SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-14108
360 COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
47-0649117
(I.R.S. Employer Identification No.)
8725 W. Higgins Road
Chicago, Illinois
60631-2702(312) 399-2500
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
On July 31, 1996, 116,859,310 shares of the registrant's Common Stock were
outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..............................................1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................15
Item 2. Changes in Securities ............................................*
Item 3. Defaults Upon Senior Securities...................................*
Item 4. Submission of Matters to a Vote of Security Holders...............*
Item 5. Other Information.................................................16
Item 6. Exhibits and Reports on Form 8-K..................................17
- ---------------
* No reportable information under this item.
When used in this Report, the words "intends," "expects," "plans,"
"anticipates," "estimates" and similar expressions are intended to identify
forward looking statements. Specifically, statements included in this Report
that are not historical facts, including statements about the Company's beliefs
and expectations about continued market and industry growth and ability to
maintain existing churn and increased penetration rates, are forward looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results or outcomes to differ materially. Such risks and
uncertainties include, but are not limited to, the impact resulting from the
loss of the Sprint name and the uncertainties and costs associated with the
implementations of a new brand name; the Company's history of net losses and the
lack of assurance that the Company's earnings will be sufficient to cover fixed
charges in the future; the degree to which the Company is leveraged and the
restrictions imposed on the Company under its existing debt instruments which
may adversely affect the Company's ability to finance its future operations, to
compete effectively against better capitalized competitors and to withstand
downturns in its business or the economy generally; continued downward pressure
on the prices charged for cellular equipment and services resulting from
increased competition in the Company's markets; the lack of assurance that the
Company's ongoing network improvements and scheduled implementation of digital
technology in its markets will be sufficient to meet or exceed the capabilities
and quality of competing networks; the effect on the Company's operations and
financial performance of changes in the regulation of cellular activities; the
degree to which the Company incurs significant costs due to cellular fraud; the
impact on the Company of more restrictive standards on radio frequency emissions
that may arise from concerns suggesting cellular telephones may be linked to
cancer; and the other factors discussed under the heading "Certain Risk Factors"
in the Company's Information Statement set forth as Exhibit 99 to the Company's
Form 10 (File No. 1-14108) filed with the Securities and Exchange Commission,
which section is hereby incorporated by reference herein. Forward looking
statements included in this Report speak only as of the date hereof and the
Company undertakes no obligation to revise or update such statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
i
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, December 31,
ASSETS 1996 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 28,607 $ 19,023
Accounts Receivable, less allowances
of $3,780 and $2,370, respectively 86,275 68,087
Other Receivables 28,592 29,799
Unbilled Revenue 34,909 23,481
Inventory 16,731 19,576
Other 7,666 6,604
---------------- ---------------
Total Current Assets 202,780 166,570
---------------- ---------------
Property, Plant and Equipment 1,315,369 1,151,157
Less: Accumulated Depreciation 364,580 300,703
---------------- ---------------
Property, Plant and Equipment, net 950,789 850,454
---------------- ---------------
Investments in Unconsolidated Entities 333,851 318,287
Intangibles, net 709,363 632,756
Other Assets 20,210 5,179
---------------- ---------------
Total Assets $ 2,216,993 $ 1,973,246
================ ===============
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Trade Accounts and Other Payables $ 141,462 $ 111,770
Advance Billings 23,949 20,559
Accrued Taxes 32,589 19,690
Short-Term Borrowings 24,950 --
Accrued Agent Commissions 7,170 15,417
Other 31,336 27,092
---------------- ---------------
Total Current Liabilities 261,456 194,528
---------------- ---------------
Long-Term Debt 1,387,662 --
Advances From and Notes to Affiliates -- 1,517,729
---------------- ---------------
Deferred Credits and Other Liabilities
Deferred Income Taxes 103,741 99,168
Postretirement and Other Benefit Obligations 5,871 12,859
---------------- ---------------
Total Deferred Credits and Other Liabilities 109,612 112,027
---------------- ---------------
Minority Interests in Consolidated Entities 171,596 146,894
---------------- ---------------
Shareowners' Equity
Common Stock ($.01 par value; 1,000,000,000 shares authorized;
116,847,813 shares issued and outstanding) 1,168 11,541
Additional Paid-In Capital 627,309 360,978
Unamortized Restricted Stock (2,623) --
Accumulated Deficit (339,187) (370,451)
---------------- ---------------
Total Shareowners' Equity 286,667 2,068
---------------- ---------------
Total Liabilities and Shareowners' Equity $ 2,216,993 $ 1,973,246
================ ===============
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
</TABLE>
1
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<TABLE>
<CAPTION>
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Cellular Service Revenues $ 263,560 $ 196,478 $ 494,314 $ 364,556
Equipment Sales 10,613 12,417 19,554 23,814
-------------- -------------- -------------- --------------
Total Operating Revenues 274,173 208,895 513,868 388,370
-------------- -------------- -------------- --------------
OPERATING EXPENSES
Cost of Service 22,205 18,181 44,344 33,001
Cost of Equipment Sales 23,224 24,437 41,667 45,675
Other Operations Expense 11,783 8,930 24,326 17,832
Selling, General, Administrative 114,023 89,638 221,173 167,083
and Other Expenses
Depreciation and Amortization 35,157 27,502 68,154 54,286
-------------- -------------- -------------- --------------
Total Operating Expenses 206,392 168,688 399,664 317,877
-------------- -------------- -------------- --------------
OPERATING INCOME 67,781 40,207 114,204 70,493
Interest Expense (24,274) (31,864) (54,102) (62,705)
Minority Interests in Net Income
of Consolidated Entities (13,861) (8,895) (24,325) (16,915)
Equity in Net Income of
Unconsolidated Entities 14,348 7,455 24,020 11,563
Other Income (Expense), net (137) 53 322 48
-------------- -------------- -------------- --------------
Income Before Income Taxes 43,857 6,956 60,119 2,484
Income Tax Expense 19,573 7,714 28,855 9,161
-------------- -------------- -------------- --------------
Net Income (Loss) $ 24,284 $ (758) $ 31,264 $ (6,677)
============== ============== ============== ==============
Net Income (Loss) per Share (in Dollars) $ 0.21 $ (0.01) $ 0.27 $ (0.06)
============== ============== ============== ==============
Weighted Average Shares
Outstanding, in thousands 117,066 116,725 117,048 116,549
============== ============== ============== ==============
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
</TABLE>
2
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<TABLE>
<CAPTION>
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
For the Six Months
Ended June 30,
------------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
Operating Activities
Net Income (Loss) $ 31,264 $ (6,677)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization 68,154 54,286
Deferred Income Taxes 11,919 7,294
Equity in Net Income of Unconsolidated
Entities, net of distributions (14,891) 529
Minority Interests in Net Income of
Consolidated Entities 24,325 16,915
Changes in Operating Assets and Liabilities
Receivables, net (12,010) 4,618
Other Current Assets (6,529) 8,746
Trade Accounts and Other Payables 26,573 14,448
Accrued Expenses and Other
Current Liabilities 7,759 (12,126)
Noncurrent Assets and Liabilities, net 255 588
Other, net (2) (522)
--------------- --------------
Net Cash Provided by Operating Activities 136,817 88,099
--------------- --------------
Investing Activities
Capital Expenditures (143,942) (178,732)
Acquisitions (109,642) --
Investment in Unconsolidated Entities and Other (2,476) (3,552)
--------------- --------------
Net Cash Used by Investing Activities (256,060) (182,284)
--------------- --------------
Financing Activities
Net Borrowings under Bank Revolving Credit Facility 473,658 --
Proceeds from Long-Term Debt 900,000 --
Net Short-Term Borrowings 24,950 --
Increase (Decrease) in Advances from Affiliates (1,400,000) 113,874
Equity Contributions 132,697 --
Contributions from Minority Investors 4,597 3,903
Distributions to Minority Investors (7,075) (3,537)
--------------- --------------
Net Cash Provided by Financing Activities 128,827 114,240
--------------- --------------
Increase in Cash and Cash Equivalents 9,584 20,055
Cash and Cash Equivalents at Beginning of Period 19,023 5,527
--------------- --------------
Cash and Cash Equivalents at End of Period $ 28,607 $ 25,582
=============== ==============
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
</TABLE>
3
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360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Consolidation and Presentation
360 Communications Company and its subsidiaries (the "Company") provide
wireless voice and data telecommunications services. The Company operates as a
general and limited partner and majority owner of cellular systems in various
metropolitan and rural service areas and as a limited minority partner or
manager in other cellular systems. The Company operates in five regions in the
United States: Mid-Atlantic, Midwest, North Carolina, Southeast and West.
The Company was a wholly-owned subsidiary of Centel Corporation, a
wholly-owned subsidiary of Sprint Corporation ("Sprint"). On March 7, 1996,
Sprint completed the spin-off of the Company to Sprint shareholders through a
pro rata distribution of all of the Common Stock of the Company (the
"Spin-off"). For further discussion of the Spin-off, see Note 3.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned and majority owned subsidiaries.
The assets, liabilities and results of operations of entities (both corporations
and partnerships) in which the Company has a controlling interest have been
consolidated. The ownership interests of noncontrolling owners in such entities
are reflected as minority interests. The Company accounts for all other
investees using the equity method of accounting. All significant intercompany
accounts and transactions have been eliminated.
The unaudited consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and are presented in
accordance with the rules and regulations of the Securities and Exchange
Commission applicable to interim financial information. In the Company's
opinion, the unaudited consolidated financial statements include all adjustments
necessary to present fairly the financial position and results of operations for
each interim period presented. All such adjustments are of a normal recurring
nature. These financials should be read in conjunction with the consolidated
financial statements, including the notes thereto, included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
2. Earnings Per Share
Earnings per share was computed using weighted average shares outstanding,
including common stock equivalents, totaling 117,065,513 and 116,725,486 for the
three months ended June 30, 1996 and 1995, respectively, and 117,047,971 and
116,548,862 for the six months ended June 30, 1996 and 1995, respectively. In
1995, Net Loss per Share was recalculated based upon the number of Sprint
weighted average shares outstanding for each respective period, adjusted for a
conversion ratio of 1 share of the Company's Common Stock to 3 shares of Sprint
common stock.
3. Spin-off
On July 26, 1995, Sprint announced that its Board of Directors decided to
pursue a tax-free Spin-off of the Company to Sprint shareholders. In the March
1995 Federal Communications Commission ("FCC") auction of wireless Personal
Communications Services ("PCS") licenses, Sprint Spectrum LP won the rights to
several markets which overlap service territories operated by the Company. Under
FCC rules, Sprint was required to divest or reduce its cellular holdings in
certain markets to clear conflicts with the PCS licenses awarded to Sprint
Spectrum LP. For these reasons, Sprint and its Board of Directors decided to
pursue a Spin-off of the cellular operations of Sprint.
4
<PAGE>
3. Spin-off (continued)
On March 7, 1996, the Spin-off was consummated. In conjunction with the
Spin-off, the Company repaid $1.4 billion of intercompany debt to Sprint. The
remaining intercompany debt was contributed to the Company as Additional Paid-In
Capital. Funding for the repayment was derived from the proceeds of $900 million
of the Company's Senior Notes issued under an indenture ("Indenture") and $527
million of initial borrowings under a $800 million five-year revolving credit
facility ("Credit Facility") with a number of banks and institutional lenders.
In addition, a recapitalization of the Company's Common Stock was effected
pursuant to which the Company split the 10 shares of the then issued and
outstanding Common Stock into 116,733,983 new shares of the Common Stock to
allow for the pro rata distribution of such stock to the common shareholders of
Sprint. This distribution was effected as a tax-free stock dividend.
The Indenture and Credit Facility have general and financial covenants
which place certain restrictions on the Company. The Company is limited with
respect to: the making of payments (dividends and distributions); the incurrence
of certain liens; the sale of assets under certain circumstances; entering into
or otherwise permitting any subsidiary distribution restrictions; certain
transactions with affiliates; certain consolidations, mergers and transfers; and
the use of loan proceeds. In addition, the Indenture and Credit Facility limit
the aggregate amount of additional borrowings which can be incurred by the
Company.
4. Significant Equity Investments
The Company's investments in the Kansas City SMSA Limited Partnership,
Orlando SMSA Limited Partnership, New York SMSA Limited Partnership, and GTE
Mobilnet of South Texas Limited Partnership meet the conditions prescribed by
the Securities and Exchange Commission which require interim financial statement
disclosures for significant equity investments. Selected unaudited combined
interim financial information follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Results of Operations
Cellular Service Revenues $ 308,792 $ 248,815 $ 595,039 $ 479,969
Equipment Sales 11,980 12,950 22,404 24,354
------- ------- ------- -------
Total Operating Revenues 320,772 261,765 617,443 504,323
------- ------- ------- -------
Cost of Equipment Sales 26,434 21,324 51,688 42,715
Operating, Selling, General,
Administrative and Other Expenses 155,165 130,593 305,114 266,858
Depreciation and Amortization 28,300 25,710 56,143 48,804
------- ------- ------- -------
Total Operating Expenses 209,899 177,627 412,945 358,377
------- ------- ------- -------
Operating Income 110,873 84,138 204,498 145,946
Other Income (Expense), net (2,347) 1,366 (4,123) 2,912
------- ------- ------- -------
Net Income $ 108,526 $ 85,504 $ 200,375 $ 148,858
------- ------- ------- -------
</TABLE>
5
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5. Income Taxes
In the second quarter of 1996, the Company identified certain tax planning
strategies. The annual effect of these tax planning strategies combined with the
effect of increased earnings estimates resulted in an effective tax rate of 48%
for the six months ended June 30, 1996.
6. Contingencies
On or about March 29, 1996, a class action lawsuit was brought in the
Chancery Court of Washington County, Jonesborough, Tennessee (the "Tennessee
Action") on behalf of all customers in the Company's Tennessee markets regarding
customer notification of the Company's practice with respect to billing for
fractional minutes of service. In April 1996, the original complaint was amended
to enlarge the class of plaintiffs to include all customers in all of the
Company's service areas. In late April 1996, the Tennessee Action was removed to
the United States District Court for the Eastern District of Tennessee, Northern
Division. The Company moved to dismiss the action and the plaintiff filed a
motion to remand. On July 16, 1996, the Tennessee District Court granted the
plaintiff's motion to remand and returned the case to the Chancery Court of
Washington County. The Company's Motion to Dismiss is currently pending before
the Chancery Court.
On or about May 28, 1996, a class action lawsuit was brought in the Common
Pleas Court of Erie County, Ohio (the "Ohio Action") on behalf of all customers
in all of the Company's service areas regarding notification of the Company's
practice with respect to billing for fractional minutes of service. On June 25,
1996, the Ohio Action was removed to the United States District Court for the
Northern District of Ohio, Western Division. On July 18, 1996, the Company filed
a Motion to Dismiss Or, In The Alternative, Stay pending resolution of the
Tennessee Action. The basis for the Motion to Stay is the duplicity of the two
actions. On July 24, 1996, the plaintiff filed a Motion to Remand to return the
case to the state court.
Discovery has not commenced in either case. The Company believes that both
lawsuits are without merit, however, the ultimate outcome of these matters and
the potential effect on the financial condition and results of operations of the
Company cannot be determined at this time.
The Company is party to various other legal proceedings in the ordinary
course of business. Although the ultimate resolution of these various
proceedings cannot be ascertained, management of the Company does not believe
that such proceedings, individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
7. Acquisitions
On January 31, 1996, the Company purchased additional partnership
interests in Centel Cellular Company of Ft. Walton Beach Limited Partnership and
Centel Cellular Company of Tallahassee Limited Partnership. Also on January 31,
1996, the Company purchased an operating license and related cellular assets in
the North Carolina RSA 14 market. On February 23, 1996, the Company acquired an
operating license and related assets in the Ohio RSA 1 market. In addition, on
February 29, 1996, the Company purchased a 50% interest in South Carolina RSA
No. 4 Cellular General Partnership, a 50% interest in South Carolina RSA No. 5
Cellular General Partnership and a 50% interest in South Carolina RSA No. 6
Cellular General Partnership. The aggregate purchase price of these acquisitions
was approximately $109,600,000.
Effective May 31, 1996, the Company entered into a definitive agreement to
acquire Independent Cellular Network's ("ICN") cellular operations. The Company
will acquire ICN's interests in 20 markets in Pennsylvania, Ohio, Kentucky and
West Virginia for $362 million of debt and 6.5 million shares of the Company's
Common Stock. The debt includes $122 million of subordinated debt and
approximately $240 million in senior debt. The proposed transaction is subject
to the receipt of all necessary consents and government approvals. The Company
expects to complete the transaction during 1996.
6
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8. Contingencies of Unconsolidated Entities
The GTE Mobilnet of South Texas Limited Partnership, (the "South Texas
partnership"), an equity investee of the Company, filed suit in 1994 against a
former agent and its principals alleging that the former agent continued to hold
itself out as an agent of the South Texas partnership after its contract
expired. The former agent and its principals subsequently filed a counterclaim
against the South Texas partnership, claiming the South Texas partnership
falsely represented to them that all agent agreements were identical and that
all agents were paid the same amount. The complaint against the South Texas
partnership alleges fraud, breach of covenant of good faith and fair dealing,
tortuous interference with plaintiffs' business relations, violation of the
Texas Deceptive Trade Practices Act, and defamation. The plaintiff is seeking
unspecified damages.
On April 12, 1995, a suit which purports to be a class action was filed
alleging that the defendants (including the South Texas partnership) violated
the Telephone Consumer Protection Act ("TCPA") and invaded the plaintiff's
privacy by sending unauthorized facsimiles to the plaintiffs. The complaint
seeks $500 in damages for each alleged violation of the TCPA, plus treble
damages, or in the alternative, punitive damages. In addition, the plaintiffs
seek interest, cost and attorney's fees. The defendants filed a motion to
dismiss for want of subject matter jurisdiction and for failure to state a
proper claim. At a recent hearing, the court ruled that the TCPA applied only to
interstate faxing, and not to intrastate faxing, such as those allegedly
associated with the South Texas partnership. The action is stayed pending the
parties appeal.
On January 25, 1996, a suit was filed against the South Texas partnership
by a former employee of GTE Mobilnet, who alleges among other claims, certain
employment discrimination charges. The plaintiff seeks unspecified damages.
The ultimate outcome of these three matters cannot presently be
determined. Accordingly, no provision for any liability that might result from
these matters has been made in the financial statements of the South Texas
partnership and the Company's financial statements.
On July 26, 1995, a partnership which is a general partner in the New York
SMSA Limited Partnership (the "New York partnership"), an equity investee of the
Company, was named as a defendant in a class action lawsuit brought by a
subscriber, Mr. Daniel J. Mandell. The plaintiffs have alleged that the
defendant's cellular operations are engaged in fraudulent, misleading, and
deceptive practices by concealing the practice of rounding up airtime usage to
bill in full minute increments. The plaintiffs seek an accounting of monies
received as a result of the above conduct by the defendant, compensatory
damages, punitive damages, treble damages pursuant to the New Jersey Consumer
Fraud Act, and injunctive relief. Although the defendant has informed the New
York partnership that it believes that it has meritorious defenses to the claims
asserted against it, and intends to defend itself vigorously, the ultimate
outcome of this matter cannot be determined at the present time. The New York
partnership may be allocated a portion of the damages that may result upon
adjudication of this matter if the plaintiffs prevail in their action. If an
adverse judgment is entered, the potential effect on the financial condition and
the results of operations of the New York partnership general partner, the New
York partnership and the Company cannot be ascertained at this time but may be
material.
A general partner in the New York partnership was named as a defendant in
a class action lawsuit brought on behalf of New York retail customers. The
plaintiffs have alleged that the general partner has overcharged customers who
experienced an involuntary disconnection ("dropped calls") of their mobile
service calls during the period June 1985 through September 1994. Further, the
plaintiffs allege that the amount of credit given for a dropped call, the New
York partnership general partner's policy of requiring customers to specifically
request such credits, and the absence of sufficient notice advising customers to
actively request such credits constitutes a breach of contract and deceptive
practice. Discovery is ongoing at this time. The New York partnership is not a
defendant in this matter having been dismissed from the case in the early stages
of the litigation. The New York partnership has been informed that the defendant
intends to defend itself vigorously but that the ultimate outcome of the matter
cannot be determined. The New York partnership may be allocated a portion of the
damages that may result upon adjudication of this matter if the plaintiffs
prevail in their action. If an adverse judgment is entered, the potential effect
on the financial condition and the results of operations of the New York
partnership general partner, the New York partnership and the Company cannot be
ascertained at this time but may be material.
7
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8. Contingencies of Unconsolidated Entities (continued)
On August 31, 1995, an unfair labor practice charge was filed with region
2 of the National Labor Relations Board ("NLRB") by the Communication Workers of
America, AFL-CIO ("CWA"), against NYNEX Corporation ("NYNEX"), a partner in
Cellco Partnership ("Cellco") which is a general partner in the New York
partnership, and Cellco. The charge alleges that since July 1, 1995, NYNEX and
Cellco have refused to recognize the CWA as the exclusive representative of
employees in the operations department in the New York metropolitan area,
repudiated the existing bargaining agreement, and constructively discharged
certain employees who would not accept unlawful conditions of employment. The
CWA is arguing that Cellco is either a successor employer or an alter ego of the
former cellular companies, and must honor prior collective bargaining agreements
with the CWA. Cellco filed its statement of position with the NLRB in March,
1996. NYNEX was not required to file a statement of position. Although both
NYNEX and Cellco have informed the New York partnership that they believe that
they have meritorious defenses to the claims asserted against them, and intend
to defend themselves vigorously, the ultimate outcome of this matter cannot be
determined at the present time. The New York partnership may be allocated a
portion of the damages that may result upon adjudication of this matter if the
CWA prevails in its action. If an adverse judgment is entered, the potential
effect on the financial condition and results of operation of the general
partner and the New York partnership cannot be ascertained at this time but may
be material.
