CONTRIBUTION AND SERIES A PREFERRED STOCK PURCHASE AGREEMENT
by and among
BIG BAD CELLULAR COMPANY, INC.,
ZZZ COMMUNICATIONS, INC.
UTEL, INC.,
UTEL-IOWA, INC.
and
MARTIN LEWIS
Dated: March 9, 2001
| NSD_DOCS\324.3 [W97]||
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS......
1.1Defined Terms......
1.2Other Defined Terms......
1.3Interpretation Provisions......
ARTICLE II. contribution OF ASSETS and STOCK; CAPITALIZATION OF Clear talk......
2.1Transfer of BBC Licenses to ZZZ......
2.2Transfer of LEWIS License to ZZZ...... 8
2.3Transfer of Stock of UTEL-IOWA; Additional Capital Contributions......
2.4Assumption of Liabilities......
2.5Issuance of Capital Stock of ZZZ......
2.6Closing Costs; Transfer Taxes and Fees; Proration......
ARTICLE III. CLOSING......
3.1Closing......
3.2Deliveries at Closing......
ARTICLE IV. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO UTEL-IOWA......
4.1Organization of UTEL-IOWA......
4.2Authority of UTEL-IOWA......
4.3Capitalization of UTEL-IOWA......
4.4No Conflicts......
4.5Litigation......
4.6No Finder......
4.7Undisclosed Liabilities......
4.8Subsequent Events......
4.9Legal Compliance......
4.10Tax Matters......
4.11Real Property......
4.12Intellectual Property......
4.13Contracts......
4.14Tangible Assets......
4.15Insurance......
4.16Powers of Attorney......
4.17Employees; Employee Benefit Plans......
4.18Environment, Health and Safety......
4.19Certain Business Relationships with UTEL-IOWA......
4.20Disclosure......
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF LEWIS......
5.1Authority of LEWIS......
5.2No Conflicts......
5.3The License......
5.4Title to License......
5.5No Violation, Litigation or Regulatory Action......
5.6No Finder......
5.7Investment......
ARTICLE VI. REPRESENTATIONS and warranties of UTEL......
6.1Organization of UTEL......
6.2Authority......
6.3No Conflict......
6.4UTEL-IOWA Stock......
6.5No Finder......
6.6Restricted Securities......
6.7Investment......
ARTICLE VII. REPRESENTATIONS and warranties of BBC......
7.1Organization of BBC......
7.2Authority of BBC......
7.3No Conflicts......
7.4The Licenses......
7.5Title to Licenses......
7.6No Violation, Litigation or Regulatory Action......
7.7No Finder......
7.8Restricted Securities......
7.9Investment......
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO CLEAR TALK......
8.1Organization of ZZZ; Certificate of Incorporation......
8.2Authorization......
8.3Capitalization of ZZZ......
8.4No Conflict or Violation; Consents......
8.5No Brokers......
8.6Litigation......
8.7Business Plan......
ARTICLE IX. actions prior to the closing date; PRE-CLOSING COVENANTS......
9.1Investigation by BBC......
9.2Preserve Accuracy of Representations and Warranties......
9.3Consents of Third Parties; Governmental Approvals......
9.4Operations Prior to the Closing Date......
9.5Conduct of Business of UTEL-IOWA......
9.6Radio Frequency Testing Letters......
ARTICLE X. ADDITIONAL AGREEMENTS
10.1Reasonable Efforts......
10.2Governmental Authorizations......
10.3No Obligation of BBC to Provide Additional Funds to ZZZ......
10.4BBC Rights with Respect to Dream Field and Twin Farms Markets......
10.5Right of First Offer......
ARTICLE XI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BBC......
11.1No Misrepresentation or Breach of Covenants and Warranties......
11.2No Restraint or Litigation......
11.3Final FCC Order and HSR Approval......
11.4Management Agreement......
11.5Minimum Value of UTEL-IOWA Qualifying Assets......
11.6Necessary Consents......
11.7Closing Deliveries......
ARTICLE XII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LEWIS, UTEL and CLEAR TALK
12.1No Misrepresentation or Breach of Covenants and Warranties......
12.2No Restraint or Litigation......
