press
International Limited
SCHEDULE 1
NUMBER OF SHARES OF
CONVERTIBLE STOCK TO BE
PURCHASER PURCHASED PURCHASE PRICE
--------- --------- --------------
Sandler Capital Partners IV, L.P. 151,500 $15,150,000
Sandler Capital Partners IV FTE, L.P. 62,250 6,225,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6,250 625,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 2,500 250,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 2,000 200,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 500 50,000
South Fork Partners 7,000 700,000
The Georgica International Fund Limited 8,000 800,000
Aspen Partners 3,750 375,000
Consolidated Press International Limited 6,250 625,000
------- -----------
Total 250,000 $25,000,000
======= ===========
The address for each of Sandler Capital Partners IV, L.P., Sandler Capital
Partners IV FTE, L.P., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is:
c/o Sandler Capital Management
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
The address for South Park Partners, The Georgica International Fund Limited,
Aspen Partners and Consolidated Press International Limited is:
c/o Georgica Advisors
1114 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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