On June 12, 1996, a class action lawsuit was filed against Bell Atlantic
Corporation and NYNEX, partners in Cellco all of which are partners with both
direct and indirect ownership interests in the New York partnership. Michael
Dubin on his own behalf and on the behalf of all others similarly situated,
plaintiff, alleges that the defendant has fraudulently and negligently
misrepresented their cellular services and prices since 1990 by, among other
things, failing to properly disclose to customers the practice of rounding
airtime to the next full minute and failing to disclose the pass through to
customers of landline termination charges. More generally, the complaint alleges
that consumers were defrauded by defendants' failure to disclose pricing
arrangements with their dealers to the public. To date the defendants have not
been legally served with the complaint in this matter. The ultimate outcome of
this matter cannot be determined at the present time. The New York partnership
may be allocated a portion of the damages that may result upon adjudication of
this matter if the plaintiff prevails in this action. If an adverse judgment is
entered, the potential effect on the financial condition and results of
operation of the general partner and the New York partnership cannot be
ascertained at this time but may be material.
On July 2, 1996, a class action lawsuit was filed against Cellco, which is
a general partner in the New York partnership. Steven Kahn, plaintiff, alleges
that the defendant has failed to adequately disclose its automatic renewal
policy, whereby annual agreements are automatically renewed unless a customer
cancels the agreement prior to its expiration. The plaintiff contends that the
renewals are unenforceable under a New York statute that requires a vendor to
give notice to the consumer by personal service or certified mail of the
automatic renewal at least 15 days and not more than 30 days prior to renewal.
As a result, the plaintiff alleges that the defendant has breached its contracts
by failing to provide the required notice, and seeks a ruling that all contracts
are void or voidable. The plaintiff further contends that the defendant has been
unjustly enriched by charges it has collected from consumers who were
automatically renewed without legally sufficient notification. The complaint
seeks compensatory damages in an amount not less than $10 million. The class
action is brought on behalf of all New York customers who contracted with the
defendant and who were automatically renewed since July 1990. The ultimate
outcome of this matter cannot be determined at the present time. The New York
partnership may be allocated a portion of the damages that may result upon
adjudication of this matter if the plaintiff prevails in this action. If an
adverse judgment is entered, the potential effect on the financial condition and
results of operation of the general partner and the New York partnership cannot
be ascertained at this time but may be material.
8
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Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
General
The following is a discussion and analysis of the historical results of
operations and financial condition of the Company and factors affecting the
Company's financial resources. This discussion should be read in conjunction
with the consolidated financial statements, including the notes thereto, set
forth herein under "Financial Statements" and the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995. This discussion contains
forward looking statements which are qualified by reference to, and should be
read in conjunction with, the Company's statement regarding forward looking
statements set forth on page (i) of this Report.
Results of Operations
Customer Growth Rate
Cellular customers increased to 1,750,329 at June 30, 1996 from 1,241,282
at June 30, 1995, a 41.0% increase. For the three months ended June 30, 1996 and
1995, the Company added 107,320 and 116,443 customers, respectively, through
internal growth. For the six months ended June 30, 1996, customer growth through
acquisitions added 46,647 customers and internal growth added 201,925 new
customers, while in the corresponding 1995 period, the Company added 201,293
customers through internal growth. The Company's penetration rate, which is the
number of customers divided by the total population in its licensed service
areas, reached 8.36% at June 30, 1996 compared to 6.31% at June 30, 1995. During
the three months ended June 30, 1996 and 1995, customer churn, the average
monthly rate of customer disconnects, was 1.80% and 1.72%, respectively, and
during the six months ended June 30, 1996 and 1995 was 1.80% and 1.74%,
respectively.
Cellular Service Revenues
Cellular service revenues consist primarily of charges for airtime,
access fees, roaming fees and other services. Cellular service revenues
increased 34.1% and 35.6% in the three and six months ended June 30, 1996 when
compared to the corresponding 1995 periods, principally from growth in the
number of cellular customers. Increased distribution channels, expanded network
capacity, declining cellular telephone equipment prices and pricing plans
targeted at particular market segments are key factors contributing to the
Company's customer growth. In addition, customers added through acquisitions
completed in the first quarter of 1996 contributed $10.0 million and $14.6
million of service revenues in the three and six months ended June 30, 1996,
respectively.
Consistent with the rest of the cellular industry, the Company has
experienced increased penetration in the consumer market, a trend attributable
to declining cellular telephone equipment prices and increased promotional
activities (i.e. packaging, free weekends), an increased awareness of the
benefits of cellular communications, widespread distribution channels in
consumer-oriented retail locations and expanded network coverage and capacity.
The Company expects this trend to continue. New customers generally use less
airtime than existing customers, causing the average service revenue per
customer per month to decline. As a result, cellular service revenue growth has
not kept pace with the level of growth in the number of customers. Service
revenue per average customer per month was $51.73 and $55.53 during the three
months ended June 30, 1996 and 1995, respectively, and $50.61 and $53.83 during
the six months ended June 30, 1996 and 1995, respectively. The Company expects
that service revenue per average customer per month will continue to decline as
penetration rates continue to increase.
9
<PAGE>
In an effort to increase cellular telephone usage through increased
roaming airtime, the Company expects the continuation of the industry-wide trend
for negotiated reduced roaming rates between carriers, which may reduce revenues
derived from cellular service users who roam into the Company's systems. The
Company expects roaming airtime to increase as reduced roaming rates between
carriers are ultimately passed on to customers, thus stimulating increased
usage. Roaming airtime minutes increased during the three and six months ended
June 30, 1996, when compared to the same periods in 1995, the major factor
contributing to the $13.9 million and $25.1 million increase in roaming revenue
for the three and six months ended June 30, 1996.
Future revenue growth will be impacted by the Company's success in
maintaining customer growth in existing markets, additional revenue generated
from the increasing availability of a variety of enhanced services and products
and by the Company's success in acquiring additional cellular communications
systems to further strengthen its existing regional clusters. The growth rate of
new customers is expected to decline as the customer base grows. Future revenue
growth will also be impacted by the Company's entrance into the residential long
distance business. An improved competitive position, reduced cellular churn and
increased brand awareness are expected as residential long distance service is
initiated. In August 1996, the Company expects to begin marketing its
residential long distance service in a majority of its markets and expects to
complete the rollout in its remaining markets by year end.
Equipment Sales
Equipment sales consist of revenues from sales of cellular telephone
equipment and accessories. Equipment sales decreased 14.5% and 17.9% in the
three and six months ended June 30, 1996 when compared to the corresponding 1995
periods, despite an increase in the number of telephone units sold. Competitive
market pressures have resulted in a continued trend of selling equipment at
discounted prices. Although declining cellular telephone prices have generated
increased activations of cellular service, gross margins on equipment sales have
also declined as the Company continues to sell cellular telephones at or below
cost. The Company expects competitive market pressures and negative gross
margins on equipment sales to continue.
Cost of Service, Other Operations Expense and Selling, General, Administrative
and Other Expenses
Cost of service, other operations expense and selling, general,
administrative and other expenses increased principally due to growth in the
cellular customer base. During the three months ended June 30, 1996 and 1995,
these expenses as a percent of cellular service revenues were 56.2% and 59.4%,
respectively, and during the six months ended June 30, 1996 and 1995 were 58.6%
and 59.8%, respectively. The decline in these percentages reflect economies of
scale gained from serving additional customers, improved operational support
systems, strong revenue growth and improved productivity. Significant
expenditures associated with the rollout of the Company's new brand name
partially offset economies of scale produced during the six months ended June
30, 1996. The Company expects that these costs as a percentage of cellular
service revenues will continue to decrease as economies of scale continue to be
realized.
In the three and six months ended June 30, 1996, selling and customer
operations expenses were impacted by $6.6 million and $16.2 million,
respectively, of additional advertising, promotional and other marketing expense
associated with the planned introduction of the Company's new brand name. This
increase also resulted in an increase in sales, marketing and advertising costs
to acquire a new customer. Such costs were $250 and $215 during the three months
ended June 30, 1996 and 1995, respectively, and $262 and $213 during the six
months ended June 30, 1996 and 1995, respectively.
10
<PAGE>
In an effort to control costs associated with acquiring new customers,
the Company has begun to utilize more extensively an internal sales force
located in Company retail outlets. Incremental sales costs at a Company retail
store are significantly lower than commissions paid to national dealers.
Although the Company intends to continue to support its large dealer network,
continued increases in its own retail distribution channels are planned. The
Company has experienced lower churn levels in the consumer segment acquired
through its retail distribution channel, thereby helping to control the cost of
growing its customer base. The Company is unable to anticipate whether the cost
to add new customers will increase as savings associated with the transition to
the use of an internal sales force levels off, the growth rate of new customers
declines and competition for local and national dealers intensifies.
Following the Spin-off, the Company began to perform certain functions
previously provided to the Company by Sprint. The undertaking of such functions
is not expected to have a significant impact on the Company's operating
expenses.
Depreciation and Amortization
Acquisitions of cellular communications systems generated intangibles,
assets such as FCC license costs and goodwill, which are currently being
amortized over 40 years. During the three and six months ended June 30, 1996
amortization expense increased 11.6% and 9.1%, respectively, when compared to
the corresponding periods in 1995. The increase is attributable to acquisitions
completed in the first quarter of 1996.
During the three and six months ended June 30, 1996 depreciation expense
increased 31.2% and 29.1%, respectively, when compared to the corresponding
period in 1995. During the three months ended June 30, 1996 and 1995,
depreciation as a percent of cellular service revenues was 11.3% and 11.6%,
respectively, and during the six months ended June 30, 1996 and 1995 was 11.7%
and 12.3%, respectively. The increase in depreciation expense in the first and
second quarter of 1996 when compared to the corresponding 1995 periods is the
result of increased capital investment in the Company's cellular network.
Interest Expense
Interest expense decreased in the three and six months ended June 30,
1996 when compared to the corresponding prior year periods due to decreases in
interest rates and borrowing levels. Prior to the Spin-off, the Company borrowed
from Sprint, primarily to fund construction costs and start-up losses, at
interest rates based on prime plus 2 percent and a 30 day commercial paper rate.
The annualized average interest rate for the three and six months ended June 30,
1995 was 8.8% and 8.7%, respectively. Current borrowings consist of $450 million
of 7 1/8% Senior Notes due 2003, $450 million of 7 1/2% Senior Notes due 2006,
borrowings under the Credit Facility with interest rates based on the London
Interbank Offered Rate plus 50 basis points and market based short-term
borrowings. The annualized interest rate for the three and six months ended June
30, 1996 was 6.8% and 7.4%, respectively.
Equity in Net Income of Unconsolidated Entities
"Equity in Net Income of Unconsolidated Entities" represents the
Company's share of operating results of cellular systems in which the Company
does not have a controlling interest. Equity earnings increased for the three
and six months ended June 30, 1996, when compared to the prior year periods,
primarily as a result of increased income generated by minority cellular
investments in the Company's larger and more mature systems in Houston, Kansas
City, New York and Orlando. The Company expects that its minority cellular
investments operating in other cities will add increasing income as those
markets continue to mature and penetration increases.
11
<PAGE>
GTE Mobilnet of South Texas Limited Partnership ("South Texas L.P.") and
New York SMSA Limited Partnership ("New York L.P."), two of the Company's equity
investees, are parties to separate legal proceedings. Because the outcome of
such legal proceedings has not been determined by the South Texas L.P. and the
New York L.P., no provision for any liability that may result upon adjudication
of that litigation has been made in the unaudited interim consolidated financial
statements. The Company's combined investments in these partnerships, including
intangible assets recorded in connection with the acquisitions of these
partnerships, was $220.2 million at June 30, 1996 and its combined equity in the
net income of these partnerships, net of amortization of intangible assets, was
$5.9 million and $11.6 million for the three and six months ended June 30, 1996,
respectively. In view of the uncertainty regarding such litigation, there can be
no assurance that the outcome of such litigation will not have a material
adverse effect on the Company's investment in these partnerships or in its
equity in the combined income of such partnerships.
Competition
Cellular carriers compete primarily against the other cellular carriers
in each market. However, companies with PCS licenses have begun to offer their
products and services in several of the Company's serving areas. The Company is
preparing for this new competitive environment by enhancing its networks,
expanding its service territory and offering new features, products and services
to its customers. The Company believes it will benefit from its position as an
incumbent in the cellular field with a high quality network, extensive
geographic footprint that is not capacity constrained, strong distribution
channels, superior customer service capabilities and an experienced management
team.
Liquidity and Capital Resources
Spin-off
On March 7, 1996, the Spin-off was consummated. In conjunction with the
Spin-off, the Company repaid $1.4 billion of intercompany debt to Sprint. The
remaining intercompany debt was contributed to the Company as Additional Paid-In
Capital. Funding for the repayment was derived from the proceeds of $900 million
of the Company's Senior Notes issued under the Indenture and $527 million of
initial borrowings under the Credit Facility. In addition, a recapitalization of
the Company's Common Stock was effected pursuant to which the Company split the
10 shares of the then issued and outstanding Common Stock into 116,733,983 new
shares of the Common Stock to allow for the pro rata distribution of such stock
to the common shareholders of Sprint. This distribution was effected as a
tax-free stock dividend.
Cash Flows - Operating Activities
Cash flows from operating activities were $136.8 million and $88.1
million for the six months ended June 30, 1996 and 1995, respectively. Operating
cash flow increases are due to improved operating results. Although future
operating cash flows will continue to be impacted by the advertising,
promotional and other marketing expenses associated with the introduction and
promotion of the Company's new brand name, the Company expects cash flows
generated by operating activities to continue to increase.
Cash Flows - Investing Activities
During the six months ended June 30, 1996 and 1995 the Company's
investing activities used cash of $256.1 million and $182.3 million,
respectively, of which capital expenditures were $143.9 million and $178.7
million, respectively. The decrease in capital expenditures was the result of a
gradual decline in the building of cellular systems as the Company's network
matures. In previous years, the Company concentrated on satisfying FCC cellular
systems building requirements regarding the expansion of the geographic
footprint or coverage area of Company held licenses. The Company currently
focuses on capital investment to support customer growth and on improving
customer call quality. In August 1996, the Company began offering Code Division
Multiple Access ("CDMA") digital technology to the Company's new and existing
customers in Las Vegas, Nevada. The introduction of CDMA technology in Las Vegas
followed a six month market trial that began in early 1996. The Company plans to
implement a gradual transition to CDMA technology in its other markets on a
market by market basis as additional calling capacity is required to accommodate
growth in call volume. This approach should provide time for anticipated digital
technology improvements to be proven, while also avoiding premature capital
expenditures. The Company expects that its investment in digital technology will
increase over time as network capacity needs warrant.
12
<PAGE>
In the 1996 first quarter, the Company acquired cellular properties in
South Carolina, North Carolina and Ohio and acquired additional partnership
interests in Florida. The aggregate purchase price of these acquisitions totaled
$109.6 million.
Cash Flows - Financing Activities
During the six months ended June 30, 1996 and 1995 net cash received from
financing activities was $128.8 million and $114.2 million, respectively. In
1995, cash received from financing activities principally reflects borrowings
from Sprint. Following the Spin-off, capital to meet funding requirements is not
available from Sprint and its subsidiaries. In conjunction with the Spin-off,
the Company repaid $1.4 billion of intercompany debt to Sprint. The remaining
intercompany debt was contributed to the Company as Paid-In Capital. Funding for
the repayment was derived from proceeds of the Company's Senior Notes issued
under the Indenture and initial borrowings under the Credit Facility. As part of
its cash management program, the Company also incurs short-term borrowings based
on market interest rates to support its daily cash requirements. The aggregate
amount of these borrowings is limited to $50 million under certain debt
covenants.
Liquidity and Capital Requirements
Substantial capital is required to expand and operate the Company's
existing cellular systems and to acquire interests in additional cellular
systems. The Company has met its funding requirements in the past through
existing cash resources, cash flow from operations and borrowings from Sprint.
Prior to the Spin-off, the Company borrowed from Sprint to the extent its
existing cash needs were not met through existing cash resources and cash flows
from operations.
The Company expects to make capital expenditures, excluding acquisitions,
of approximately $280 million in 1996. Funding for these expenditures is
expected to be derived from existing cash resources, cash flow from operations
and borrowings under the Credit Facility. These expenditures will expand and
enhance existing cellular systems. Enhancements will include a minimal level of
digital technology deployment.
Contingencies have been identified regarding class action lawsuits
regarding customer notification as to the practice of billing for fractional
minutes of service. The ultimate outcome of these matters and the potential
effect on the financial condition and results of operations of the Company
cannot be determined at this time. In addition, contingencies have been
identified in the South Texas L.P. and New York L.P., the outcome of which
cannot presently be determined.
For the next several years, the Company does not expect its operations to
generate sufficient cash flows to meet both future capital requirements for
operating activities and cash requirements for acquisitions of ownership
interests in cellular communications systems. Acquisition activities may include
acquisitions of new cellular communications systems or additional investments in
cellular communications systems in which the Company already holds an ownership
interest. The Company expects that it will need to raise additional funds
through borrowings under the Credit Facility, the public or private sale of debt
or the issuance of equity securities to make such acquisitions, subject to the
limitations of an agreement entered into for a period of two years after the
Spin-off by the Company and Sprint designed to preserve the tax-free status of
the Spin-off. The Company believes that it will be able to obtain the needed
access to the capital markets on suitable terms and that, together with
borrowings under the Credit Facility and net cash provided by operations, it
will have adequate capital to satisfy its projected funding requirements for
operations in 1996 and thereafter. However, acquisitions and possibly other
contingencies may require access to the capital markets in addition to funding
under the Credit Facility. There can be no assurance that access to the capital
markets can be obtained in amounts and on terms adequate to meet its objectives
or that the borrowings or net cash from operations will be adequate to meet the
Company's projected funding requirements.
13
<PAGE>
At June 30, 1996, the Company was not restricted or limited in its
borrowing capacity under the Credit Facility. The aggregate amount of additional
borrowings which can be incurred is ultimately limited by certain covenants
included in the Credit Agreement and the Indenture.
Effective May 31, 1996, the Company entered into a definitive agreement
to acquire ICN's cellular operations. The Company will acquire ICN's interests
in 20 markets in Pennsylvania, Ohio, Kentucky and West Virginia for $362 million
of debt and 6.5 million shares of Company Common Stock. The debt includes $122
million of subordinated debt and approximately $240 million in senior debt. The
proposed transaction is subject to the receipt of all necessary consents and
government approvals. The Company expects to obtain the required amendments to
certain covenants under the Credit Facility. In addition, the Company expects to
have the borrowing capacity to incur the additional borrowings associated with
the acquisition and may need to increase the commitment level available under
the Credit Facility in order to meet future cash requirements for general
corporate purposes.
14
<PAGE>
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On or about March 29, 1996, a class action lawsuit was brought in the
Chancery Court of Washington County, Jonesborough, Tennessee (the "Tennessee
Action") on behalf of all customers in the Company's Tennessee markets regarding
customer notification of the Company's practice with respect to billing for
fractional minutes of service. In April 1996, the original complaint was amended
to enlarge the class of plaintiffs to include all customers in all of the
Company's service areas. In late April 1996, the Tennessee Action was removed to
the United States District Court for the Eastern District of Tennessee, Northern
Division. The Company moved to dismiss the action and the plaintiff filed a
motion to remand. On July 16, 1996, the Tennessee District Court granted the
plaintiff's motion to remand and returned the case to the Chancery Court of
Washington County. The Company's Motion to Dismiss is currently pending before
the Chancery Court.
On or about May 28, 1996, a class action lawsuit was brought in the Common
Pleas Court of Erie County, Ohio (the "Ohio Action") on behalf of all customers
in all of the Company's service areas regarding notification of the Company's
practice with respect to billing for fractional minutes of service. On June 25,
1996, the Ohio Action was removed to the United States District Court for the
Northern District of Ohio, Western Division. On July 18, 1996, the Company filed
a Motion to Dismiss Or, In The Alternative, Stay pending resolution of the
Tennessee Action. The basis for the Motion to Stay is the duplicity of the two
actions. On July 24, 1996, the plaintiff filed a Motion to Remand to return the
case to the state court.
Discovery has not commenced in either case. The Company believes that both
lawsuits are without merit, however, the ultimate outcome of these matters and
the potential effect on the financial condition and results of operations of the
Company cannot be determined at this time.
The Company is party to various other legal proceedings in the ordinary
course of business. Although the ultimate resolution of these various
proceedings cannot be ascertained, management of the Company does not believe
that such proceedings, individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
15
<PAGE>
Item 5. Other Information.
360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
SELECTED PROPORTIONATE OPERATING RESULTS AND DATA
(Unaudited)
The following table sets forth supplemental financial data reflecting the
proportionate consolidation of entities in which the Company holds interests
significant to its operations. This presentation differs from the consolidation
methodology used to prepare the Company's principal financial statements in
accordance with Generally Accepted Accounting Principles ("GAAP") (see Note 1 of
"360 Communications Company and Subsidiaries Notes to Unaudited Interim
Consolidated Financial Statements" set forth herein under "Financial
Statements") and does not reflect operating results in accordance with GAAP. The
proportionate operating data reflects the Company's ownership percentage of
entities consolidated for financial reporting purposes and the Company's
ownership percentage of certain of its significant unconsolidated entities which
are accounted for under the equity method for financial reporting purposes.
Because significant assets of the Company are not consolidated, the Company
believes the following proportionate operating results facilitate the
understanding and assessment of the overall extent of its investments. However,
the operating data presented below are not indicative of the cash flow available
to the Company with respect to its interests in unconsolidated entities. Such
interests are subject to partnership agreements and other restrictions limiting
the Company's ability to effect distributions of cash and other assets of the
entity in which the Company holds a noncontrolling interest. The following table
is not required by GAAP, and is not intended to replace and should not be viewed
as being of greater significance than, or in isolation from, the consolidated
financial statements prepared in accordance with GAAP.