12.3FCC Consent and HSR Approval......
12.4Necessary Consents......
12.5Closing Deliveries......
ARTICLE XIII. INDEMNIFICATION......
13.1Survival......
13.2Indemnification by LEWIS, UTEL and ZZZ......
13.3Indemnification by BBC......
13.4Certain Limitations......
13.5Notice of Claims......
13.6Third Person Claims......
13.7Amount of Indemnification Payments......
ARTICLE XIV. TERMINATION......
14.1Termination......
ARTICLE XV. GENERAL PROVISIONS......
15.1Confidential Nature of Information......
15.2No Public Announcement; Press Releases......
15.3Notices......
15.4Successors and Assigns......
15.5Entire Agreement; Amendments......
15.6Waivers......
15.7Expenses......
15.8Partial Invalidity......
15.9Execution in Counterparts......
15.10Further Assurances......
15.11Resolution of Disputes......
15.12Governing Law......
15.13Specific Performance......
15.14Representation by Counsel; Construction......
EXHIBITS
Exhibit ADescription of LEWIS License
Exhibit BDescription of BBC Licenses
Exhibit CBusiness Plan of ZZZ
Exhibit DForm of Investor’s Rights Agreement
Exhibit EINTENTIONALLY OMMITTED
Exhibit FForm of Stockholders’ Agreement
Exhibit GPerformance Criteria
Exhibit HForm of UTEL Pledge Agreement
Exhibit IForm of First Amended and Restated Certificate of Incorporation
Exhibit JForm of BBC RF Testing Letter
Exhibit KForm of LEWIS RF Testing letter
Exhibit LDescription of Exchange transaction
1
| NSD_DOCS\324.3 [W97]||
CONTRIBUTION AND SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Contribution and Series A Preferred Stock Purchase Agreement (this “Agreement”), dated as of March 9, 2001 (the “Effective Date”), is by and among BIG BAD CELLULAR COMPANY, Inc., a Delaware corporation (“BBC”), ZZZ Communications, Inc., a Delaware corporation (“ZZZ”), UTEL, Inc., a Delaware corporation (“UTEL”), MARTIN LEWIS, an individual (“LEWIS”), and UTEL-IOWA, Inc., an Iowa corporation (“UTEL-IOWA”). BBC, ZZZ, UTEL, LEWIS and UTEL-IOWA are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
A.LEWIS has acquired the authorization (the “LEWIS License”) of the Federal Communications Commission (the “FCC”) described on ExhibitA hereto to construct and operate personal communication services (“PCS”) wireless telecommunications systems in the Cedar Rapids, IOWA Basic Trading Area (“BTA”).
B.BBC holds PCS wireless licenses for the Dream Field, and Twin Farms, IOWA BTAs as described on ExhibitB hereto (the “BBC Licenses,” and together with the LEWIS License, the “Licenses”).
C.In order to implement the business objectives of the Parties, (i)BBC desires to contribute the BBC Licenses to ZZZ in exchange for shares of ZZZ SeriesA preferred stock, $0.001 par value per share (the “Series A Preferred Stock”), (ii)LEWIS desires to contribute the LEWIS License to ZZZ in exchange for shares of ZZZ common stock, $0.001 par value per share (the “Common Stock”), which shares of Common Stock shall be issued to UTEL, a company in which LEWIS has a substantial interest, and (iii)UTEL desires to contribute all of the issued and outstanding capital stock of UTEL-IOWA (the “UTEL-IOWA Stock”) to ZZZ in exchange for shares of Common Stock.
D.The Parties have established ZZZ to hold the Licenses and the UTEL-IOWA Stock and to have UTEL-IOWA build-out and operate PCS wireless networks (the “Networks”) in the Hawkeye City, Dream Field and Twin Farms, IOWA markets, and such other markets in which ZZZ may desire to operate. The Parties intend for ZZZ to qualify as a “designated entity” under the FCC Rules to hold C- Block and F-Block FCC Licenses.
E.As conditions to the contribution of the BBC Licenses, the LEWIS License and the UTEL-IOWA Stock, among other things, ZZZ, BBC and UTEL, will enter into certain additional agreements described in this Agreement.