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
and as of June 30,(1) <F1> and as of June 30,(1)<F1>
-------------------------------- ---------------------------------
1996 1995 1996 1995
(Thousands of Dollars)
Operating Results:
Operating Revenues
<S> <C> <C> <C> <C>
Cellular Service Revenues $ 258,676 $ 195,545 $ 489,143 $ 365,272
Equipment Sales 10,839 12,339 20,102 23,548
------- ------- ------- -------
Total Operating Revenues 269,515 207,883 509,245 388,820
------- ------- ------- -------
Operating Expenses
Cost of Equipment Sales 23,390 23,200 42,637 44,027
Operating, Selling, General, Administrative
and Other Expenses 142,769 114,314 281,894 217,229
Depreciation and Amortization 35,810 28,630 69,895 56,285
------- ------- ------- -------
Total Operating Expenses 201,969 166,143 394,426 317,541
------- ------- ------- -------
Operating Income $ 67,546 $ 41,740 $ 114,819 $ 71,279
------- ------- ------- -------
Other Operating Data:
EBITDA(2) <F2> $ 103,356 $ 70,370 $ 184,714 $ 127,564
EBITDA Margin (3)<F3> 38.35% 33.85% 36.27% 32.81%
Capital Expenditures(4)<F4> 86,185 $ 118,330 $ 141,283 $ 164,447
Selected Net POPs (5) <F5> 21,061,767 20,007,309 21,061,767 20,007,309
Proportionate Customers (6) <F6> 1,696,375 1,110,093 1,696,375 1,110,093
Average Proportionate Customers (7) <F7> 1,624,804 1,081,153 1,599,639 1,059,419
Churn 1.8% 1.8% 1.8% 1.8%
Penetration 8.1% 5.5% 8.1% 5.5%
Service Revenue per Average Customer per
Month $ 53.07 $ 60.29 $ 50.96 $ 57.46
<FN>
- -------------
Notes to Selected Proportionate Operating Results and Data
<F1>
(1) The proportionate operating results include the Company's ownership
percentage of entities consolidated for financial reporting purposes as
well as the Company's ownership percentage of certain unconsolidated equity
investments which are significant to the Company, consisting of the
Company's investments in cellular partnerships serving markets such as
Chicago, IL; Houston, TX; Kansas City, MO; New York, NY; Omaha, NE;
Orlando, FL; and Richmond, VA.
<F2>
(2) EBITDA is defined as operating income plus depreciation and amortization
and is included herein as supplemental disclosure because it is generally
considered useful information regarding a company's ability to service
debt. EBITDA, however, is not a measure determined in accordance with GAAP
and should not be considered in isolation or as an alternative to net
income (loss), cash flow provided by operating activities or other income
or cash flow data prepared in accordance with GAAP or as a measure of a
company's performance or liquidity. Proportionate EBITDA represents the
Company's ownership interest in the respective entities multiplied by the
entities' EBITDA and, therefore, does not represent cash available to the
Company.
<F3>
(3) EBITDA Margin represents EBITDA divided by Total Operating Revenues.
<F4>
(4) Capital Expenditures exclude acquisitions.
<F5>
(5) Selected Net POPs are the estimated market population multiplied by the
Company's ownership interest in each presented market and excludes certain
markets as described above.
<F6>
(6) Proportionate customers reflect total customers in each presented market in
which the Company owns an interest multiplied by the Company's ownership
interest.
<F7>
(7) Average Proportionate Customers represents a simple average of beginning of
period plus end of period proportionate customers divided by 2.
</FN>
</TABLE>
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibits are listed in the Exhibit Index.
(b) Reports on Form 8-K:
On Form 8-K dated April 23, 1996, under "Item 5. Other Events," the Company
filed a press release announcing its consolidated operating results for the
first quarter of 1996 and the Company's execution of a letter of intent to
acquire from ICN certain cellular properties in Pennsylvania, Ohio, Kentucky and
West Virginia.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
360 Communications Company
By: /s/ Gary L. Burge
Gary L. Burge
Senior Vice President - Finance
(Principal Accounting Officer)
Date: August 14, 1996
18
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
2.2 Exchange and Merger Agreement, dated as of May 31, 1996, by and
among Independent Cellular Network Partners, James A. Dwyer, Jr.,
David Winstel, CC Industries, Inc., Ohio Cellular RSA, L.P., Ohio
RSA Corporation, Quality Cellular Communications of Ohio, Inc.,
Cellular Plus, L.P., C-Plus, Inc., Quality Cellular Plus
Communications, Inc., Henry Crown and Company (Not Incorporated )
and 360 Communications Company.
3.1 Amended and Restated Certificate of Incorporation of 360
Communications Company, as amended as of March 4, 1996.*
3.2 Amended and Restated Bylaws of 360 Communications Company.*
3.3 Certificate of Designation of First Series Junior Participating
Preferred Stock of 360 Communications Company. (Filed
as Exhibit 3.3 to Amendment No. 4 to Registration Statement
No. 33-99756 and incorporated herein by reference.)
4.1 360 Communications Company's 7 1/8% Senior Note Due 2003
and 7 1/2% Senior Note Due 2006.*
4.2 Indenture dated as of March 7, 1996 between 360
Communications Company and Citibank, N.A., as Trustee.*
4.3 Form of 360 Communications Company Common Stock, $0.01
par value, certificate.*
27 Financial Data Schedule.
- ------------
* Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and incorporated herein by reference.
<PAGE>
EXHIBIT 2.2 EXCHANGE AND MERGER AGREEMENT
BY AND AMONG
INDEPENDENT CELLULAR NETWORK PARTNERS,
JAMES A. DWYER, JR.,
DAVID WINSTEL,
CC INDUSTRIES, INC.,
OHIO CELLULAR RSA, L.P.,
OHIO RSA CORPORATION,
QUALITY CELLULAR COMMUNICATIONS OF OHIO, INC.
CELLULAR PLUS, L.P.,
C-PLUS, INC.,
QUALITY CELLULAR PLUS COMMUNICATIONS, INC., AND
HENRY CROWN AND COMPANY (NOT INCORPORATED)
AND
360 COMMUNICATIONS COMPANY
Dated as of May 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 CERTAIN DEFINITIONS.............................................-2-
SECTION 2 BASIC TRANSACTION...............................................-22-
2.1 Toronto Dominion Debt.........................................-22-
2.2 Merger of CCTS and 360 Subsidiary............................-22-
2.3 Merger of ICN.................................................-22-
2.4 Sale and Assignment of Cell Plus Interests....................-22-
2.5 Sale and Assignment of Ohio LP Interests......................-22-
2.6 Issuance of 360 Shares and 360 Notes to Exchanging Group ...-23-
2.7 Working Capital...............................................-23-
2.8 Conveyance of Non-Retained Assets.............................-25-
2.9 Assumption of Non-Retained Liabilities........................-25-
2.10 Allocation....................................................-25-
2.11 Other Payments................................................-26-
SECTION 3 REPRESENTATIONS AND WARRANTIES OF EXCHANGING GROUP
.................................................................-26-
3.1 Due Organization, Power and Authority.........................-26-
3.2 No Default Effected...........................................-28-
3.3 Subsidiaries and Investments..................................-28-
3.4 Financial Statements..........................................-28-
3.5 No Material Adverse Change....................................-29-
3.6 Undisclosed Liabilities.......................................-29-
3.7 Capital Stock of ICN..........................................-29-
3.8 Capital Stock of CCTS.........................................-30-
3.9 Capital Stock of WCTC.........................................-30-
3.10 Status of Partnership Interests...............................-31-
3.11 Status of Interests in Minority Partnerships..................-32-
3.12 Accounts Receivable...........................................-32-
3.13 Inventories...................................................-33-
3.14 Real Property.................................................-33-
(a) Owned Real Property............................-33-
(b) Lease Obligations..............................-34-
(c) Owned and Leased Real Property.................-34-
3.15 Property and Condition and Compliance.........................-35-
3.16 Title to Assets...............................................-35-
3.17 Licenses......................................................-36-
3.18 Licensee Qualifications.......................................-36-
3.19 Compliance with Laws..........................................-37-
3.20 No Other Agreements to Sell Assets or Stock...................-37-
3.21 Affiliate Agreements..........................................-37-
3.22 Contracts.....................................................-37-
-i-
<PAGE>
3.23 Trademarks....................................................-38-
3.24 Technology....................................................-38-
3.25 Labor Relations...............................................-39-
3.26 Employee Benefits.............................................-39-
(a) Employee Benefit Plans.........................-39-
(b) Continuation Coverage..........................-40-
3.27 Insurance.....................................................-40-
3.28 Litigation....................................................-41-
3.29 Environmental Matters.........................................-41-
3.30 Tax Matters...................................................-41-
(a) Tax Returns....................................-41-
(b) Payments.......................................-42-
(c) Additional Taxes...............................-42-
(d) Waivers........................................-42-
(e) Rulings/Agreements.............................-42-
3.31 Interim Operations............................................-42-
3.32 Brokers.......................................................-43-
3.33 Approvals and Consents........................................-43-
3.34 Investment Representation.....................................-43-
3.35 Sophistication, Financial Strength, Access to Information.....-43-
3.36 Merger Representations........................................-44-
SECTION 4 REPRESENTATIONS AND WARRANTIES OF 360 ..........................-45-
4.1 Authority of 360 .............................................-45-
4.2 No Default E..................................................-45-
4.3 Brokers.......................................................-46-
4.4 Approvals and Consents........................................-46-
4.5 Investment Representation.....................................-46-
4.6 No Material Adverse Change....................................-46-
4.7 Status of 360 Shares and 360 Notes..........................-46-
4.8 Financial Statements..........................................-47-
4.9 Merger Representations........................................-47-
SECTION 5 OBLIGATIONS OF EXCHANGING GROUP AND 360 PENDING
CLOSING...........................................................-49-
5.1 Conduct of System.............................................-49-
5.2 Notice of Material Developments...............................-50-
5.3 Information and Access........................................-51-
5.4 Subscribers/Marketing Expenditures............................-51-
5.5 Capital Expenditures..........................................-54-
5.6 Interim Agreements............................................-54-
5.7 Certain Structural Changes....................................-54-
SECTION 6 OTHER AGREEMENTS................................................-55-
6.1 Hart-Scott-Rodino.............................................-55-
6.2 Other Consents................................................-55-
-ii-
<PAGE>
6.3 Certain Agreements Regarding Consents.........................-55-
6.4 FCC Compliance................................................-56-
6.5 Exclusivity...................................................-56-
6.6 Real Property Title Information...............................-56-
6.7 Environmental Assessments.....................................-56-
6.8 Transition Services Agreements................................-58-
6.9 Financial Statements..........................................-58-
6.10 System Employees..............................................-59-
6.11 Effective Date for Partnership Allocations and Distributions..-61-
6.12 Welfare Benefit Plans.........................................-62-
6.13 Pension Benefit Plans.........................................-62-
6.14 Restrictive Legends...........................................-62-
6.15 Standstill Provision..........................................-63-
6.16 Registration Rights...........................................-63-
SECTION 7 CONDITIONS TO OBLIGATION OF EXCHANGING GROUP TO
CLOSE.............................................................-63-
7.1 Representations and Warranties................................-63-
7.2 Compliance with Agreement.....................................-64-
7.3 No Adverse Proceeding.........................................-64-
7.4 Necessary Consents............................................-64-
7.5 Material Adverse Change/Change of Control.....................-64-
7.6 Legal Opinion.................................................-64-
SECTION 8 CONDITIONS TO OBLIGATION OF 360 TO CLOSE.......................-65-
8.1 Representations and Warranties................................-65-
8.2 Compliance with Agreement.....................................-66-
8.3 No Adverse Proceeding.........................................-66-
8.4 Necessary Consents............................................-66-
8.5 No Material Adverse Change....................................-66-
8.6 Opinion of FCC Counsel........................................-66-
8.7 Legal Opinion.................................................-67-
8.8 Other Documentation...........................................-70-
SECTION 9 THE CLOSING; TERMINATION OF AGREEMENT...........................-70-
9.1 The Closing...................................................-70-
9.2 Termination...................................................-70-
9.3 Risk of Loss.................................. ...............-71-
9.4 Deliveries by Exchanging Group at the Closing.................-71-
9.5 Deliveries by 360 at the Closing..............................-74-
SECTION 10 REMEDIES UNDER THIS AGREEMENT..................................-75-
10.1 Survival of Representations and Warranties.....................-75-
10.2 Indemnification Provisions for Benefit of the 360..............-76-
10.3 Indemnification Provisions for Benefit of Exchanging Group.....-77-
10.4 Notice; Right to Defend........................................-78-
-iii-
<PAGE>
10.5 Adjustment for Insurance......................................-79-
10.6 Payment of Damages............................................-79-
10.7 Exclusive Remedy..............................................-80-
SECTION 11 POST-CLOSING MATTERS GENERALLY................................-81-
11.1 Preparation of Tax Returns for Acquired Corporations and
Certain Partnerships...................................-81-
11.2 Ongoing Cooperation...........................................-82-
11.3 Litigation Support............................................-83-
11.4 Confidential Information......................................-83-
11.5 Further Assurance.............................................-84-
11.6 Books and Records.............................................-84-
11.7 Securities Filings............................................-84-
11.8 Specific Performance..........................................-85-
11.9 Toronto Dominion Debt.........................................-85-
SECTION 12 MISCELLANEOUS PROVISIONS......................................-85-
12.1 Notices......................................................-85-
12.2 Amendments...................................................-86-
12.3 Waivers......................................................-86-
12.4 Assignment and Parties in Interest...........................-86-
12.5 Third-Party Beneficiaries....................................-87-
12.6 Announcements................................................-87-
12.7 Taxes, Recording Charges.....................................-87-
12.8 Expenses.....................................................-88-
12.9 Entire Agreement.............................................-88-
12.10 Descriptive Headings.........................................-88-
12.11 Counterparts.................................................-88-
12.12 Governing Law................................................-88-
12.13 Construction.................................................-88-
12.14 No Recourse..................................................-89-
12.15 Guaranty.....................................................-89-
-iv-
<PAGE>
SCHEDULE
NUMBER SCHEDULE NAME
I Ownership of ICN Shares
I(a) Controlled PA Partnerships
I(b) Minority Partnerships
II System/Markets
1.1 Knowledge
1.2 Non-Retained Assets
1.3 Operating Budget
1.4 Personalty Liens
1.6 Swaps
1.7 360 Group
2.10 Allocation
3.2 No Default Effected
3.3 Subsidiaries
3.4 Financial Statements
3.6 Undisclosed Liabilities
3.7 ICN Stockholder Agreements
3.9 WCTC Stockholders
3.10 Partnership Interests
3.13 Inventories
3.14(a) Owned Real Property
3.14(b) Leases and Consents
3.15 Personal Property
3.16 Title to Assets
3.17 Licenses
3.18 Licensee Qualifications
3.19 Compliance with Laws
3.20 Other Agreements to Sell Assets or
Stock
3.21 Affiliate Agreements
3.22 Contracts
3.23 Trademarks
-v-
<PAGE>
SCHEDULE
NUMBER SCHEDULE NAME
3.24 Technology
3.26 Employee Benefits
3.27 Insurance
3.28 Litigation
3.29 Environmental Matters
3.30(a) Tax Returns
3.30(c) Additional Taxes
3.30(d) Tax Waivers
3.31 Interim Operations
4.2 No Default Effected (360 )
4.4 360 Approvals and Consents
5.5 Cap-Ex Projects
-vi-
<PAGE>
EXCHANGE AND MERGER AGREEMENT
This Exchange and Merger Agreement (the "Agreement") is made and
entered into as of May 31, 1996, by and among INDEPENDENT CELLULAR NETWORK
PARTNERS, an Illinois partnership ("ICNP"), JAMES A. DWYER, JR. ("Dwyer"), DAVID
WINSTEL ("Winstel"), CC INDUSTRIES, INC., a Delaware corporation ("CCI"), OHIO
CELLULAR RSA, L.P., an Illinois limited partnership ("Ohio LP"), OHIO RSA
CORPORATION, a Delaware corporation and a general partner of Ohio LP ("Ohio
RSA"), QUALITY CELLULAR COMMUNICATIONS OF OHIO, INC., an Ohio corporation and a
general partner of Ohio LP ("QCCO"), CELLULAR PLUS, L.P., an Illinois limited
partnership ("Cell Plus"), C-PLUS, INC., a Delaware corporation and a general
partner of Cell Plus ("C-Plus"), QUALITY CELLULAR PLUS COMMUNICATIONS, INC., a
Delaware corporation and a general partner of Cell Plus ("QCPC") (ICNP, CCI,
Dwyer, Winstel, Ohio LP, C-Plus, QCPC, Ohio RSA, QCCO and Cell Plus are
sometimes referred to hereinafter collectively as the "Exchanging Group"), 360
COMMUNICATIONS COMPANY, a Delaware corporation ("360 "), and,for the sole
purpose of being bound by Sections 3.1, 3.2, 12.14 and 12.15 of the following
Agreement, HENRY CROWN AND COMPANY (NOT INCORPORATED), an Illinois limited
partnership ("HCNI").
BACKGROUND
A. ICNP, Dwyer and Winstel collectively own one hundred percent of the
issued and outstanding shares of common capital stock ("ICN Common Shares") of
Independent Cellular Network, Inc., a Delaware corporation ("ICN"), in the
specific amounts indicated on Schedule I attached hereto and made a part hereof.
CCI owns one hundred percent of the issued and outstanding shares of preferred
stock ("ICN Preferred Shares") of ICN.
B. QCPC and C-Plus are the sole general partners of Cell Plus, with a
17% and 1% percentage interest, respectively, in Cell Plus. ICNP and Winstel are
the sole limited partners of Cell Plus, with a 79% and 3% interest,
respectively.
C. QCCO and Ohio RSA are the sole general partners of Ohio LP, with a
16% and 1% interest, respectively. ICNP and Winstel are the sole limited
partners of Ohio LP, with an 82% and 1% percentage interest, respectively, in
Ohio LP.
D. ICN owns (i) an 85% general partnership interest ("Charleston
Interest") in ICN-Charleston, West Virginia Limited Partnership, a West Virginia
limited partnership ("ICN-Charleston") and (ii) various cellular telephone
systems and businesses in Pennsylvania, Ohio, Kentucky and West Virginia.
E. Cell Plus owns (i) various cellular telephone systems and businesses
in Pennsylvania, (ii) a 69.23% general partnership interest in Williamsport/PA-8
Cellular Limited Partnership, an Illinois limited partnership ("WPCLP") (the
"Williamsport GP Interest") and (iii) all of the issued and outstanding capital
stock ("CCTS Shares") of Commonwealth Cellular Telephone Services, Inc., a
Delaware corporation ("CCTS"). CCTS, in turn, owns (I) the partnership interests
<PAGE>
in the general and limited partnerships (the "PA Partnerships") identified on
Schedules I(a) and I(b) attached hereto and made a part hereof ("PA Partnership
Interests") (the PA Partnerships listed on ScheduleI(a)attached hereto are
sometimes hereinafter collectively referred to as the"Controlled PA
Partnerships," and the Partnerships listed on Schedule I(b)attached hereto are
sometimes hereinafter collectively referred to as the "Minority Partnerships")
and (II) 93.949% of the issued and outstanding capital stock (the "WCTC Shares")
of Williamsport Cellular Telephone Company, Inc., a Delaware corporation
("WCTC"). WCTC, in turn, owns a 30.77% limited partnership interest in WPCLP
(the "Williamsport LP Interest").
F. Ohio LP owns various cellular telephone systems and businesses
in Ohio and West Virginia.
G. ICN, Ohio LP, and Cell Plus, together with CCTS, PA Partnerships,
WCTC, WPCLP and ICN-Charleston (collectively, the "ICN Group") collectively own
all of the assets and rights related to the cellular telephone system and
related business in the Metropolitan Statistical Areas and Rural Statistical
Areas (each, a "Market, and collectively, the "Markets") in the States of
Pennsylvania, Ohio, West Virginia and Kentucky identified on Schedule II
attached hereto and made a part hereof (collectively, the "System").
H. The 360 Group owns and operates various cellular telephone systems
and businesses in Pennsylvania and other states serving smaller to mid-size
markets (the "360 System").
I. Exchanging Group and 360 believe that 360's ownership and operation of
the System will enhance the financial, operational and customer needs of both
the System and the 360 System. Therefore, in exchange for the consideration set
forth herein and subject to all other terms and conditions described herein (1)
Exchanging Group and 360, or such wholly-owned subsidiaries of 360 as are
designated by 360, desire to (a) merge ICN into 360, or such wholly-owned
subsidiary of 360 as designated by 360 and (b) merge a wholly-owned subsidiary
of 360 as designated by 360 into CCTS, and (2) Exchanging Group desires to
transfer and assign to 360, or to such wholly-owned subsidiaries of 360 as are
designated by 360, 100% of the general and limited partnership interests in Cell
Plus and Ohio LP owned by certain members of Exchanging Group which are the
general and limited partners of Cell Plus and Ohio LP.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
AGREEMENT
SECTION 1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings set forth below:
"Accountants" has the meaning set forth in Section 2.7(e).
<PAGE>
"Acquired Corporations" shall mean, collectively, ICN, CCTS and WCTC.
"Additional Marketing Expenditures" has the meaning set forth in
Section 5.4.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director, officer or general partner (a) of such specified Person, (b) of any
Subsidiary of such specified Person or (c) of any Person described in clause (i)
above. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
direct or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. "Affiliate" shall also mean any
Beneficial Owner of shares representing 10% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of a corporation or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such Beneficial Owner pursuant
to the first sentence hereof. With respect to each member of the Exchanging
Group and each Subject Entity and their respective Affiliates, the term
"Affiliate" shall also include: (x) any lineal descendant of such parties or any
spouse or adopted child of any such descendant or any child of any such spouse,
any trust or trusts for the benefit of any of the Persons named in this clause
(x); (y) the executors, administrators, conservators or personal representatives
of any Person referred to in clause (x); or (z) any Person which, directly or
indirectly, is owned and controlled by one or more of the Persons referred to in
clauses (x) or (y).
"Agreement" has the meaning set forth in the preamble, and shall
include all Schedules.
"Allentown" refers to Allentown SMSA Limited Partnership, a Delaware
limited partnership.
"Allocation" shall have the meaning set forth in Section 2.10.
"Base Rate" shall have the meaning set forth in Section 2.7(e).
"Beneficial Ownership" shall have the meaning provided in Rule 13d-3
under the Exchange Act and "Beneficial Owner" shall have a meaning correlative
to the foregoing.
"Board of Directors" means, with respect to any Person, the board of
directors (or equivalent body) of such Person or any duly authorized committee
of such board of directors (or equivalent body).
"Business Day" refers to a day, other than a Saturday or a Sunday, on
which commercial banks are not required or authorized to close in the City of
Chicago.
"Cap" has the meaning set forth in Section 10.2.
<PAGE>
"Cap-Ex Shortfall" has the meaning set forth in Section 5.5.
"Cap-Ex Surplus" has the meaning set forth in Section 5.5.
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right, warrant, option or other interest
in the nature of an equity interest in such Person, but excluding any debt
security convertible or exchangeable into such equity interest.
"Cash Portion" has the meaning set forth in Section 10.6.
"Cash Proceeds" means an amount equal to (a) all cash and other
proceeds received by or distributed from (without double counting) Subject
Entities from the sale, transfer or other disposition of any non-current assets
of such entities, minus (b) the amount of all investments in and acquisitions of
any non-current assets, which are capital assets necessary to operate the System
as it is currently being operated, by Subject Entities during the period from
January 1, 1996 through and including the date hereof.
"CCTS" has the meaning set forth in the Background.
"CCTS Merger Survivor" refers to the surviving corporation in existence
immediately after the consummation of the transactions described in Section 2.2
hereof.
"CCTS Shares" has the meaning set forth in the Background.
"Cell Plus" has the meaning set forth in the Background.
"Cell Plus Interests" refers to all general and limited partnership
interests owned by QCPC, C-Plus, ICNP and Winstel in Cell Plus.
"Change of Control" means (a) the occurrence of any of the events
described in (i) or (ii) below, together with the occurrence of the event
described in (iii) below, or (b) the occurrence of the event described in (iv)
below:
(i) Any "person" or "group" (within the meaning of Sections 13(d) and
14(d) of the Exchange Act or any successor provision to either of the foregoing,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act;
provided, however, that a group formed solely for the purpose of voting
securities shall not be deemed to be a group for purpose of this definition) is
or becomes the Beneficial Owner, directly or indirectly, of 35% or more of the
total voting power of the fully diluted Voting Stock of 360.
(ii) 360 consolidates or merges with or into any other Person or any
other Person consolidates or merges with or into 360, in either case where the
Beneficial Owners, directly or
<PAGE>
indirectly, of Voting Stock of 360 immediately prior to such merger are not
the Beneficial Owners, directly or indirectly, of 35% or more of the total
voting power of the fully diluted Voting Stock of the surviving Person, other
than a consolidation or merger with a Wholly Owned Subsidiary in which all of
the Voting Stock of 360 outstanding immediately prior to the effectiveness
thereof is changed into or exchanged for substantially the same consideration.
(iii) During any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of 360 (together
with any new directors whose election by the Board of Directors of 360 or whose
nomination for election by the stockholders of 360 was approved by a vote of
66-2/3% of the directors of 360 then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of 360 then in office.
(iv) 360 sells, conveys, transfers or leases, directly or indirectly, all
or substantially all of its assets to any Person other than one or more Wholly
Owned Subsidiaries (other than a sale, conveyance, transfer or lease where the
Beneficial Owners, directly or indirectly, of Voting Stock of 360 immediately
prior to such transaction are the Beneficial Owners, directly or indirectly, of
35% or more of the total voting power of the fully diluted Voting Stock of the
entity or entities acquiring all or substantially all of such assets).
"Change of Control Triggering Event" means the occurrence of both a
Change of Control and a Rating Decline with respect to the Senior Notes.
"Charleston Interest" has the meaning set forth in the Background.
"CLNS" refers to CLNS General Partnership, a Pennsylvania partnership.
"Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Closing Fiscal Year" has the meaning set forth in Section 6.11(a).
"Code" refers to the Internal Revenue Code of 1986, as amended.
"Communications Act" shall mean the Communications Act of 1934, as
amended.
"Confidentiality Agreements" has the meaning set forth in Section 5.3.
"Contracts" shall mean all Leases, contracts, agreements, options and
other rights and obligations, whether written or oral, related to the System and
held or owned by any of the Subject Entities on the Closing Date, which are
listed on Schedules 3.22 and 3.14(b).
<PAGE>
"Controlled PA Partnerships" has the meaning set forth in the
Background.
"Controlled Partnerships" refers to Cell Plus, Ohio LP, ICN-Charleston,
WPCLP and the Controlled PA Partnerships.
"Cushion" has the meaning set forth in Section 10.2.
"Damages" refers to, in respect of any obligation to indemnify any
Person pursuant to the terms of this Agreement, any losses, claims, damages
(including, without limitation, consequential damages), liabilities,
obligations, judgments, settlements (including, without limitation, settlements
with federal, state and local governmental entities) and reasonable
out-of-pocket costs, expenses and attorneys' fees excluding, however, all
punitive damages except for punitive damages recovered or recoverable by a third
party against Indemnifying Party.
"Dispute Notice" has the meaning set forth in Section 2.7(e).
"Employee Benefit Plan" refers to an Employee Pension Benefit Plan,
Employee Welfare Benefit Plan (where no distinction is required by the context
in which the term is used), or any compensation plan, incentive plan (whether or
not stock related), bonus plan or fringe benefit plan.
"Employee Costs" refers to all costs of the Subject Entities incurred
in connection with its employees, including, without limitation, any obligation
for wages, commissions, "golden parachute," annual or long term incentives,
severance, vacation and holiday pay, sick pay, bonuses, severance pay, retiree
or employee medical benefits, nonqualified deferred compensation, obligations to
employees under COBRA and other health insurance obligations, retiree medical,
other benefits due employees under Employee Welfare Benefit Plans or Employee
Pension Benefit Plans, underfunding of any defined benefit plan, withdrawal
liability under the Multi-Employer Pension Plan Amendment Act of 1980, as
amended, any liability imposed by WARN in connection with the notice or failure
to provide notice of a plant closing, mass layoff or termination of employees
(other than as contemplated by Section 6.10(f)) or any obligation under any
collective bargaining agreement, employment agreement or employment at-will
relationship.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Enforceability Exceptions" has the meaning set forth in Section 3.1.
"Environmental Assessment" has the meaning set forth in Section 6.7.
"Environmental Laws" refers to, as of the Closing Date, any existing
federal, state or local statute, regulation or ordinance or any existing
judicial or administrative decree or decision
<PAGE>
with respect to any Hazardous Materials, drinking water, groundwater, wetlands,
landfills, open dumps, storage tanks, underground storage tanks, solid waste,
waste water, storm water runoff, waste emissions or wells. Without limiting the
generality of the foregoing, the term will encompass each of the following
statutes, and the regulations promulgated thereunder, in each case as in effect
as of Closing: (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified in scattered sections of 26 U.S.C., 33 U.S.C.,
42 U.S.C. and 42 U.S.C. ss. 9601 et seq., "CERCLA"); (b) the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq., "RCRA")); (c)
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq., "HMTA");
(d) the Toxic Substances Control Act (15 U.S.C. ss. 2061 et seq., "TSCA"); (e)
the Clean Water Act (33 U.S.C. ss. 1251 et seq.); (f) the Clean Air Act and
Amendments (42 U.S.C. ss. 7401 et seq.); (g) the Safe Drinking Water Act (21
U.S.C. ss. 349; 42 U.S.C. ss. 201 and ss. 300 et seq.); (h) the National
Environmental Policy Act of 1969 (42 U.S.C. ss. 4321); (i) the Superfund
Amendments and Reauthorization Act of 1986 (codified in scattered sections of 10
U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C., "SARA"); and (j) Title III of the
Superfund Amendments and Reauthorization Act (42 U.S.C. ss. 1101 et seq.).
"Equity Security" means the 360 Voting Stock and any options, warrants,
convertible securities, or other rights to acquire such 360 Voting Stock.
"ERISA" refers to the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Agent" has the meaning set forth in Section 10.6.
"Exchanging Group" has the meaning set forth in the first paragraph of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchanging Group Assumption Agreement" refers to the Assumption
Agreement to be executed at Closing whereby Exchanging Group will jointly and
severally assume the Non-Retained Liabilities.
"Exchanging Group Indemnitees" has the meaning set forth in Section
10.3.
"FCC" shall mean the United States Federal Communications Commission.
"FCC Counsel" has the meaning set forth in Section 8.7.
"Final Approval" means that any consents to the transfer of the
Licenses, ICN Shares, CCTS Shares, WCTC Shares and Partnership Interests shall
no longer be subject to administrative or judicial appeal, review or
reconsideration by the FCC.
Final Order" means a Preliminary Grant which is not reversed, stayed,
enjoined, set aside, annulled, or suspended, and with respect to which no timely
request for stay, motion or petition for reconsideration or rehearing,
application or request for review, or notice of appeal or
<PAGE>
other judicial petition for review is pending, and as to which the time for
filing any such request, motion, petition, application, appeal, or notice, and
for the entry of an order staying, reconsidering, or reviewing on the FCC's or
other regulatory authorities' own motion, has expired. A Preliminary Grant which
is not reversed, stayed, enjoined, set aside, annulled, or suspended, and with
respect to which no timely request for stay, motion or petition for
reconsideration or rehearing, application or request for review, or notice of
appeal or other judicial petition for review is pending, and as to which the
time for filing any such requests, motion, petition, application, appeal, or
notice, and for the entry of an order staying, reconsidering or reviewing on the
FCC's or other regulatory authorities' own motion has expired, but which is
subject to conditions is not (and shall not be deemed) a Final Order unless and
until (i) in the event that such conditions are imposed upon the 360 Group, the
Subject Entities or the Partnerships, 360 shall have notified Exchanging Group
in writing of its willingness to accept such conditions and (ii) in the event
that such conditions are imposed upon Exchanging Group, Exchanging Group shall
have notified 360 in writing of its willingness to accept such conditions.
"Final Statement" has the meaning set forth in Section 2.7(d).
"Financial Statements" refers to (a)(i) the consolidated financial
statements of ICN (including ICN-Charleston) and Cell Plus (including CCTS,
WPCLP and the PA Partnerships), and (ii) the financial statements of Ohio LP,
PA5GP, NEPA, each as of December 31, 1994 and 1995, audited by Arthur Andersen
LLP; (b) the financial statements of ICN-Charleston as of December 31, 1994 and
1995, prepared by ICN Group on a modified tax basis and reviewed by Arthur
Andersen LLP; and (c)(i) the interim consolidated financial statements of ICN
(including ICN-Charleston) and Cell Plus (including CCTS, WPCLP and the PA
Partnerships), and (ii) the interim financial statements of Ohio LP,
ICN-Charleston, WPCLP, WCTC, CLNS, NEPA and PA5GP, each for the three months
ended March 31, 1996, which interim statements have been compiled by ICN Group,
each included as Schedule 3.4.
"Floor" has the meaning set forth in Section 5.4.
"GAAP" refers to United States generally accepted accounting
principles, as in effect from time to time.
"Hazardous Materials" refers to each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance
which is defined, determined or identified as hazardous or toxic under any
Environmental Law or the Release of which is prohibited under any Environmental
Law. Without limiting the generality of the foregoing, the term will include:
(a) "hazardous substances" as defined in CERCLA, SARA, or Title III of
the Superfund Amendments and Reauthorization Act, each as amended to date, and
regulations promulgated thereunder;
(b) "hazardous waste" as defined in RCRA and regulations promulgated
thereunder;
<PAGE>
(c) "hazardous materials" as defined in the HMTA, as amended to date,
and regulations promulgated thereunder;
(d) "chemical substance or mixture" as defined in the TSCA, as amended
to date, and regulations promulgated thereunder; and
(e) any petroleum or petroleum-related product (including, without
limitation, crude oil or any fraction thereof).
"HCNI" has the meaning set forth in the Background.
"Holdback" has the meaning set forth in Section 10.6.
"Holdback Escrow" has the meaning set forth in Section 10.6.
"HSR Act" refers to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSR Termination" is defined in Section 7.4.
"ICN" has the meaning set forth in the Background.
"ICN-Charleston" has the meaning set forth in the Background.
"ICN Common Shares" has the meaning set forth in the Background.
"ICN Group" has the meaning set forth in the Background.
"ICN Group Employee List" has the meaning set forth in Section 6.10(b).
"ICN Merger Survivor" refers to the surviving corporation in existence
immediately after the consummation of the transactions described in Section 2.3
hereof.
"ICN Preferred Shares" has the meaning set forth in the Background.
"ICN Shareholders" has the meaning set forth in Section 2.3.
"ICN Shares" shall refer collectively to the ICN Common Shares and the
ICN Preferred Shares.
"Interest" has the meaning set forth in the 360 Notes.
"Interest Payment Date" has the meaning set forth in the 360 Notes.
<PAGE>
"Inventories" shall mean, with respect to the System, all cellular
telephone units, and related components, spare parts and accessories (i) owned
by any member of the Subject Entities solely for usage in connection with the
Markets or the System and maintained in inventory, outside warehouses, by third
parties on a consignment basis solely with respect to certain Inventories of
PA5GP which are held on consignment by the partners of PA5GP, or in transit or
on order on the Closing Date and (ii) which are held for sale to customers in
the ordinary course of business.
"Inventory List" has the meaning set forth in Section 3.13.
"Investment Grade Rating" means a rating equal to or higher than Baa3
(or the equivalent) by Moody's Investors Service, Inc. (or any successor to the
rating agency business thereof), BBB- (or the equivalent) by Standard & Poors
Ratings Group (or any successor to the rating agency business thereof) and BBB-
(or the equivalent) by Duff & Phelps Credit Rating Co. (or any successor to the
rating agency business thereof).
"IRS" refers to the Internal Revenue Service of the United States
Department of the Treasury.
"knowledge," as applied to Exchanging Group and/or the Subject
Entities, refers to the actual knowledge, after reasonable investigation, of
those persons listed on Schedule 1.1 hereto. For purposes hereof, "reasonable
investigation" shall mean an investigation that includes due inquiry of
appropriate personnel with operational, engineering, managerial or other
supervisory duties with respect to the System, and, where it is reasonably
appropriate, seeking the advice of counsel or independent consultants.
"Leased Real Property" has the meaning set forth in Section 3.14(b).
"Leases" has the meaning set forth in Section 3.14(b).
"Licenses" shall mean all licenses, permits, grants, certificates or
other authorizations from the FCC, Federal Aviation Administration, public
utility commissions, public service commissions and any other regulatory
agencies, if any, issued in connection with the System on or before the Closing
Date, and all applications and construction permits related thereto, including,
without limitation, the Licenses identified on Schedule 3.17 hereto.
"Loan Agreement" refers to that certain Loan Agreement dated as of
September 9, 1994, as amended on May 30, 1995, by and among ICNP, the lenders
whose names appear on the signature pages thereof and Toronto Dominion (Texas),
Inc., as Administrative Agent.
"Markets" has the meaning set forth in the Background.
"Material Adverse Effect" refers to a material adverse effect with
respect to the business, properties, operations, or financial condition of
Subject Entities or, with respect to the 360
<PAGE>
Group, a material adverse effect with respect to the business, properties,
operations or financial condition of 360 and its Subsidiaries, taken as a whole.
With respect to a Material Adverse Effect relating to Subject Entities referred
to in Sections 3.5(a), 3.26(c) and 8.5(a), such Material Adverse Effect shall be
determined by reference to all Subject Entities, taken as a whole. With respect
to a Material Adverse Effect relating to a Subject Entity and referred to in any
other section of this Agreement, such Material Adverse Effect shall be
determined by reference to each Subject Entity.
"Mergers" has the meaning set forth in Section 12.7(c).
"Minority Partnerships" has the meaning set forth in the Background.
"Multiemployer Plan" has the meaning set forth in Section 3(37)of
ERISA.
"NEPA" refers to Northeast Pennsylvania SMSA Limited Partnership, a
Delaware limited partnership.
"New System 360 Employees" has the meaning set forth in Section
6.10(c).
"Non-Retained Assets" refers to, collectively, (a) any cash, cash
equivalents or marketable securities of Subject Entities, (b) any rights of
Subject Entities to any cash Tax refund with respect to periods prior to the
Closing Date (but not including (i) any non-cash Tax refund such as an increase
in net operating losses, credits or similar adjustments, or (ii) any cash Tax
refund if and to the extent that such refund results from carrying back to a
taxable period prior to the Closing Date any losses or credits arising in any
taxable period after the Closing Date), (c) any accounts receivable or notes
receivable of a Subject Entity as to which the account debtor is any other
Subject Entity, officer, director, partner or Affiliate thereof, or any member
of any such Person's immediate family, other than (i) any accounts receivable
arising in connection with the Swaps and (ii) the notes receivable of ICNP from
ICN, CCTS and Cell Plus referred to in Section 2.1 hereof, (d) any assets of any
Employee Benefit Plan maintained by Subject Entities or any of their Affiliates,
(e) any property, casualty, workers' compensation or other insurance policy or
related insurance services contract relating to Subject Entities or any of their
Affiliates and any rights of Subject Entities or any of their Affiliates under
such insurance policy or contract, other than (i) rights to proceeds under such
insurance policies or contracts with respect to any liabilities related to the
System prior to the Closing Date or any casualty affecting any assets of or used
in connection with the System prior to the Closing Date and (ii) any pre-paid
insurance for which Exchanging Group does not receive a credit as a Current
Asset in connection with the Working Capital, (f) any rights of Exchanging Group
under this Agreement or under any other agreement between Exchanging Group and
360, (g) any assets, properties or rights of Subject Entities listed on Schedule
1.2 (which also include some assets used in the conduct of Exchanging Party's
Florida operations), (h) any books, records and information related to any of
the Non-Retained Assets or Non-Retained Liabilities, (i) any supply of Inventory
at Closing for which Exchanging Group does not receive a credit as a Current
Asset in connection with the Working Capital, (j) any assets, properties or
rights used by Affiliates of Exchanging Group solely
<PAGE>
in connection with the operation of a cellular telephone system in the State of
Florida, Rural Service Area Nos. 1, 2 and 3, and (k) any distributions from
Allentown and Reading made in calendar year 1996 (CCTS' share of which, under
the 1996 budgets for Allentown and Reading, are projected to be approximately
$375,000 in the aggregate). To the extent any Non-Retained Asset is prohibited
from being transferred to Exchanging Group pursuant to the terms hereof due to
restrictions in any Partnership Agreement or under applicable law, such
Non-Retained Asset shall not be transferred without the consent of any required
party or in accordance with such applicable law, in which event such
Non-Retained Asset shall be included within the determination of Working
Capital, and Exchanging Group shall be credited in the Working Capital with its
pro-rata share of such Non-Retained Asset.
"Non-Retained Liabilities" refers to, collectively, all obligations,
commitments and liabilities of Subject Entities, whether attributable to the
System, the Markets or otherwise, absolute or contingent, direct or indirect,
known or unknown, other than the Retained Liabilities, including by way of
illustration but not limitation, any of the following liabilities, obligations
or commitments of Subject Entities:
(a) any foreign, federal, state, county or local income or other Tax
arising from the operation of the System or the ownership of assets of Subject
Entities prior to the Closing Date in excess of any amount received by 360 as a
credit as a Current Liability in the Working Capital, and all Taxes required to
be paid by Exchanging Group in accordance with the terms of Section 12.7 hereof;
(b) any liability, commitment or obligation to any member of the
Exchanging Group or any officer, director, partner or Affiliate thereof, or to
any member of any such Person's immediate family, or to any Minority
Partnerships, other than (i) the notes payable by ICN, CCTS and Cell Plus to
ICNP referred to in Section 2.1 hereof, and (ii) those agreements with
Affiliates which 360 may expressly agree to assume in writing at or prior to
Closing pursuant to Section 9.4(j) hereof;
(c) any cost, broker's or finder's fee or expense incurred incident to
the negotiation or preparation of this Agreement or the performance and
compliance with the agreements and conditions contained herein (including any
expenses required to be paid by Exchanging Group under Section 12.8 hereof,
other than expenses required to be paid by 360 under such Section 12.8);
(d) any liability, obligation or commitment resulting from litigation
or other proceedings relating to the assets of Subject Entities or the
Exchanging Group, including the litigation set forth on Schedule 3.28 hereto,
which arose as a result of events occurring or conditions existing prior to the
Closing Date;
(e) any Employee Costs relating to periods prior to the Closing Date;
(f) any obligations (including any termination liabilities) with
respect to any lease, contract, commitment, understanding or agreement not
listed in Schedules 3.14(b) or 3.22;
(g) any withholding Tax liabilities or state franchise tax liabilities
accruing as a result of operations prior to the Closing Date;
(h) any liability, obligation or commitment incurred prior to the
Closing Date;
<PAGE>
(i) any liability the existence of which would constitute a breach of
any of the representations, warranties or covenants of any party other than 360
hereunder;
(j) any mechanic's, materialmen's and similar liens with respect to
amounts not yet due and payable arising prior to the Closing except to the
extent reflected as a Current Liability in the Working Capital;
(k) any liability for distributions, dividends or any other payments,
liabilities, costs, expenses or claims on or in connection with, arising under,
pursuant to, related to, required by or associated with the ICN Common Shares,
CCTS Shares, WCTC Shares or the ICN Preferred Shares;
(l) any liability, obligation or commitment, including Taxes, relating
to the Non-Retained Assets;
(m) any liability imposed by WARN in connection with the notice or
failure to provide notice of a plant closing or termination of employees (other
than as set forth in Section 6.10(f));
(n) any liability, obligation or commitment resulting from any of the
conditions described on Schedule 3.29; or
(o) any liability, obligation or commitment resulting from discrepancies in
the stock records of WCTC referred to in the parenthetical at the end of the
second to last sentence in Section 3.2.