AGREEMENT
In consideration of the mutual agreements set forth herein, the Parties hereto agree as follows:
ARTICLE I.DEFINITIONS
1.1Defined Terms
. As used in this Agreement:
“Action” means any action, claim, suit, litigation, proceeding, hearing, labor dispute, arbitral action, governmental audit, inquiry, criminal prosecution, investigation, charge or complaint.
“Affiliate” has the meaning set forth in Rule12b-2 promulgated under the Securities Exchange Act of 1934, as amended.
“Ancillary Agreements” mean the Investor’s Rights Agreement, the Management Agreement, the Pledge Agreement and the Stockholders’ Agreement and the other agreements and documents required hereunder as conditions to the conveyance of the Contributed Assets to ZZZ.
“Assets” means all real and personal property, whether tangible or intangible, including, without limitation, the following: (i) all personal property, plant and equipment; (ii) all real property and improvements thereon; (iii) all leasehold interests; (iv) all accounts receivable, inventory, purchase and sales orders, sales, service data and other current assets; (v) all cash, bank deposits, securities or similar cash items; (vi) all contracts, leases, easements, commitments and any other agreements or arrangements; (vii) all municipal, state and federal franchises, licenses, authorizations and permits; (viii) all patents, trade names, trade dress, trademarks, copyrights, service marks and other intellectual property rights; (ix) all insurance policies; (x) all books and records (including all computer records and software); and (xi) all claims, choses-in-action, rights and entitlements.
“Business Plan” means the business plan of ZZZ attached hereto as ExhibitC, which includes among other things, capital expenditure budgets, operating budgets, cash flow models, construction milestones relating to the build-out of the contemplated PCS wireless voice and data telecommunications networks in the Hawkeye City, Dream Field and Twin Farms, IOWA BTAs, and specific performance criteria relating to the operation of the contemplated PCS wireless voice and data telecommunications networks in the Hawkeye City, Dream Field and Twin Farms, IOWA BTAs, and all Intellectual Property contained or embodied therein.
“Contributed Assets” means the BBC Licenses, the LEWIS License and the UTEL-IOWA Stock.
“Court Order” means any judgment, order, award or decree of any foreign, federal, state, local or other court or tribunal and any award in any arbitration proceeding.
“Default” means (a)a breach of or default under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, instrument, mortgage, security interest or other arrangement, (b)the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, instrument, mortgage, security interest or other arrangement or (c)the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, re-negotiation or acceleration under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, instrument, mortgage, security interest or other arrangement or result in a modification of the terms thereof.
“Disclosure Schedule” means a schedule executed and delivered by one Party to the other Parties hereto as of the date hereof which sets forth the exceptions to the representations and warranties contained in ArticleIV, ArticleV, ArticleVI, ArticleVII or ArticleVIII, as the case may be, and certain other information called for by this Agreement. Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered schedule which is included in a Disclosure Schedule.
“Employee Benefit Plan” means any (a) nonqualified deferred compensation or retirement plan or arrangement that is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement that is an Employee Pension Benefit Plan, (c)qualified defined benefit retirement plan or arrangement that is an Employee Pension Benefit Plan (including any Multiemployer Plan) or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program.
“Employee Pension Benefit Plan” has the meaning set forth in Section3(2) of ERISA.
“Employee Welfare Benefit Plan” has the meaning set forth in Section3(1) of ERISA.
“Encumbrance” means any lien, claim, charge, security interest, mortgage, pledge, easement, right of first offer or first refusal, conditional sale or other title retention agreement, defect in title, covenant or other restriction of any kind, other than the FCC build-out requirements relating to the Licenses.
“Environmental, Health and Safety Laws” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and charges thereunder) of federal, state, local and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety or employee 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.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Expenses” means any fees or expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against under ArticleXIII hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).
“Extremely Hazardous Substance” has the meaning set forth in Section302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
“FCC Consent” means the consent of the FCC to the assignment of the BBC Licenses from BBC to ZZZ and the assignment of the LEWIS License from LEWIS to ZZZ.