"Ohio LP" has the meaning set forth in the Background.
"Ohio LP Interests" refers to all general and limited partnership
interests owned by QCCO, Ohio RSA, ICNP and Winstel in Ohio LP.
"Operating Assets" shall mean, with respect to Markets or the System,
all fixed assets and personal property of every type or description related to
or used or useful in connection with the operation of the System and owned, used
or leased by any member of the Subject Entities, or its Affiliates, on the
Closing Date including, without limitation, any transmitters/receivers, towers
and antennas, switching equipment, computer hardware and all other installed
items, and all spare parts, accessories, supplies thereto, but excluding all
Non-Retained Assets.
"Operating Budget" shall mean the budget set forth as Schedule 1.3
hereto.
"Other Assets" shall mean, with respect to the System, all computer
software, including source and object codes, marketable securities, prepaid
expenses, trade secrets, accounting data, books and records (and, to the extent
received by Exchanging Group, all books and records relating to the Minority
Partnerships), customer lists, supplier lists, Licenses, customer account
information, phone numbers, Trademarks, Technology, rights under any acquisition
agreement
<PAGE>
or agreements whereby the Exchanging Group acquired the System Assets, the ICN
Shares, the CCTS Shares, the WCTC Shares or the Partnership Interests (including
all rights and claims thereunder), and all other tangible and intangible
property, including goodwill and covenants not to compete, related to the
Markets or the System and owned by any member of the Subject Entities, or its
Affiliates, on the Closing Date, but excluding all Non-Retained Assets.
"Owned Real Property" has the meaning set forth in Section 3.14(a)
hereof.
"PA Partnership Interests" has the meaning set forth in the Background.
"PA Partnerships" has the meaning set forth in the Background.
"PA5GP" refers to Pennsylvania RSA No. 5 General Partnership, a
Pennsylvania partnership.
"Partnership Agreements" has the meaning set forth in Section 3.10.
"Partnership Interest Assignment Agreement" refers to the Assignment to
be executed at Closing by the partners of Ohio LP and Cell Plus conveying the
Ohio LP Interests and Cell Plus Interests.
"Partnerships" refers to Cell Plus, Ohio LP, ICN-Charleston, WPCLP and
the PA Partnerships.
"Partnership Interests" refers collectively to the Cell Plus Interests,
the Ohio LP Interests, the Charleston Interest, the Williamsport GP Interest,
the Williamsport LP Interest and all partnership interests owned by CCTS in the
PA Partnerships.
"Permits" refers to any permit, approval, authorization, license,
variance, or permission required by a governmental authority, including zoning
commissions, under any applicable laws other than the Licenses.
"Permitted Exceptions" refers to (i) the matters disclosed by or that would
be disclosed by any accurate surveys of the Owned Real Property and Leased Real
Property, excluding, however, any Unpermitted Exceptions and any discrepancy
from the size or location of any of the Owned Real Property or Leased Real
Property as set forth in this Agreement, the Leases or any conveyance document
referenced in Schedule 3.14(a), (ii) those matters set forth or that would be
set forth as title exceptions in title insurance commitments with respect to the
Owned Real Property and Leased Real Property, excluding, however, any
Unpermitted Exceptions, and (iii) liens for Taxes not yet delinquent and for
which 360 is receiving a credit at Closing as a Current Liability in the Working
Capital.
<PAGE>
"Person" refers to any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Personalty Lien" refers to any pledge, security interest, charge,
lien, claim, assessment, or other encumbrance of any nature whatsoever, on
personal property of Subject Entities other than (i) liens for Taxes not yet
delinquent or which are being contested in good faith through appropriate
proceedings and which are credited to 360 as a Current Liability in the Working
Capital and (ii) any other liens or encumbrances specifically listed on the
Schedule 1.4 hereto.
"PIK Portion" has the meaning set forth in Section 10.6.
"Post Closing A/R Adjustment Date" has the meaning set forth in Section
2.7(f).
"Pre-Closing Taxes" means all Taxes relating to any of the Subject
Entities and the Minority Partnerships for all periods prior to the Closing.
"Preliminary Grant" means an action by the FCC and other applicable
state regulatory authority consenting to or authorizing the transfer of control
of the Licenses to 360 , which action has not yet become a Final Order.
"Preliminary Statement" has the meaning set forth in Section 2.7(b).
"Principal" has the meaning set forth in the 360 Notes.
"Rating Agencies" mean Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., Duff & Phelps Credit Rating Co. and Moody's Investors
Service, Inc. or any successor to the respective rating agency businesses
thereof.
"Rating Date" means the date which is 90 days prior to the earlier of
(i) a Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of 360 to effect a Change of Control.
"Rating Decline" means, with respect to the Senior Notes, the occurrence of
the following on, or within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by 360 to effect a Change
of Control (which period shall be extended so long as the rating of such Senior
Notes is under publicly announced consideration for possible downgrade by any of
the Rating Agencies): (a) in the event the Senior Notes are assigned an
Investment Grade Rating by at least two of the three Rating Agencies on the
Rating Date, the rating of the Senior Notes by at least two of the three Rating
Agencies shall be below an Investment Grade Rating; or (b) in the event the
Senior Notes are rated below an Investment Grade Rating by at least two of the
three Rating Agencies on the Rating Date, the rating of the Senior Notes by at
least two of the three Rating Agencies shall be decreased by one or more
gradations (including gradations within rating categories as well as between
rating categories).
<PAGE>
"Reading" refers to Reading SMSA Limited Partnership, a Delaware
limited partnership.
"Release" refers to any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping, burying,
abandoning, or disposing into the environment.
"Remediation Costs" has the meaning set forth in Section 6.7.
"Retained Liabilities" refers to, collectively, all liabilities,
commitments and obligations of Subject Entities in connection with the System
which are (a) listed, described or reserved for on the Financial Statements as
current liabilities or incurred between January 1, 1996 and the Closing Date in
the ordinary course of business, consistent with past practice, that have not
been or will not be satisfied or discharged on or prior to the Closing Date and
are included in the calculation of the Working Capital, including liabilities
under the Swaps, provided the Swaps are assigned to 360 and all required
consents for such assignment are obtained, (except for liabilities, commitments
and obligations set forth in items (a) through (o) of the definition of
"Non-Retained Liabilities" in Section 1 hereof), (b) arising with respect to the
performance after the Closing Date of the Contracts, excluding any liability or
obligation resulting from any breach, violation, failure to comply, act,
omission, condition or circumstance with respect thereto prior to the Closing
Date, (c) notes payable by ICN, CCTS and Cell Plus referred to in Section 2.1
hereof in an amount equal to the Toronto Dominion Debt, (d) accrued Taxes that
would be shown on the balance sheets of the Subject Entities as of the Closing
Date, but only to the extent 360 receives a credit as a Current Liability in the
Working Capital for such amounts, and (e) any liability of 360 for Taxes
pursuant to Section 12.7 hereof.
"Schedules" refers to, collectively, the various Schedules attached to
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" refers to the United States Securities and Exchange Commission.
"Senior Notes" mean the 7 1/8% Senior Notes Due 2003 and 7 1/2% Senior
Notes Due 2006 issued by 360 under the Senior Note Indenture.
"Senior Note Indenture" means the Indenture dated as of March 7, 1996
between 360 and Citibank, N.A., as trustee, as amended or supplemented from time
to time.
"Standstill Period" means the period beginning on the date hereof and
ending on the first to occur of (a) five years after the date hereof, (b) a
Change of Control Triggering Event or (c) a default under the 360 Notes which
has not been cured within the applicable cure period.
"Subject Entities" means ICN, Cell Plus, Ohio LP, ICN-Charleston, CCTS,
WCTC, WPCLP and the Controlled PA Partnerships.
<PAGE>
"Subscriber Credit" has the meaning set forth in Section 5.4.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which at least 50% of the total voting power of the Voting Stock is held by
such first-named Person or any of its Subsidiaries and such first-named Person
or any of its Subsidiaries has the power to direct the management, policies and
affairs thereof; or (ii) in the case of partnership, joint venture, association,
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise.
"Survivors" refers to the CCTS Merger Survivor and the ICN Merger Survivor.
"Swaps" means those certain interest rate swaps between various banking
institutions and ICNP and certain of its Affiliates in connection with the
Toronto Dominion Debt, all of which Swaps are identified on Schedule 1.6 hereto.
"System" has the meaning set forth in the Background.
"System Assets" refers to all right, title and interest of Subject
Entities in and to any and all authorizations, licenses and assets related to or
used or useful in connection with the operation of the System (other than
Non-Retained Assets), including, without limitation, all Licenses, Contracts,
accounts receivable, notes receivable, Inventories (not in excess of a 45 day
supply based upon the prior experience of Exchanging Group with respect to the
System), Operating Assets, Owned Real Property and Other Assets of the System as
of the Closing Date.
"System Employee Plans" has the meaning set forth in Section 3.26(a).
"System Welfare Plan" has the meaning set forth in Section 6.12.
"Target" has the meaning set forth in Section 5.4.
"Tax Return" refers to any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" or "Tax" refers to all federal, state, local and foreign taxes,
charges, fees, levies, imposts, duties or other assessments, including, without
limitation, income, gross receipts, excise, employment, sales, use,
telecommunications, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental (including taxes under Code Section
59A), premium, federal highway use, commercial rent, customs duties, capital
stock, paid up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be
<PAGE>
withheld by the United States or any state, local, foreign government or
subdivision or agency thereof, including any interest, penalties or additions
thereto, whether disputed or not.
"Technology" refers to all patents, patent applications, inventions,
copyrights, copyright registrations, computer software, technology, know-how and
trade secrets owned by or licensed to the Subject Entities or licensed or
franchised or used in the conduct of the System and operations thereof.
"Terminated Employees" has the meaning set forth in Section 6.10(a).
"Toronto Dominion Debt" means an amount not in excess of $240,000,000
of outstanding principal, accrued interest, pre-payment charges, costs, fees and
other expenses due and owing by ICN Group under and pursuant to the Loan
Agreement.
"Trademarks" has the meaning set forth in Section 3.23.
"Uncollected Receivables" has the meaning set forth in Section 2.7(f).
"Unpermitted Exceptions" refers to (i) any existing covenants, conditions
or restrictions (a) which require the payment to a third party of any sums of
money other than Taxes not yet delinquent for which 360 is receiving a credit at
Closing as a Current Liability in the Working Capital, or (b) the violation of
which would result in the loss of title to the estate or interest in any Owned
Real Property (including any improvements thereon), (ii) any easement or other
similar right (including the right to extract or develop surface or sub-surface
minerals) which would be disclosed on a title commitment, title policy or
accurate survey of any of the Owned Real Property or Leased Real Property where
the exercise of such right by any party (other than 360) would result in damage
to the existing improvements (whether such improvements constitute Owned Real
Property or Leased Real Property), (iii) any mechanic's, materialmen's and
similar liens, or (iv) mortgages or other liens which do not relate to Retained
Liabilities, or (v) any other matter which impairs the title or marketability or
the ability of 360 to use for any current, or to the knowledge of Exchanging
Group, intended use of the Owned Real Property or Leased Real Property.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"WARN" means the Worker Adjustment Retraining and Notification Act, 29
U.S.C. et seq.
"WCTC" has the meaning set forth in the Background.
"WCTC Shares" has the meaning set forth in the Background.
<PAGE>
"Wholly Owned Subsidiary" means, at any time, a Subsidiary all of the
Voting Stock of which (except directors', qualifying shares) is at the time
owned, directly or indirectly, by 360 or its other Wholly Owned Subsidiaries.
"Williamsport GP Interest" has the meaning set forth in the Background.
"Williamsport LP Interest" has the meaning set forth in the Background.
"WPCLP" has the meaning set forth in the Background.
"Working Capital" as of the Closing Date shall be equal to the sum of
clauses (a) and (b) below:
(a) The difference between the "Current Assets" of ICN (including ICN's
pro-rata share of Current Assets of ICN-Charleston), Ohio LP, CCTS (including
CCTS's pro-rata share of Current Assets of the Controlled PA Partnerships and
WCTC (including WCTC's pro-rata share of Current Assets of WPCLP)), and Cell
Plus (including Cell Plus's pro-rata share of Current Assets of WPCLP) on the
Closing Date and the "Current Liabilities" of ICN (including ICN's pro-rata
share of Current Liabilities of ICN-Charleston), Ohio LP, CCTS (including CCTS's
pro-rata share of Current Liabilities of the Controlled PA Partnerships and
WCTC), WCTC (including WCTC's pro-rata share of Current Liabilities of WPCLP),
and Cell Plus (including Cell Plus's pro-rata share of Current Liabilities of
WPCLP) on the Closing Date, all determined in accordance with GAAP, subject to
the following modifications:
(1) Current Assets for purposes of the Working Capital shall
be comprised of the following categories of assets only: cash, cash
equivalents or marketable securities of any Partnership (but only to
the extent such cash, cash equivalents or marketable securities are not
transferred to Exchanging Group as Non-Retained Assets), security
deposits, prepaid expenses, accounts receivable and Inventories. 360
acknowledges that the Inventories set forth on the Financial Statements
of ICN reflect both Inventories related to the System and Inventories
used in the Florida operations of ICN Affiliates. All items of
Inventory programmed for B-side operations relate to the System and all
items of Inventory programmed for A-side operation relate to the
Florida operations. Inventories for purposes of Working Capital shall
include only such items of Inventory programmed for B-side operations
and on hand in the System or in transit to (from Exchanging Group's
distribution center in Florida) the System. Exchanging Group and 360
acknowledge and agree that the quantities, mix and allocation of
Inventories at Closing will not materially differ from those set forth
in the inventory list of the System as of March 31, 1996 set forth on
Schedule 3.13 attached hereto, except for normal seasonal adjustments
consistent with past practices, provided, however, that in no event
shall the Inventory included as a System Asset exceed a 45 day supply
based upon the prior experience of Exchanging Group with respect to the
System. Notwithstanding anything contained herein to the contrary,
Current Assets shall not include any Non-Retained Assets.
<PAGE>
(2) The accounts receivable for purposes of the Working
Capital shall be valued as follows:
(A) 100% of the face amount for accounts receivable
which are 30 days or less past due;
(B) 97% of the face amount for accounts receivable
which are 31 days or more and 60 days or less past due;
(C) 40% of the face amount for accounts receivable
which are 61 days or more and 90 days or less past due;
(D) 10% of the face amount for accounts receivable
which are 91 days or more and 150 days or less past due; and
(E) 0% of the face amount for accounts receivable
which are 151 days or more past due.
Notwithstanding the foregoing, to the extent that any such
accounts are in dispute at the time of the Closing Date, the disputed
portion of such receivables shall be valued under subsection (D) above
and the undisputed portion shall be valued in accordance with the
applicable provisions of this entire clause (2). Accounts receivable
shall include the gross amount of all accounts receivable (without
taking into account any reserve therefor) of Subject Entities after
excluding therefrom any receivables from Persons which are Subject
Entities, ICNP or any partner or stockholder, director, officer,
employee or Agent of a partner or stockholder of such entities, or any
Affiliate thereof.
(3) Current Liabilities for purposes of the Working Capital
shall be comprised of the following categories of liabilities only:
accounts payable, accrued expenses, accrued interest (other than in
connection with the Toronto Dominion Debt (the satisfaction of which
will be as set forth in Section 2.1 hereof), inter-company debt or debt
to Affiliates which constitute Non-Retained Liabilities), Cash Proceeds
and customer deposits. Current Liabilities shall not include any
Non-Retained Liabilities.
(b) The amount of any proratable items of the Subject Entities as of
the Closing Date (without double counting any items of Working Capital included
in (a) of this definition), including ICN's pro-rata share of proratable items
of ICN-Charleston, CCTS's pro-rata share of proratable items of the Controlled
PA Partnerships and WCTC (including WCTC's pro-rata share of proratable items of
WPCLP), and Cell Plus's pro-rata share of proratable items of WPCLP), including,
without limitation, rent, property taxes (based solely and without further
adjustment or reproration on 103% of the most recent invoices or assessments
received by Subject Entities in connection with such taxes), license fees,
customer prepayments, prepaid advertising charges, prepaid rent, accrued revenue
relating to the provision of phone services which are unbilled as of the Closing
Date and prepaid insurance policies to the extent expressly assumed by 360 , to
the extent such items are proratable, all determined in accordance with GAAP as
of the close of business on the date immediately preceding the Closing Date.
<PAGE>
Notwithstanding the foregoing, Working Capital shall be determined on an entity
by entity basis and shall not be aggregated for all members of the Subject
Entities.
"360 Financial Statements" refers to the consolidated financial
statements of 360 (formerly Sprint Cellular Company) and its subsidiaries as of
December 31, 1994 and 1995, audited by Ernst & Young, LLP, and interim
consolidated financial statements of 360 (formerly Sprint Cellular Company) and
its subsidiaries for the three months ended March 31, 1996, which interim
statements have been compiled by 360.
"360 Group" means 360 and all direct and indirect subsidiaries, partnership
and other entities in which 360 has a controlling interest as identified on
Schedule 1.7 attached hereto.
"360 Indemnified Parties" has the meaning set forth in Section 10.2.
"360 Notes" means subordinated notes in the initial aggregate principal
amount of one hundred and twenty-two million dollars ($122,000,000) in the form
attached hereto as Exhibit 1. In the event of a conflict between the terms of
this Agreement and the 360 Notes, the terms of the 360 Notes shall control.
"360 Shares" means six million five hundred thousand (6,500,000) shares
(the "Number") of unregistered, validly issued, fully paid and non-assessable
shares of common stock, $0.01 par value, of 360, free and clear of all liens,
claims, security interests and other encumbrances, other than restrictions on
sale and transfer imposed by applicable securities laws and the terms and
conditions of the Amended and Restated Certificate of Incorporation, as amended,
of 360 and that certain Rights Agreement dated March 5, 1996 between 360 and
Chemical Bank (the "Rights Agreement"), true and correct copies of which have
been provided to Exchanging Group. The Number shall be adjusted for splits,
re-classifications, stock dividends, etc. occurring prior to Closing.
"360 System" has the meaning set forth in the Background.
"360 Voting Stock" means the common stock, $0.01 par value, of 360, and
all other securities of 360, if any, entitled to vote generally in the elections
of directors of 360.
<PAGE>
SECTION 2 BASIC TRANSACTION.
2.1 Toronto Dominion Debt. On the terms and subject to the conditions set
forth in this Agreement, at Closing and immediately upon consummation of the
transactions described in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 and 2.11 and in
consideration of the various agreements and covenants of Exchanging Group
contained herein, 360 shall assume the Toronto Dominion Debt and as
consideration for such assumption, ICNP shall assign and transfer to 360, free
and clear of all liens, claims, security interests and encumbrances, notes
receivable from ICN, CCTS and Cell Plus in an aggregate amount equal to the
Toronto Dominion Debt. If applicable, 360 shall obtain, and present to
Exchanging Group at Closing, evidence of all waivers and consents required from
senior lenders of 360 in connection with the assumption of the Toronto Dominion
Debt as described herein. In addition, at Closing and provided that all consents
required for the assignment of each of the Swaps to 360 have been obtained, ICNP
and its Affiliates that are parties to the Swaps shall assign the Swaps to a
member or members of the 360 Group as designated by 360. In the event that
Exchanging Group fails to obtain any such required consent as of the Closing,
ICNP and its Affiliates shall not assign, nor shall 360 be obligated to assume,
any of the Swaps. 360 agrees to reasonably assist and cooperate with Exchanging
Group between the date hereof and the Closing in order to obtain all consents
required in connection with the transfer of the Swaps to 360.
2.2 Merger of CCTS and 360 Subsidiary. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, Cell Plus and 360 will
cause a direct subsidiary of 360 to be merged with and into CCTS under
applicable law. Each CCTS Share issued and outstanding immediately prior to the
Closing shall be delivered to 360 in exchange for the 360 Shares described in
Section 2.6 below.
2.3 Merger of ICN and 360 Subsidiary. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, ICNP, CCI, Dwyer and
Winstel ("ICN Shareholders") and 360 will cause ICN to be merged with and into a
direct subsidiary of 360 under applicable law. Each ICN Common Share and each
ICN Preferred Share issued and outstanding immediately prior to the Closing
shall be delivered to 360 in exchange for the 360 Shares described in Section
2.6 below.
2.4 Sale and Assignment of Cell Plus Interests. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, QCPC and C-Plus will
sell, transfer, assign, convey and deliver to a direct subsidiary of 360 and
ICNP and Winstel will sell transfer, assign, convey and deliver to another
direct subsidiary of 360, each and all of the Cell Plus Interests owned by each,
respectively, and such direct subsidiaries of 360 will accept from QCPC, C-Plus,
ICNP and Winstel the Cell Plus Interests.
2.5 Sale and Assignment of Ohio LP Interests. On the terms and subject
to the conditions set forth in this Agreement, at the Closing, QCCO and Ohio RSA
will sell, transfer, assign, convey and deliver to a direct subsidiary of 360
and ICNP and Winstel will sell transfer, assign, convey and deliver to another
direct subsidiary of 360, each and all of the Ohio LP
<PAGE>
Interests owned by each, respectively, and such direct subsidiaries of 360
will accept from QCCO, Ohio RSA, ICNP and Winstel the Ohio LP Interests.