“FCC Rules” means the Communications Act of 1934, as amended, and the published rules, regulations, policies, decisions and orders of the Federal Communications Commission.
“Final Order” means action by a regulatory authority as to which: (i)no request for stay by such authority of the action is pending, no such stay is in effect and, if any deadline for filing any such request is designated by statute or regulation, such deadline has passed; (ii)no petition for rehearing or reconsideration of the action is pending before such authority, and the time for filing any such petition has passed; (iii)such authority does not have the action under reconsideration on its own motion, and the time for such reconsideration has passed; and (iv)no appeal to a court or request for stay by a court or such authority’s action is pending or in effect, and, if any deadline for filing any such appeal or request is designated by statute or rule, such deadline has passed.
“Governmental Body” means any foreign, federal, state, local or other governmental authority or regulatory body.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“HSR Approval” means the expiration or termination of the applicable waiting period under the HSR Act.
“Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, domain names and corporate names, together with all translations, adaptations, derivations and combinations thereof (including all goodwill associated therewith), and all applications, registrations and renewals in connection therewith, (c) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, (d) all mask works and all applications, registrations and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights and (h) all copies and tangible embodiments thereof (in whatever form or medium).
“Investor’s Rights Agreement” means the Investor’s Rights Agreement in the form attached hereto as ExhibitD, to be entered into as of the Closing Date by and between ZZZ and BBC.
“IRS” means the Internal Revenue Service.
“Knowledge” means, in the case of any Person, (a) such Person is actually aware of such fact or matter or (b) a prudent individual could reasonably be expected to discover or otherwise become aware of such fact or other matter in the Ordinary Course of Business or the discharge of his or her duties. In respect of a corporation, limited liability company, partnership or similar business entity, its Knowledge will be that of its executive officers and directors (or those engaged in similar functional tasks, such as the managers of a limited liability company).
“Liabilities” mean any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether accrued, absolute, contingent, matured, unmatured, liquidated, unliquidated, known or unknown.
“Losses” means any loss, cost, obligation, liability, settlement payment, award, judgment, fine, penalty, damage, expense, deficiency or other charge and shall include, without limitation, any taxes incurred on payments received under ArticleXIII.
“Management Agreement” shall mean an agreement by and among BBC, LEWIS, ZZZ and UTEL-IOWA for the build-out and management of the Networks.
“Material Adverse Effect” or “Material Adverse Change” means, with respect to any Person, any effect, circumstance or change which has or is reasonably likely to have, a material adverse effect on the condition (financial or other), business, results of operations, prospects, Assets, Liabilities or operations of such Person.
“Multiemployer Plan” has the meaning set forth in Section3(37) of ERISA.
“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).
“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body.
“Qualifying UTEL-IOWA Assets” means any of the following types of Assets owned by UTEL-IOWA at Closing: (i)cash or other liquid securities; (ii)a license to use the ClearTalk brand name and service mark as contemplated by Section 3.2(c)(vi) below; (iii)the Business Plan; or (iv)other Assets useful and necessary to the business of building and operating PCS wireless telecommunications networks in the Hawkeye City, Dream Field and Twin Farms, IOWA BTAs, consistent with the Business Plan and as determined by the mutual agreement of BBC, on the one hand, and UTEL and UTEL-IOWA, on the other hand, which shall include, but not be limited to, those Assets listed on Schedule 2.3C attached hereto.
“Requirements of Laws” means any foreign, federal, state and local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body or common law that is applicable to the Licenses, the transactions contemplated in this Agreement or any material aspect of such transactions.
“Stockholders’ Agreement” means the Stockholders’ Agreement in the form attached hereto as ExhibitF, to be entered into as of the Closing Date by and among ZZZ, BBC and UTEL.
“Tax” means any and all taxes, charges, fees, levies or other assessments with respect to net income, gross income, gross receipts, real or personal property, ad valorem, sales, withholding, social security, retirement, unemployment, occupation, use, payroll, franchise and transfer, imposed by the IRS or any taxing authority (whether domestic or foreign, including any federal, state, county, local or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest whether paid or received, fines, penalties or additional amounts attributable to or imposed upon or with respect to, any such tax, charge, fee, levy or other assessment.