2.6 Issuance of 360 Shares and 360 Notes to Exchanging Group. The
consideration to be provided by 360 for the transfers described in Sections 2.2,
2.3, 2.4, 2.5, 2.7 and 2.11 shall be as follows:
(a) (1) $27,295,000 in aggregate principal amount of 360 Notes shall be
issued to QCPC, C-Plus, ICNP and Winstel for the Cell Plus Interests,
which 360 Notes shall be divided between such parties as directed in a
writing delivered at Closing to 360 by QCPC, C-Plus, ICNP and Winstel.
(2) $5,770,000 in aggregate principal amount of 360 Notes shall be issued
to ICNP to purchase its note receivable in like amount from Cell Plus.
(b) $75,135,000 in the aggregate principal amount of 360 Notes shall be
issued to QCCO, Ohio RSA, ICNP and Winstel for the Ohio LP Interests, which 360
Notes shall be divided among such parties as directed in a writing delivered at
Closing to 360 by QCCO, Ohio RSA, ICNP and Winstel .
(c) 5,810,000 in the aggregate of 360 Shares shall be issued to Dwyer,
Winstel, ICNP and CCI in exchange for the ICN Shares in connection with the
merger of ICN into a direct subsidiary of 360 and shall be allocated among
Dwyer, Winstel, ICNP and CCI as directed in a writing delivered at Closing to
360 by Dwyer, Winstel, ICNP and CCI, provided that no fractional shares shall be
issued.
(d) $13,125,000 in the aggregate principal amount of 360 Notes shall be
issued to HCNI to purchase its note receivable in like amount from ICN.
(e) (1) 690,000 in the aggregate of 360 Shares shall be issued to the
shareholders of CCTS in connection with the merger of a direct
subsidiary of 360 into CCTS and shall be allocated among the
shareholders of CCTS as directed in a writing delivered at Closing to
360 by the shareholders of CCTS, provided that no fractional shares
shall be issued.
(2) $675,000 in the aggregate of 360 Notes shall be issued to the
shareholders of CCTS, which 360 Notes shall be divided among the shareholders of
CCTS as directed in a writing delivered at Closing to 360 by the shareholders of
CCTS.
2.7 Working Capital.
(a) In the event that the Working Capital as of the Closing Date
exceeds zero, Exchanging Group shall be entitled to the amount of such excess.
In the event that the Working Capital as of the Closing Date is negative, 360
shall be entitled to the amount of such shortfall.
-
<PAGE>
(b) As soon as practicable but no later than fifteen (15) days before the
scheduled Closing Date, Exchanging Group shall prepare and deliver to 360 a
statement setting forth Exchanging Group's good-faith estimate of the Working
Capital as of the Closing Date ("Preliminary Statement"), which shall be
certified by the chief financial officer of ICNP and be prepared in accordance
with the principles described in the definition of "Working Capital." In
conjunction with the preparation of the Preliminary Statement, 360 and its
representatives shall be entitled to review all work papers, schedules and other
supporting materials, and consult with Exchanging Group and its representatives
regarding the methods used to calculate the Working Capital.
(c) Any Working Capital as set forth in the Preliminary Statement in excess
of zero shall be paid, at Closing, to Exchanging Group, or an entity or entities
designated by Exchanging Group, by 360 or its designee, by wire transfer of
immediately available funds to an account or accounts designated by Exchanging
Group. In the event the Working Capital as set forth in the Preliminary
Statement is negative, Exchanging Group shall jointly and severally pay, at
Closing, such negative amount to 360 or its designee, by wire transfer of
immediately available funds to an account or accounts designated by 360.
(d) As promptly as practicable, but in no event later than ninety (90) days
after the Closing, 360 shall deliver to Exchanging Group a statement setting
forth the Working Capital as of the Closing Date ("Final Statement"), which
shall be certified by the chief financial officer of 360 (which certification
may rely upon statements prepared by Exchanging Group and Subject Entities prior
to Closing) and prepared in accordance with the principles described in the
definition of "Working Capital" in conjunction with the preparation of the Final
Statement, Exchange Group and its representatives shall be entitled to review
all work papers, schedules and other supporting documentation materials and
consult with 360 and its representatives regarding the methods used to calculate
Working Capital. Exchanging Group agrees to cooperate with and assist 360, to
the extent reasonably requested by 360, in the preparation of the Final
Statement.
(e) Within thirty (30) days after receipt of the Final Statement,
Exchanging Group shall notify 360 in writing (the "Dispute Notice") of any
dispute as to the Final Statement or any supporting documentation furnished in
connection therewith. 360 and Exchanging Group shall provide one another with
such additional information relating to the Final Statement as each party shall
reasonably request. Within thirty (30) days after delivery of the Dispute
Notice, Exchanging Group and 360 shall attempt to resolve such dispute in good
faith, and if the parties cannot agree within forty-five (45) days after
delivery of the Dispute Notice such dispute shall be resolved by a nationally
known independent firm of certified public accountants (the "Accountants")
jointly chosen by 360 and Exchanging Group. If Exchanging Group and 360 are
unable to agree upon the Accountants, the Accountants shall be selected by lot
from a list of four "Big Six" accounting firms (of which two firms shall be
selected by each of Exchanging Group and 360, but excluding any firm which has
previously audited the financial statement of any member of the Exchanging Group
or 360). Promptly, but not later than 30 days after the acceptance of its
appointment, the Accountants will determine (based solely on presentations by
the Exchanging Group and 360 to the Accountants and not by independent review)
only those items in dispute and will render a
<PAGE>
report as to its resolution of such items and the resulting calculation of
the items which are the subject of the Dispute Notice. In resolving any disputed
item, the Accountants may not assign a value to such item greater than the
greatest value for such item claimed by either party or less than the lowest
value for such item claimed by either party, in each case as presented to the
Accountants. The written decision of the Accountants shall be final and binding
on the parties hereto and shall not be subject to dispute or review. Any fees or
expenses payable to the Accountants shall be shared equally between Exchanging
Group and 360. If the Working Capital as finally determined exceeds the amounts
credited at Closing pursuant to the Preliminary Statement, then within 10 days
after the final determination of the Working Capital, 360 or its designee shall
pay such amount by wire transfer of immediately available funds to an account or
accounts designated by Exchanging Group and interest accrued thereon from the
Closing Date through the date of such payment at a rate equal to the corporate
base rate of interest announced to be in effect from time to time by The First
National Bank of Chicago ("Base Rate"). If the Working Capital as finally
determined is less than the Working Capital shown on the Preliminary Statement,
then within 10 days after the final determination of the Working Capital,
Exchanging Group shall jointly and severally pay to 360 or its designee such
amount by wire transfer of immediately available funds to an account or accounts
designated by 360 and interest accrued thereon from the Closing Date through the
date of such payment at a rate equal to the Base Rate. Any amounts paid by
Exchanging Group to 360 or its designee pursuant to Sections 2.7(c) and (e)
shall not be subject to the limitations on indemnification set forth in Section
10.
(f) Subsequent to the Closing Date, if any accounts receivable are paid
by account debtors to Exchanging Group or its lockbox account, Exchanging Group
shall promptly deliver said proceeds to 360 within 5 Business Days after
receipt.
2.8 Conveyance of Non-Retained Assets. On the terms and subject to the
conditions set forth in this Agreement, as of the date one day prior to the
conveyance date described in Sections 2.2, 2.3, 2.4 and 2.5, Exchanging Group
will cause Subject Entities to convey, to an entity or entities designated by
Exchanging Group, any Non-Retained Assets owned by Subject Entities.
2.9 Assumption of Non-Retained Liabilities. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, and in consideration
of the various agreements and covenants of 360 contained herein, Exchanging
Group shall execute the Exchanging Group Assumption Agreement and will thereby
jointly and severally assume and become fully responsible for all of the
Non-Retained Liabilities.
2.10 Allocation. Exchanging Group and 360 agree to allocate
("Allocation") the consideration received hereunder pursuant to Sections 2.6 (a)
and (b) to System Assets of Ohio LP, Cell Plus and WPCLP as set forth on
Schedule 2.10 attached hereto. The parties agree to file all Tax reports,
returns and claims and other statements consistent with the Allocation (and in
particular to report the information required by Section 1060(b) of the Code) in
a manner consistent with such Allocation and shall not make any inconsistent
written statement or take any inconsistent position on any returns, in any
refund claim, during the course of any IRS or other
<PAGE>
Tax audit, for any financial or regulatory purpose, in any litigation or
investigation or otherwise, so long as there exists a reasonable basis in law to
maintain such position. Each party shall notify the other party if it receives
notice that the IRS proposes any allocation different from the Allocation.
2.11 Other Payments. At Closing, (a) any Subscriber Credits, shortfalls
in sales and marketing expenditures and Cap Ex Shortfall shall be paid by
Exchanging Group, jointly and severally, to 360 in accordance with the terms of
Sections 5.4 and 5.5, (b) any Additional Marketing Expenditures and Cap Ex
Surplus shall be paid by 360 to Exchanging Group in accordance with the terms of
Sections 5.4 and 5.5, and (c) the Working Capital shall be paid as set forth in
Section 2.7.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF EXCHANGING GROUP.
Exchanging Group hereby jointly and severally represent and warrant to 360, and
HCNI, solely for the purposes of Sections 3.1 and 3.2 below, hereby represents
and warrants to 360, as follows:
3.1 Due Organization, Power and Authority. ICN is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and is duly qualified to transact business as a foreign corporation in
the States of Pennsylvania, Ohio, West Virginia, Kentucky and Florida, which is
each jurisdiction where the ownership of its assets or the conduct of its
operations requires such qualification. Ohio LP is a limited partnership duly
formed and validly existing under the laws of the State of Illinois, and is duly
qualified to transact business as a foreign limited partnership in the States of
Ohio and West Virginia, which is each jurisdiction where the ownership of its
assets or the conduct of its operations requires such qualification. Ohio RSA is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is duly qualified to transact business as a
foreign corporation in the States of Illinois, Ohio and West Virginia, which is
each jurisdiction where the ownership of its assets or the conduct of its
operations requires such qualification. QCCO is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Ohio, and
is duly qualified to transact business as a foreign corporation in the States of
Illinois and West Virginia, which is each jurisdiction where the ownership of
its assets or the conduct of its operations requires such qualification. Cell
Plus is a limited partnership duly formed and validly existing under the laws of
the State of Illinois, and is duly qualified to transact business as a foreign
limited partnership in the State of Pennsylvania, which is each jurisdiction
where the ownership of its assets or the conduct of its operations requires such
qualification. C-Plus is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and is duly qualified to
transact business as a foreign corporation in the States of Illinois and
Pennsylvania, which is the only jurisdiction where the ownership of its assets
or the conduct of its operations requires such qualification. QCPC is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is duly qualified to transact business as a
foreign corporation in the States of Illinois and Pennsylvania, which is each
jurisdiction where the ownership of its assets or the conduct of its operations
requires such qualification. CCTS is a corporation duly organized, validly
existing, and in good
<PAGE>
standing under the laws of the State of Delaware, and is duly qualified to
transact business as a foreign corporation in the State of Pennsylvania, which
is the only jurisdiction where the ownership of its assets or the conduct of its
operations requires such qualification. WPCLP is a limited partnership duly
formed and validly existing under the laws of the State of Illinois, and is duly
qualified to transact business as a foreign limited partnership in the State of
Pennsylvania, which is the only jurisdiction where the ownership of its assets
or the conduct of its operations requires such qualification. ICN-Charleston is
a limited partnership duly formed and validly existing under the laws of the
State of West Virginia and is licensed in each jurisdiction where the ownership
of its assets or the conduct of its business requires such qualification. ICNP
is a partnership duly formed and validly existing under the laws of the State of
Illinois. CCI is a corporation duly organized, validly existing and in good
standing in the State of Delaware. Each of the Controlled PA Partnerships, and
to the knowledge of the Exchanging Group, each of the Minority Partnerships, is
a duly formed and validly existing limited partnership (other than CLNS and
PA5GP which are duly formed and validly existing general partnerships) under the
laws of its jurisdiction of organization as indicated on Schedules I(a) and I(b)
and is qualified as a foreign limited partnership in the States indicated on
Schedules I(a) and I(b) which is each jurisdiction where the ownership of its
assets or the conduct of its operations requires such qualification. HCNI is a
limited partnership duly formed and validly existing under the laws of the State
of Illinois. Exchanging Group and HCNI have full corporate or partnership or
individual authority, as the case may be, to execute, deliver and perform this
Agreement and the other agreements contemplated hereby, and the execution,
delivery and performance by Exchanging Group and HCNI of this Agreement and the
other agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate, partnership or individual action, as the case may be, on
the part of Exchanging Group and HCNI , and this Agreement and the other
agreements contemplated hereby constitute legal, valid, and binding obligations
of Exchanging Group and HCNI enforceable against each member of the Exchanging
Group and HCNI in accordance with their terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws from
time to time in effect which affect creditors' rights generally, and by legal
and equitable limitations on the enforceability of specific remedies
("Enforceability Exceptions"). Subject Entities have full corporate or
partnership power and authority, as the case may be, to own their properties and
to carry on the business presently being conducted by them. The articles of
incorporation and bylaws or partnership agreements of the Subject Entities, as
applicable, that have been previously furnished to 360 reflect all amendments
thereto and are correct and complete. The minute books containing the records of
meetings of the stockholders, board of directors and partners, as applicable,
the stock certificate books and the stock record books (or comparable
partnership documentation) of the Subject Entities are correct and complete with
respect to the period of ownership of each Subject Entity by the ICN Group and,
to the knowledge of Exchanging Group and Subject Entities, with respect to all
periods prior to such ownership (other than in connection with various
discrepancies in the stock records of WCTC, any liability, obligation or
commitment resulting from which are Non-Retained Liabilities). Subject Entities
are not in default under or in violation of any provision of their partnership
agreements or in default under or in violation of their respective articles or
certificates of incorporation or bylaws.
<PAGE>
3.2 No Default Effected. Except as set forth on Schedule 3.2, neither
the execution and delivery of this Agreement and the other agreements
contemplated hereby by Exchanging Group or HCNI, nor the consummation of the
transactions contemplated hereby or thereby, nor the fulfillment of the terms
and compliance with the provisions hereof or thereof, will (a) violate, conflict
with, result in a breach of or a default (or an occurrence which with the lapse
of time or action by a third party, or both, could result in a default) or
result in the termination or acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice with respect to
any of the terms, conditions or provisions of any applicable order, writ,
decree, judgment, stipulation, injunction, change or other restriction of any
court or of any governmental department, commission, board, bureau, agency, or
instrumentality applicable to the Subject Entities or the certificates of
incorporation, certificates of limited partnership, by-laws or partnership
agreements of the Subject Entities, Exchanging Group or HCNI, as the case may
be, or of any indenture, contract, agreement, lease or other instrument to which
any of the Subject Entities, Exchanging Group or HCNI is a party or subject or
by which either the Subject Entities, Exchanging Group or HCNI or any of their
properties or assets are bound, or of any applicable statute, law, rule, or
regulation to which either the Subject Entities, Exchanging Group or HCNI or
their respective businesses are subject, or (b) result in the creation or
imposition of any Personalty Lien, Permitted Exception or Unpermitted Exception
upon the ICN Shares, the CCTS Shares, the Cell Plus Interests, the Partnership
Interests or the System Assets.
3.3 Subsidiaries and Investments. Except as set forth on Schedule 3.3,
the Subject Entities do not control directly or indirectly or have any direct or
indirect equity participation in any Person.
3.4 Financial Statements. Schedule 3.4 sets forth true, complete and
correct copies of the Financial Statements. The Financial Statements (other than
the interim statements included in the Financial Statements and the Financial
Statements of ICN-Charleston) have been prepared by the ICN Group and audited by
Arthur Andersen LLP in accordance with GAAP, consistently applied, and present
fairly in all material respects the financial condition, the results of
operations and cash flows of the applicable entities as of the dates and for the
periods indicated thereon subject to the footnotes contained therein. The
interim statements included in the Financial Statements have been prepared by
the ICN Group in accordance with GAAP on a basis consistent with the annual
Financial Statements (other than normal year-end and other adjustments and
accruals which have not been included in the interim statements), and present
fairly in all material respects the financial condition, the results of
operations and cash flows of the applicable entities as of the dates and for the
periods indicated thereon. The Financial Statements of ICN-Charleston have been
prepared by the ICN-Group on a modified tax basis and reviewed by Arthur
Andersen LLP, and present fairly in all material respects the financial
condition, the results of operations and cash flows of ICN-Charleston on a
modified tax basis as of the dates and for the periods indicated thereon subject
to the footnotes contained therein.
<PAGE>
3.5 No Material Adverse Change.
(a) Other than changes resulting from conditions affecting the
telecommunications or cellular telephone industry generally and except for the
transactions contemplated by this Agreement, since December 31, 1995, there has
not been any change in the financial condition or results of operations of the
Subject Entities or the System which has had a Material Adverse Effect.
(b) Other than changes resulting from conditions affecting the
telecommunications or cellular telephone industry generally and except for the
transactions contemplated by this Agreement, since December 31, 1995, there has
not been any change which has had a Material Adverse Effect on (i) the
operations of the Subject Entities or the System or (ii) the coverage provided
by any Subject Entity in each portion of the Market that it serves.
3.6 Undisclosed Liabilities. The Subject Entities have no debts,
liabilities, commitments or obligations (including without limitation unasserted
claims whether known or unknown), whether absolute or contingent, liquidated or
unliquidated, or due or to become due or otherwise, including Taxes, except for
liabilities and obligations (i) reflected or reserved for on the Financial
Statements (none of which results from, arises out of, relates to, is in the
nature of or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), (ii) that have arisen since December 31, 1995
in the ordinary course of the operations of the Subject Entities (none of which
results from, arises out of, relates to, is in the nature of or was caused by
any breach of contract, breach of warranty, tort, infringement or violation of
law, or relates to indebtedness for borrowed money other than in connection with
the Toronto Dominion Debt or inter-company debt or debt owed to Affiliates),
(iii) relating to performance obligations under Contracts in accordance with the
terms and conditions thereof (none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of contract, breach of
warranty, tort, infringement or violation of law) or (iv) as expressly set forth
in Schedule 3.6 hereto.
3.7 Capital Stock of ICN. ICN has two thousand (2,000) authorized
shares of common capital stock, of which one thousand (1,000) are issued and
outstanding. ICN also has two thousand (2,000) authorized shares of preferred
capital stock, of which one thousand (1,000) are issued and outstanding. The ICN
Shares are owned by the ICN Shareholders in the amounts set forth on Schedule I
attached hereto. All voting rights in ICN are vested exclusively in the ICN
Common Shares. The ICN Shares are validly authorized and issued and are fully
paid and nonassessable, free of preemptive rights and have not been issued in
violation of federal or state securities laws. Except as disclosed on Schedule
3.7, there are no outstanding or authorized warrants, options, commitments or
rights of any kind (including, without limitation, rights of first refusal,
tag-along rights and drag-along rights) to acquire from ICN or the Exchanging
Group any ICN Shares or any securities issued by ICN of any kind. ICN has and,
on the Closing Date will have, no obligation to acquire any of its issued and
outstanding shares of common stock or any other security issued by it from any
holder thereof. Except as disclosed on Schedule 3.7, there are no voting
agreements, voting trust agreements or shareholder or similar agreements
relating to the ICN Shares. Delivery of the ICN Shares by the ICN Shareholders
<PAGE>
to 360 in accordance with this Agreement will vest good and marketable title to
all of the ICN Shares in 360, free and clear of all liens, security interests,
pledges, encumbrances, claims and equities of every kind, other than
restrictions on sale and transfer imposed by applicable securities laws and
liens created or suffered to exist by 360.
3.8 Capital Stock of CCTS. CCTS has one thousand (1,000) authorized
shares of common capital stock, of which one hundred (100) are issued and
outstanding. Cell Plus owns all of the issued and outstanding shares of capital
stock of CCTS. All voting rights in CCTS are vested exclusively in the CCTS
Shares. The CCTS Shares are validly authorized and issued and are fully paid and
nonassessable, free of preemptive rights and have not been issued in violation
of federal or state securities laws. There are no outstanding or authorized
warrants, options, commitments or rights of any kind (including, without
limitation, rights of first refusal, tag-along rights and drag-along rights) to
acquire from CCTS or Cell Plus any CCTS Shares or any securities issued by CCTS
of any kind. CCTS has and, on the Closing Date will have, no obligation to
acquire any of its issued and outstanding shares of common stock or any other
security issued by it from any holder thereof. There are no voting agreements,
voting trust agreements or shareholder or similar agreements relating to the
CCTS Shares. Delivery of the CCTS Shares by Cell Plus to 360 in accordance with
this Agreement will vest good and marketable title to all of the CCTS Shares in
360, free and clear of all liens, security interests, pledges, encumbrances,
claims and equities of every kind, other than restrictions on sale and transfer
imposed by applicable securities laws and liens created or suffered to exist by
360.
3.9 Capital Stock of WCTC. WCTC has one hundred thousand (100,000)
authorized shares of common capital stock, of which twenty-seven thousand
fifty-four and four thousand five hundred and fifty-nine ten thousandths
(27,054.4559) are issued and outstanding. CCTS owns twenty-five thousand four
hundred and seventeen and four thousand seven hundred and fifty-nine ten
thousandths (25,417.4759) shares of the issued and outstanding shares of capital
stock of WCTC and WPCLP owns five hundred and thirty-five and two hundred and
twenty-eight one thousandths (535.228) shares of the issued and outstanding
shares of capital stock of WCTC (such shares owned by CCTS and WPCLP being
hereinafter referred to as the "WCTC Shares"). The remaining shares of capital
stock in WCTC are held by the parties and in the amounts identified on Schedule
3.9. The WCTC Shares represent 95.93% of the voting rights in WCTC. The WCTC
Shares are validly authorized and issued and are fully paid and nonassessable,
free of preemptive rights and have not been issued in violation of federal or
state securities laws. There are no outstanding or authorized warrants, options,
commitments or rights of any kind (including, without limitation, rights of
first refusal, tag-along rights and drag-along rights) to acquire from WCTC,
CCTS or WPCLP any WCTC Shares or any securities issued by WCTC of any kind. WCTC
has and, on the Closing Date will have, no obligation to acquire any of its
issued and outstanding shares of common stock or any other security issued by it
from any holder thereof. There are no voting agreements, voting trust agreements
or shareholder or similar agreements (including, without limitation, rights of
first refusal, tag-along rights and drag-along rights) relating to the WCTC
Shares. Delivery of the WCTC Shares by CCTS and WPCLP to 360 in accordance with
this Agreement will vest good and marketable title to all of the WCTC Shares,
<PAGE>
free and clear of all liens, security interests, pledges, encumbrances, claims
and equities of every kind, other than restrictions on sale and transfer imposed
by applicable securities laws and liens created or suffered to exist by 360.
3.10 Status of Partnership Interests. ICNP, QCPC, C-Plus, QCCO, Ohio
RSA, Winstel, ICN, Cell Plus, CCTS, CLNS and WCTC, as the case may be, is the
lawful owner of the Partnership Interests and has good and marketable title
thereto, free and clear of all liens, claims, security interests, pledges,
encumbrances and equities of every kind other than Personalty Liens (other than
those Personalty Liens listed on Schedule 1.4, all of which will be released at
or prior to Closing), which Partnership Interests entitle ICNP, QCPC, C-Plus,
QCCO, Ohio RSA, Winstel, ICN, Cell Plus, CCTS and WCTC, as the case may be, to
the percentage of the profits, losses, distributions and percentage interests in
the Partnerships set forth on Schedule 3.10 attached hereto. ICNP's, QCPC's,
C-Plus', QCCO's, Ohio RSA's, Winstel's, ICN's, Cell Plus, CCTS', CLNS' and
WCTC's and their respective Affiliates' sole ownership interest in the
Partnerships is identified on Schedule 3.10. Except as set forth in the
Partnership Agreements (as defined below), there are no outstanding rights
(including, without limitation, rights of first refusal, tag-along rights and
drag-along rights), options, warrants, subscriptions or agreements of any kind
to acquire from the Partnerships, ICNP, QCPC, C-Plus, QCCO, Ohio RSA, Winstel,
ICN, Cell Plus, CCTS, CLNS and WCTC any of the Partnership Interests. Other than
as set forth on Schedule 3.10, and excluding the Minority Partnerships, none of
the Partnerships nor any present or former partner in the Partnerships nor any
Affiliate thereof, are owed any sums attributable to capital contributions,
loans, advances, consulting fees, management fees, deferred fees, guarantee
fees, compensation or similar payments which arose during the period of
ownership of the Partnerships by the ICN Group, and, to the knowledge of
Exchanging Group, prior to such period, or is currently contesting its
partnership or percentage interest therein. Other than as set forth on Schedule
3.10, neither ICNP, QCPC, C-Plus, QCCO, Ohio RSA, Winstel, ICN, Cell Plus, CLNS,
CCTS, WCTC nor any Affiliate thereof owes any sums (whether capital
contributions, loans, advances, consulting fees, management fees, deferred fees,
guarantee fees, compensation or similar payments or otherwise) to any of the
Controlled Partnerships, and, to the knowledge of Exchanging Group, the Minority
Partnerships. The transactions contemplated by this Agreement would, under the
Partnership Agreements of the Partnerships, as amended ("Partnership
Agreements"), not require the consent or approval, or trigger any rights of
first refusal, tag-along rights, drag-along rights or other rights, of any other
partner in the Partnerships or any third party, and the 360 subsidiaries
acquiring the Cell Plus Interests and Ohio LP Interests, ICN, CLNS, CCTS and
WCTC will continue as a general partner or limited partner in the Partnerships,
as the case may be, with all of the rights which ICNP, QCPC, C-Plus, QCCO, Ohio
RSA, Winstel, ICN, CLNS, CCTS and WCTC possessed as such a partner prior to the
Closing Date. Exchanging Group has delivered true and correct copies of the
Partnership Agreements of, and K-1's relating (for the period of ownership of
the Partnerships by the ICN Group) to, the Controlled Partnerships, and to the
knowledge of Exchanging Group, the Minority Partnerships, to 360. The
Partnership Agreements of the Controlled Partnerships, and to the knowledge of
Exchanging Group, the Minority Partnerships, are in full force and effect, have
not been amended or modified except as provided in writing to 360, and there
have been no breaches, defaults or notices thereof or events which with or
without the passage of time or the giving of notice or both would constitute a
breach or default or both by Exchanging Group, the Controlled Partnerships,and
to the knowledge of
<PAGE>
Exchanging Group, the Minority Partnerships, or any other partner thereto.
Except as set forth on Schedule 3.10, neither Exchanging Group nor any Subject
Entity has received notice of any other partner's in the Partnerships intent to
transfer or assign their interests in the Partnership. Except as set forth on
Schedule 3.10, there is presently no notice pending which would require
Exchanging Group or Subject Entities to contribute additional capital to the
Partnerships. During the period of ownership of the Partnerships by the ICN
Group, ICNP, QCPC, C-Plus, QCCO, Ohio RSA, Winstel, ICN, Cell Plus, CLNS, CCTS,
WCTC or any other partner of a Partnership (other than a Minority Partnership)
has never received any distributions from the Partnerships in excess of or less
than such partner's pro rata entitlement thereto and no contributions of ICNP,
QCPC, C-Plus, QCCO, Ohio RSA, Winstel, ICN, CLNS, CCTS and WCTC to the
Partnerships have been returned by the Partnerships to ICNP, QCPC, C-Plus, QCCO,
Ohio RSA, Winstel, ICN, CLNS, CCTS and WCTC. Schedule 3.10 contains a list, for
the period of ownership of the Partnerships (other than the Minority
Partnerships) by the ICN Group, of (a) all prior capital calls (dates, amounts
and purposes of each), (b) all distributions of cash from the Partnerships to
its partners, (c) all dilutions of partners (and increase in partners'
interests) resulting from a partner's failure to make a call for additional
capital, (d) any notices or claims made with respect to clauses (a) through (c)
by any partner including ICNP, QCPC, C-Plus, QCCO, Ohio RSA, Winstel, ICN, Cell
Plus, CLNS, CCTS and WCTC and (e) all transfers of partnership interests (by
ICNP, QCPC, C-Plus, QCCO, Ohio RSA, Winstel, ICN, Cell Plus, CLNS, CCTS and WCTC
or any other partner) of a Partnership (other than a Minority Partnership)
during such ownership period.
3.11 Status of Interests in Minority Partnerships.
(a) The Exchanging Group has heretofore provided to 360 copies of all
financial statements and other partnership records that relate to the Minority
Partnerships received by any of them during the period from September 9, 1994
through the date hereof.
(b) To Exchanging Group's knowledge, since December 31, 1995, there has
not been any material change in the business, financial condition, operations or
results of operations of any of the Minority Partnerships.
(c) To Exchanging Group's knowledge, the Minority Partnerships have no
debts, liabilities, commitments or obligations, including without limitation
unasserted claims whether known or unknown (whether absolute or contingent,
liquidated or unliquidated, or due or to become due) or otherwise, including
Taxes, except for liabilities and obligations (i) reflected or reserved for on
the financial statements for the most recent period heretofore provided to 360 ;
or (ii) that have arisen since the date of such financial statements in the
ordinary course of business of the Minority Partnerships.
3.12 Accounts Receivable. All accounts receivable of the Subject
Entities are bona fide and have arisen in the ordinary course of business of
the Subject Entities and are reflected on the Subject Entities' books and
records in accordance with GAAP. To the knowledge of Exchanging
<PAGE>
Group, all accounts receivable are collectible at substantially the face amounts
thereof, except to the extent reserves have been established in the Financial
Statements or, with respect to accounts receivable arising since December 31,
1995, in accordance with GAAP. To the knowledge of Exchange Group, none of such
accounts receivable is subject to defense, counterclaim or setoff, and none of
the account debtors of such accounts receivable are members of the Exchanging
Group or an Affiliate thereof. Except as set forth on Schedule 3.16, no Person
has any Personalty Lien on any accounts receivable.
3.13 Inventories. Except as set forth on Schedule 3.13 and otherwise
set forth in this Section 3.13, the values at which Inventories are shown on the
Financial Statements have been determined in accordance with the normal
valuation policy of the Subject Entities, consistently applied and in accordance
with GAAP. The Inventories (and items of Inventory acquired subsequent to
December 31, 1995) consist only of items of (a) quality which are new, unused,
undamaged, not defective and possess valid manufacturer's warranties, and (b) a
mix which is consistent with Subject Entities past practices. Schedule 3.13
contains a list of all Inventories of the System as of March 31, 1996
("Inventory List"), including description, number, approximate carrying value
and descriptions of locations where held. The quantity, quality and mix of
Inventory on such Inventory List is consistent with past practices of the
Subject Entities. The quantity, quality and mix of Inventory at Closing will not
materially differ from that as disclosed on the Inventory List, except for
normal seasonal adjustments consistent with past practices, provided, however,
that in no event shall the Inventory included as a System Asset at Closing
exceed a 45 day supply based upon the prior experience of Exchanging Group with
respect to the System and any Inventory in excess of such 45 day supply shall be
a Non-Retained Asset. The practice of Exchanging Group is to carry its Inventory
at cost and the excess of cost over net realizable market value is considered a
pre-paid marketing expense and is included in Inventory on the Financial
Statements. Schedule 3.13 also contains a list of all Inventories stored or
otherwise located at places other than Subject Entities' business premises,
specifying in each such instance the number of units of each type of Inventory,
the approximate value of the Inventories so located and whether there is a
consignment agreement in effect with respect to such Inventories, acknowledging
Subject Entities' ownership thereof. All Inventories are reflected on the
Financial Statements at cost (on a first-in, first-out basis) subject to the
qualifications set forth in clauses (a) and (b) above and such Inventories, as
qualified, are the only Inventories to be Retained Assets and for which
Exchanging Group will receive a Working Capital credit.
3.14 Real Property.
(a) Owned Real Property. Schedule 3.14(a) contains a true, correct and
complete list and a brief description of each parcel of real property owned by
the Subject Entities (the "Owned Real Property") (in each case showing the
record title holder, which in all cases is one of the Subject Entities, and a
description of the document which conveyed the applicable parcel into the
applicable Subject Entity) and the location of each such parcel of Owned Real
Property. True, complete and correct copies of all conveyance documents
pertaining to the Owned Real Property and all policies of title insurance in
existence insuring the title of the Owned Real Property as being vested in a
Subject Entity and documents referenced in any such conveyance
<PAGE>
document or title policy have heretofore been delivered to 360. One of the
Subject Entities holds title to each of the Owned Real Property. The applicable
member of the Subject Entities has good and marketable title in fee simple
absolute to all such real property and to all buildings, structures and other
improvements thereon, in each case free and clear of all Unpermitted Exceptions
and other matters other than Permitted Exceptions. Except as set forth on
Schedule 3.14(a), all such Owned Real Property and its use conforms in all
material respects with all laws, regulations, rules, ordinances, codes,
licenses, deed restrictions and covenants of record, franchises and Permits
(including, without limitation, electrical, building, zoning, environmental and
occupational safety and health requirements), and none of the Subject Entities
nor Exchanging Group has any knowledge of or has received any notice of any
violation of such matters relating to the Owned Real Property or their use which
has not been cured.
(b) Lease Obligations. Schedule 3.14(b) contains a true, correct and
complete list and a brief description of all leases and occupancy and/or use
agreements, together with any amendments thereto (the "Leases") (showing the
lessor, lessee and the location of the real property covered by such lease or
other agreement), with respect to all real property leased by the Subject
Entities (whether as lessor or lessee and including those in the names of
nominees or other entities, all of which shall be transferred to a Subject
Entity prior to Closing), other than Non-Retained Assets, all of which are
hereinafter referred to as the "Leased Real Property." Schedule 3.14(b) also
recites each option held or given by Exchanging Group or the Subject Entities to
acquire any real property used or useful in the System other than Non-Retained
Assets. Except as identified on Schedule 3.14(b) true, complete and accurate
copies of the written Leases and all policies of title insurance in existence
insuring the leasehold interest of the applicable Subject Entity with respect to
the Leased Real Property, and documents referenced therein, have been delivered
to 360, and each of such Leases is in full force and effect without modification
or amendment from the form delivered. Schedule 3.14(b) also contains a
description of the terms and provisions of all Leases not evidenced by a
writing. No option has been exercised under any of such Leases except options
whose exercise has been evidenced by a written document, a true, complete and
accurate copy of which has been provided to 360 with the corresponding Lease.
Except as identified on Schedule 3.14(b), none of the Leases require the consent
or approval of the other party to the Lease as a result of the transactions
contemplated hereby. No Subject Entity nor, to Exchanging Group's knowledge, any
of the other parties to the Leases, is in default under any of the Leases, which
default would give either party thereto the right to terminate such Lease or
give rise to the right on the part of either party to any damages, penalty or
set-off.
(c) Owned and Leased Real Property. To the knowledge of Exchanging
Group, there are no pending or threatened condemnation proceedings relating to
any of the Owned Real Property or the Leased Real Property. To the knowledge of
Exchanging Group and Subject Entities, no notice has been received by Subject
Entities or Exchanging Group from any governmental authority requiring repairs,
replacements or alterations to the Owned Real Property or Leased Real Property,
unless such repairs, replacements or alterations have been made. All
improvements included in the Owned Real Property are, or, with respect to the
Leased Real Property, to the knowledge of Exchanging Group and the Subject
Entities are, in operating condition, ordinary wear and tear excepted. Except as
listed on Schedule 3.14(a) or (b), no
<PAGE>
improvements on any of the Owned Real Property, and, to the knowledge of
Exchanging Group and the Subject Entities, any Leased Real Property which is
utilized as a cell site, switch site or point-to-point microwave site are
subject to any matters other than Permitted Exceptions, encroach upon adjoining
real estate and all such improvements have been constructed in conformity with
all "set back" lines, easements, and other restrictions or rights of record, or
that have been established by any applicable building or safety code or zoning
ordinances, except those encroachments or violations which would not interfere
with 360's operation of the System. Except as described on Schedule 3.14(a) or
(b), Subject Entities have access to the applicable Owned Real Property, and, to
the knowledge of Exchanging Group and the Subject Entities, the Leased Real
Property, sufficient for the current operations on such real property and, to
the knowledge of Exchanging Group and the Subject Entities, 360 's intended use
thereof. No utility lines or access roads serving the Owned Real Property, and,
to the knowledge of Exchanging Group, the Leased Real Property, pass over, the
lands of others except where appropriate easements have been obtained. All
towers and other structures on the Owned Real Property and the Leased Real
Property are marked in accordance with the requirements of the Licenses, the FCC
and the Federal Aviation Administration.
3.15 Property and Condition and Compliance. Schedule 3.15 contains a
list of all material tangible personal property owned by Subject Entities as of
March 31, 1996. Subject Entities have acquired and sold personal property since
such date only in the ordinary course of business consistent with past
practices. Subject Entities have good and marketable title to all tangible and
intangible personal properties free and clear of all Personalty Liens except as
set forth on Schedule 1.4. Except as set forth on Schedule 3.15, the Operating
Assets are in good operating condition, ordinary wear and tear excepted, and
suitable for the use for which intended, and Exchanging Group is not aware of
any material defects in the Operating Assets which would interfere with 360 's
operation of the System. All Operating Assets and their uses conform in all
material respects to all applicable laws, regulations, rules, ordinances, codes,
licenses, franchises and Permits (including, without limitation, electrical,
building, zoning, environmental and occupational safety and health
requirements), and no notice of any violation of any such matters relating to
the Operating Assets or their uses has been received by Exchanging Group or
Subject Entities. The Operating Assets are operated in accordance with the
standards of good engineering practice and are sufficient to permit the Subject
Entities to operate in accordance with the terms of the Licenses, including but
not limited to, all underlying construction permits, the Communications Act and
the rules, regulations, and policies of the FCC. The System Assets constitute
all of the assets, rights and properties, tangible or intangible, real or
personal, which are required for the operation of the System, as presently
operated. Except as expressly set forth herein, Exchanging Group makes no
warranty, express or implied, as to the System Assets.
3.16 Title to Assets. Except as otherwise set forth on Schedule 3.16,
the Subject Entities have good and marketable title to all of their respective
assets (other than the Owned Real Property and Leased Real Property which are
qualified by the representations and warranties in Section 3.14), free and clear
of all liens, claims, charges, encumbrances, security interests, mortgages,
easements, defects in title, covenants and other restrictions of any kind
(including, without limitation, options, rights of first refusal, tag-along
rights and drag-along rights) except
<PAGE>
for Permitted Exceptions and items (i) and (ii) in the definition of Personalty
Lien. The consummation of the transactions contemplated hereby and the delivery
at the Closing Date of the instruments of transfer contemplated by Section 9.4
will leave Subject Entities with good and marketable title to the System Assets
(other than the Owned Real Property and Leased Real Property which are qualified
by the representations and warranties in Section 3.14), free and clear of all
liens, claims, charges, encumbrances, security interests, mortgages, easements,
defects in title, covenants or other restrictions of any kind except for the
Permitted Exceptions and as disclosed on Schedule 3.16.
3.17 Licenses. The requisite Subject Entities have obtained all
Licenses necessary to operate the System. Schedule 3.17(I) hereto lists and
identifies all Licenses, correct copies of which have been delivered to 360 .
Each Subject Entity, as the case may be, is the exclusive holder of each such
License, all of which are in full force and effect, and there are no
proceedings, pending or, to the knowledge of Exchanging Group, threatened, which
affect the validity of such Licenses. There are no impediments, legal,
regulatory or otherwise, which would prevent or preclude transfer of the ICN
Shares, the CCTS Shares or Partnership Interests on the Closing Date pursuant to
the terms of this Agreement, all of which have been or will be satisfied on or
prior to the Closing Date. No default or breach exists with respect to any of
the Licenses and no event or condition exists which but for the lapse of time or
notice or both would constitute a default or breach with respect to any of such
Licenses, which default or breach would have a Material Adverse Effect on the
operations of the Subject Entities or the System or on the coverage provided by
any Subject Entity in the market that it serves. True and correct copies of all
reports relating to such Licenses have been and will be timely filed with the
appropriate body, and true and correct copies of such reports have been
delivered to 360 . Except as set forth on Schedule 3.17(II), the Licenses are
unimpaired by any acts or omissions of the Exchanging Parties or Subject
Entities and the Licenses are free and clear of any restrictions which might
limit the operation of the Systems as it is now being conducted. The FCC actions
granting the current FCC Licenses to operate the System together with all
underlying construction permits have not been reversed, stayed, enjoined, set
aside, annulled, or suspended, and no timely request for stay, motion or
petition for reconsideration or rehearing, application or request for review, or
notice of appeal or other judicial petition for review is pending. The time for
filing any such request, motion, petition, application, appeal, or notice, and
for the entry of an order staying, reconsidering, or reviewing on the FCC's or
other regulatory authorities' own motion, has expired.
3.18 Licensee Qualifications. Except as set forth in Schedule 3.18,
Exchanging Group has not engaged in any course of conduct which would impair
Exchanging Group's ability to transfer the Licenses to 360, and Exchanging Group
is not aware of any reason why those of the Licenses subject to expiration might
not be renewed in the ordinary course or of any reason why any of the Licenses
might be revoked. Without limiting the generality of the foregoing, to
Exchanging Group's knowledge, except as set forth in Schedule 3.18 or 3.28, no
adverse finding has been made, no consent decree entered, no adverse action has
been approved by any court or other administrative body, and no admission of
liability has been made with respect to Exchanging Group or Subject Entities
concerning any civil or criminal suit, action or proceeding brought
<PAGE>
under the provisions of any federal, state, territorial or local law relating to
any of the following: any felony, unlawful restraint of trade or monopoly;
unlawful combination; contract or agreement in restraint of trade; the use of
unfair methods of competition; fraud; unfair labor practice; or discrimination.
3.19 Compliance with Laws. Except as set forth on Schedule 3.19, the
Subject Entities have, with respect to all monetary obligations complied with
and, with respect to all non-monetary obligations, materially complied with, all
federal, state, county, local and foreign laws, ordinances, regulations, orders,
judgments, injunctions, awards, Permits and decrees applicable to the System
(including, without limitation, those relating to zoning and land use, health
and sanitation, environmental protection, occupational safety, and the use of
electrical power). Specifically, but without limitation, except as disclosed on
Schedule 3.19, the Subject Entities are in compliance in all material respects
with the Licenses, the Communications Act, and all rules, regulations, policies
and orders of the FCC. Except as disclosed on Schedule 3.19, no Subject Entity
has received any written notice to the effect that, or otherwise been advised
that, it is not in material compliance with any of such Licenses, statutes,
regulations, orders, ordinances or other laws.
3.20 No Other Agreements to Sell Assets or Stock. Except as disclosed
on Schedule 3.20 or in Section 3.10, Exchanging Group and Subject Entities do
not have any legal obligation, absolute or contingent, to any other Person to
sell the Partnership Interests, the ICN Shares or the CCTS Shares.
3.21 Affiliate Agreements. Except as set forth on Schedule 3.21, no
Affiliate, officer, director, partner or employee of Subject Entities, nor any
member of any such Person's immediate family, is presently a party to any
material transaction with any member of the Exchanging Group or any Subject
Entity, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of material services by, (ii)
providing for the rental of material real or personal property from, or (iii)
otherwise requiring material payments to (other than for services as officers,
directors or employees of Subject Entities) any such person or corporation,
partnership, trust or other entity in which any such person has a substantial
interest as a shareholder, officer, director, trustee or partner.
3.22 Contracts. Schedule 3.22 contains a list of all Contracts except
for Contracts, (a) identified on Schedule 3.14(b) (Leases), (b) entered into
subsequent to the date of this Agreement and either permitted under Section 5.1
hereof or with 360's approval (which will not be unreasonably withheld or
delayed), (c) included within the Non-Retained Assets or Non-Retained
Liabilities, or (d) entered into in the ordinary course of business as provided
for in Section 5.1 hereof. Except as set forth on Schedule 3.22, Schedule
3.14(b) or Schedule 1.2, no Subject Entity is a party to or bound by any
Contract with respect to the System that requires the expenditure of more than
$5,000 or is a party to or bound by Contracts that in the aggregate require the
expenditure of more than $50,000 during the stated term of such Contracts
(unless such agreement may be terminated without cost, penalty or damages on 90
days or less notice). Except as identified on Schedule 3.22 or Schedule 3.14(b)
hereto, (i) each of the Subject Entities has performed in all respects all
monetary obligations, and in all material respects, all non-monetary
obligations, required to be performed by it with respect to the Contracts and is
not alleged to be in breach or default under any such item and no event has
occurred and no condition or state of facts exists which, with the passage of
time or the giving
<PAGE>
of notice or both, would constitute such a default or breach by the Subject
Entities with respect to a Contract, and (ii) except as identified on Schedule
3.22 or Schedule 3.14(b) hereto, none of the Contracts would be violated by the
transactions described herein and no consents of any parties to the Contracts
are necessary for Exchanging Group's execution and delivery of this Agreement or
the performance of their obligations hereunder or the consummation of the
transactions contemplated hereby. Each of the Contracts constitutes a legal,
valid and binding obligation of a Subject Entity, and to the knowledge of
Exchanging Group, the other parties thereto, enforceable in accordance with its
terms subject to the Enforceability Exceptions and is in full force and effect,
paid currently (subject to applicable grace provisions specified in any such
Contract), and not materially impaired by any acts or omissions of the
Exchanging Group, Subject Entities or their representatives, and has not been
amended or modified except as provided in writing to 360. Except as set forth on
Schedule 3.22 or Schedule 3.14(b), the Exchanging Group and the Subject Entities
are not aware of any intent or indication by any party to any Contract to
terminate or amend the terms thereof or refuse to renew any such Contract upon
expiration of its term. Exchanging Group has delivered or made available to 360
true and correct copies of all items identified in Schedule 3.22 and Schedule
3.14(b) except as identified on such schedules.
3.23 Trademarks. Schedule 3.23 is a true and complete list of all
trademarks, service marks, trade names, corporate names, and business names
(hereinafter sometimes individually and collectively referred to as the
"Trademarks") applied for, issued to, owned by or licensed to the Subject
Entities or licensed or franchised and used in the conduct of the System and
operations thereof, and of all licenses of the Trademarks to or by the Subject
Entities and used in the conduct of the Systems and operations thereof, all of
which are valid and in good standing and uncontested, except as disclosed on
Schedule 3.23. Exchanging Group has delivered to 360 copies of all documents
establishing the registered Trademarks and Trademark licenses. Except as
disclosed on Schedule 3.23, ownership or use of the Trademarks by the Subject
Entities will not be affected by the transaction contemplated in this Agreement.
Except as disclosed on Schedule 3.23, Exchanging Group has not received written
notice, and to its knowledge, has not received oral notice, that the Subject
Entities, by ownership or use or licensing of the Trademarks, are allegedly not
infringing upon or otherwise acting adversely to any copyright, trademark,
trademark rights, service marks, service names, trade names or other
intellectual property, contractual or other rights of any person or persons, and
there is no such claim or action pending, or to the knowledge of the Exchanging
Group threatened. Except as disclosed on Schedule 3.23, no person has a right to
receive a royalty or any other payment with respect to any of the Trademarks.
Except as disclosed on Schedule 3.23, to the knowledge of the Exchanging Group,
no person is infringing or violating the rights of the Subject Entities in the
Trademarks.
3.24 Technology. Except as set forth on Schedule 3.24(a), Subject Entities
have not applied for, do not own or license any Technology. Exchanging Group has
delivered to 360 copies of all documents establishing the Technology described
in Schedule 3.24(a). Except as disclosed on Schedule 3.24(b), all Technology
owned by or licensed to the Subject Entities or licensed or franchised or used
in the conduct of the System and operations thereof are valid, in good standing
and uncontested, owned by the Subject Entities or used by the Subject Entities
with authorization, and such ownership or authorization to use will not be
affected by the transactions contemplated by this Agreement. To its knowledge,
no patents, patent applications, inventions,
<PAGE>
copyrights, copyright registrations, computer software, technology, know-how or
trade secrets other than the Technology is required to permit the conduct of the
Systems and operations thereof as presently conducted. Except as disclosed on
Schedule 3.24(b) or except for the actions of the licensors of the Technology
(of which Exchanging Group does not have any knowledge), the Technology is not
infringing upon any intellectual property, contractual or other rights of any
other person, and there is no claim or action pending, or to the knowledge of
the Exchanging Group threatened with respect thereto. Except as disclosed on
Schedule 3.24(b) (or in the Contract set forth on said schedule), no person has
a right to receive a royalty or any other payment with respect to any of the
Technology. Except as disclosed on Schedule 3.24(b), to the knowledge of the
Exchanging Group no person is infringing or violating the rights of the Subject
Entities in the Technology.
3.25 Labor Relations. Except as set forth on Schedule 3.28, no Subject
Entity is a party to any collective bargaining agreement, there are no
controversies, grievances or arbitrations pending or, to the Exchanging Group's
knowledge, threatened between any Subject Entity and any of their current or
former employees or any labor or other collective bargaining unit representing
any current or former employee of any Subject Entity that could reasonably be
expected to result in a labor strike, dispute, slow-down or work stoppage.
Exchanging Group is not aware of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
any Subject Entity. To Exchanging Group's knowledge, no executive, key employee
or group of employees of any Subject Entity has any plan to terminate employment
with any Subject Entity. Each Subject Entity has complied with all applicable
laws relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes, WARN (other than as contemplated by Section
6.10(f)) and the Immigration Reform and Control Act of 1986, as amended. Except
as disclosed on Schedule 3.28, there are no administrative charges, arbitration
or mediation proceedings or court complaints pending or threatened against any
Subject Entity before the U.S. Equal Employment Opportunity Commission or any
state or federal court or agency or any other entity concerning alleged
employment discrimination, contract violation or any other matters relating to
the employment of labor. There is no unfair labor practice charge or complaint
pending or threatened against any Subject Entity before the National Labor
Relations Board or any similar state or local body.
3.26 Employee Benefits.
(a) Employee Benefit Plans. Schedule 3.26 lists all Employee Benefit Plans
that Subject Entities maintain or to which Subject Entities contribute for the
benefit of any current or former employee of Subject Entities, or under which
any current or former employees of Subject Entities are, or will be as of the
Closing, entitled to benefits (collectively, the "System Employee Plans"). The
Subject Entities do not contribute to any Multiemployer Plans. Exchanging Group
has delivered to 360 complete and accurate copies of all plans and, where
applicable, summary plan descriptions for each Employee Benefit Plan listed on
Schedule 3.26 as well as the most recent annual report and the most recent
determination letter received from the IRS, if any.
<PAGE>
(b) Continuation Coverage. With respect to each Employee Welfare Benefit
Plan listed on Schedule 3.26, Subject Entities and their Affiliates have
complied with the requirements of Code Section 4980B.
(c) The Employee Benefit Plans have been administered in accordance
with and are in compliance with applicable provisions, if any, of ERISA and the
Code and all other applicable law except where the failure to comply would not
have a Material Adverse Effect. No member of the Exchanging Group and no Subject
Entity (or anyone indemnified by a Subject Entity) has incurred any material
liability under or pursuant to Title I or Title IV of ERISA or the penalty,
excise tax or joint and several liability provisions of the Code which would
result in any material liability to any Subject Entity. There are no pending or
threatened claims against, by or on behalf of or otherwise involving any
Employee Benefit Plan which, if decided adversely, would result in material
liability to any Subject Entity. No Terminated Employee (as defined in Section
6.10) is or may become entitled to post-employment severance or welfare benefits
of any kind, including, without limitation, death or medical benefits (whether
or not insured), other than (i) coverage mandated by Section 4980B of the Code
or Sections 601 through 607 of ERISA, (ii) disability and medical benefits which
may be continued for Terminated Employees disabled at the Closing and (iii)
severance benefits which the Exchanging Group may decide to pay to Terminated
Employees.
3.27 Insurance. Schedule 3.27 sets forth a list and a brief description
of all insurance policies providing coverage for the properties or operations of
the System and a 3 year claims history with respect to such policies. Subject
Entities shall keep such insurance in full force and effect through the Closing
Date. Such policies are valid and enforceable in accordance with their terms
except for the Enforceability Exceptions, are in full force and effect and
insure against risks and liabilities with responsible and reputable insurance
companies in such amounts and covering such risks as are customarily carried by
companies engaged in similar businesses and similar properties. To the knowledge
of the Exchanging Group and the Subject Entities, there are no facts which could
adversely affect the current insurance coverage of the Subject Entities or the
ability of the Subject Entities to obtain insurance coverage in the future.
Subject Entities have complied in all material respects with each of such
insurance policies and have not failed to give any notice or present any claim
thereunder in a due and timely manner. Except as set forth on Schedule 3.27,
there are no outstanding unpaid claims under any such policies. Such policies
provide replacement cost insurance coverage for all tangible assets and
improvements upon real property. None of the Subject Entities have received
written notice, and to its knowledge, has not received oral notice, from any
insurance carrier: (i) threatening a suspension, revocation, modification or
cancellation of any insurance policy or a material increase in any premium in
connection therewith, or (ii) informing such Subject Entity that any coverage
listed on Schedule 3.27 will or may not be available in the future on
substantially the same terms as now in effect. Exchanging Group has delivered to
360 correct and complete copies of each such insurance policy.
3.28 Litigation. Except as set forth in Schedule 3.28, there are no
actions, causes of action, claims, suits, grievances, administrative
proceedings, arbitration proceedings or other proceedings pending or, to the
knowledge of Exchanging Group, threatened against the System Assets, any Subject
Entity or affecting the operation by any Subject Entity of the System at law, in
equity, or admiralty, or before or by any governmental department, commission,
board,
<PAGE>
bureau, agency, or instrumentality, domestic or foreign, or private arbitrator.
No Subject Entity is in default with respect to any order, writ, injunction, or
decree of any court or governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign. There are no unsatisfied
judgments against the System Assets or any Subject Entity.
3.29 Environmental Matters. Except for any issue specifically
identified and quantified in Schedule 3.29 (any liability, obligation or
commitment resulting from which are Non-Retained Liabilities) (i) each Subject
Entity is in compliance with all Environmental Laws in connection with the
ownership, use, maintenance and operation of the Owned Real Property and the
Leased Real Property and otherwise in connection with the conduct of the System;
(ii) no notices of violation or alleged violation of, non-compliance or alleged
non-compliance with or any liability under, any Environmental Law relating to
the operations or properties (now or previously owned or operated by any Subject
Entity) have been received by any Subject Entity; (iii) there are no
administrative, civil or criminal writs, injunctions, decrees, orders, or
judgments outstanding, or any administrative, civil or criminal actions, suits,
proceedings or investigations pending or to Exchanging Group's knowledge,
threatened, relating to compliance with or liability under any Environmental Law
affecting any Subject Entity, the assets used in System, the Owned Real
Property, the Leased Real Property or the System; and (iv) there are no
underground storage tanks on, or asbestos containing materials on or in the
improvements or fixtures located on, the Owned Real Property or the Leased Real
Property. No Subject Entity has any liability, contingent or otherwise, in
connection with any release of any Hazardous Materials into the environment.
3.30 Tax Matters.
(a) Tax Returns. Subject Entities have filed all Tax Returns that they
were required to file and/or filed for extensions in connection therewith. All
such Tax Returns were correct and complete in all material respects or reserved
for on the books of Subject Entities. All Taxes owed by the Subject Entities,
and to the knowledge of Exchanging Group, the Minority Partnerships, for all
periods prior to the Closing Date have been or will be paid. Except as set forth
on Schedule 3.30(a), Subject Entities are not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim with respect to
Subject Entities has ever been made by an authority in a jurisdiction where
Subject Entities do not file Tax Returns that they are or may be subject to
taxation by that jurisdiction. There is no Personalty Lien, Permitted Exception
or Unpermitted Exception affecting any of the assets used in the System that
arose in connection with any failure or alleged failure to pay any Tax. Prior to
the Closing, the Subject Entities will have filed all bulk sales notices, if
any, required to be filed by state and local Tax jurisdictions where the Subject
Entities conduct business.
(b) Payments. Subject Entities have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other party.
(c) Additional Taxes. The Exchanging Group has paid or will pay all
Pre-Closing Taxes. Exchanging Group does not expect any authority to assess any
material amount of additional Taxes for any period for which Tax Returns for the
Subject Entities have been filed.There is no material dispute or claim
concerning any Tax liability of Subject Entities either
<PAGE>
claimed or raised by any authority in writing or as to which Exchanging
Group has knowledge based upon direct inquiry by any agent of such authority.
Schedule 3.30(c) lists all federal and state income Tax returns of the Subject
Entities for taxable periods ended on or after January 1, 1991, indicates those
Tax Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit. Exchanging Group has delivered to the 360
correct and complete copies of all Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Exchanging Group
with respect to the Subject Entities for any taxable period ended on or after
January 1, 1991 and relating to periods of ownership of the Subject Entities by
Exchanging Group.
(d) Waivers. Except as set forth on Schedule 3.30(d), Subject Entities
have not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(e) Rulings/Agreements. Exchanging Group has not received a ruling from
any taxing authority or entered into any agreement regarding Taxes with any
taxing authority that would, individually or in the aggregate, apply to the
System, or the assets used in the System or 360 after the Closing Date.
3.31 Interim Operations. Since December 31, 1995, except as set forth
in Schedule 3.31 no Subject Entity has: (i) incurred or become subject to, or
agreed to incur or become subject to, any obligation or liability, except in the
ordinary course of business consistent with past custom and practice; (ii)
mortgaged, pledged, or subjected to Personalty Lien, Permitted Exception or
Unpermitted Exception, or agreed so to do, any portion of its assets, tangible
or intangible; (iii) sold or transferred or agreed to sell or transfer any
portion of its assets, other than Inventory (including, without limitation, any
transfer of assets to Florida Cellular RSA Limited Partnership and its
Affiliates), or cancelled or agreed to cancel any debts or claims; (iv) suffered
any extraordinary losses or waived any material rights; (v) increased in any
material respect the rate of compensation payable to any of its officers,
employees or agents over the rate being paid or accrued to them as of December
31, 1995 except in accordance with prior practices; (vi) terminated any material
contract, agreement, license, or other instrument to which it is a party; (vii)
through negotiation or otherwise, made any commitment or incurred any liability
or obligation to any labor organization; (viii) made or agreed to make any
material accrual or arrangement for or payment of bonuses or special
compensation of any kind to any officer, employee, or agent; (ix) enter into or
renew any employee welfare, pension, retirement, profit sharing or similar
payment or arrangement; (x) suffered any uninsured casualty; (xi) declared or
paid any distributions, dividends or any other amounts on or in connection with
the ICN Common Shares, CCTS Shares, WCTC Shares or ICN Preferred Shares, which
amounts are due and payable after the Closing Date to shareholders of record
prior to the Closing Date; or (xii) except as disclosed on Schedule 3.10 or in
the Financial Statements, declared, paid or received any distributions from the
Partnerships, provided that between the date hereof and Closing, (a) Exchanging
Group shall be entitled to receive distributions from any Subject Entity in
which they are a partner provided the amounts received are included as a Current
Liability in the calculation of Working Capital, and (b) Subject Entities shall
be entitled to receive distributions from any Partnerships in which they are a
partner.
<PAGE>
3.32 Brokers. Except for Salomon Brothers Inc, whose fee shall be paid by
Exchanging Group, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Exchanging Group
without the intervention of any other Person acting on its behalf in such manner
as to give rise to any valid claim by any such Person against 360 for a finder's
fee, brokerage commission or other similar payment based on an arrangement with
Exchanging Group or the Subject Entities.
3.33 Approvals and Consents. Except for the approvals, authorizations,
consents and other actions required (a) from the FCC, (b) in connection with the
transfer of the Contracts and (c) under the HSR Act, all of which are set forth
on Schedules 3.10, 3.14(b) or 3.22 attached hereto, no approval, authorization,
consent or other action by, or filing with, any governmental authority,
administrative agency, court or other party is necessary for Exchanging Group's
execution and delivery of this Agreement or performance of their obligations
hereunder or the consummation of the transactions contemplated hereby.
3.34 Investment Representation. Exchanging Group are accepting the 360
Shares and the 360 Notes for their own account and without any present view to
distribute, resell or otherwise transfer same, provided that Dwyer, Winstel,
QCCO and QCPC may sell their 360 Shares and 360 Notes to other members of
Exchanging Group and/or their Affiliates, provided that such 360 Shares and 360
Notes are the subject of an effective registration statement under the
Securities Act or Dwyer, Winstel, QCCO and QCPC deliver to 360 an opinion in
form and from counsel reasonably satisfactory to 360 that the proposed
disposition will not violate the registration requirements of the Securities Act
or any applicable state securities law or the rules and regulations thereunder.
3.35 Sophistication, Financial Strength, Access to Information. Each member
of Exchanging Group represents, warrants and acknowledges that it has such
knowledge and experience in business and financial matters as to be capable of
evaluating the merits and risks of the investment contemplated to be made
hereunder, that it was not formed or organized for the specific purpose of
investing in 360 and that it has sufficient financial strength to hold the same
as an investment and to bear the economic risks of such investment (including
possible loss of such investment) for an indefinite period of time. Each member
of Exchanging Group acknowledges that it is fully informed that the 360 Shares
and 360 Notes being sold to it hereunder are being sold pursuant to a private
offering exemption of the Securities Act and are not being registered under the
Securities Act or under the securities or blue sky laws of any state or foreign
jurisdiction; that such securities must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state
securities or blue sky laws, or unless an exemption from registration is
available thereunder; and that 360 has no obligation to register such
securities. Each member of Exchanging Group acknowledges that it has such
knowledge and experience in financial and business matters s as to be capable of
evaluating the risks and merits of this investment, that all public documents
and records pertaining to the investment in 360 have been made available or
delivered to it; that it has had an opportunity to ask questions of and receive
answers from 360 concerning its business and that all such questions have been
answered to its satisfaction.
<PAGE>
3.36 Merger Representations.
(a) The fair market value of the 360 Shares to be received by Exchanging
Group with respect to their ICN Shares and CCTS Shares will be in each instance
approximately equal to the fair market value of the ICN Shares and CCTS Shares
surrendered in exchange therefor.
(b) There is no plan or intention on the part of Exchanging Group to sell,
exchange or otherwise dispose of the 360 Shares to be received by them pursuant
to the merger of ICN into a direct subsidiary of 360 that would reduce
Exchanging Group's ownership in 360 to a number of shares having, in the
aggregate, a fair market value as of the effective date of such merger of less
than 50 percent of the total fair market value of the ICN Shares outstanding
immediately before the Mergers.
(c) There is no plan or intention on the part of Exchanging Group to sell,
exchange or otherwise dispose of the 360 Shares to be received by them pursuant
to the merger of a direct subsidiary of 360 into CCTS that would reduce
Exchanging Group's ownership in 360 to a number of shares having, in the
aggregate, a fair market value as of the effective date of such merger of less
than 80 percent of the total fair market value of the CCTS Shares outstanding
immediately before the Mergers.
(d) 360, the direct subsidiaries of 360 involved in the Mergers, ICN, CCTS,
and the Exchanging Group will pay their respective expenses, if any, incurred in
connection with the Mergers.
(e) There is no intercorporate indebtedness existing between 360 and ICN or
CCTS that was issued, acquired, or will be settled at a discount.
(f) Neither ICN nor CCTS is an investment company as defined in Section
368(a)(2)(F)(iii) of the Code.
(g) On the effective date of the Mergers, the fair market value of the
assets of each of ICN and CCTS will exceed the sum of each of their liabilities
plus the amount of liabilities, if any, to which each of their assets are
subject.
(h) Neither ICN nor CCTS is under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) ICN and CCTS each have a valid business purpose apart from tax
considerations for the Mergers.
(j) As of the Closing, neither ICN nor CCTS will have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in ICN or CCTS which, if exercised or
converted, would affect 360's acquisition or retention of control of ICN or CCTS
as defined in Section 368(c) of the Code.
(k) Neither ICN nor CCTS has any plan or intention to issue additional
shares of its common stock that would result in 360 losing control of ICN or
CCTS within the meaning of Section 368(c) of the Code.
<PAGE>
(l) In the Mergers, shares of ICN and CCTS representing control of ICN
and CCTS, as defined in Section 368(c) of the Code, will be exchanged for 360
Shares.
(m) As a result of the Mergers, ICN and CCTS will transfer to Survivors
at least 90 percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets of ICN and CCTS immediately
prior to the Mergers.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF 360. 360 represents
and warrants to Exchanging Group as follows:
4.1 Authority of 360. 360 is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
duly qualified to transact business as a foreign corporation in each
jurisdiction where the ownership of its assets or the conduct of its operations
requires such qualification. 360 has full corporate power and authority to
execute, deliver and perform this Agreement, and the execution, delivery and
performance by 360 of this Agreement and the other agreements contemplated
hereby to which 360 is a party and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the 360 Shares and 360 Notes to Exchanging Group, have been duly and validly
authorized by all necessary corporate action on the part of 360, and this
Agreement and the other agreements contemplated hereby to which 360 is a party
constitute the legal, valid, and binding obligation of 360 enforceable against
360 in accordance with their terms, subject to the Enforceability Exceptions.
360 Group, including its direct Subsidiaries that will be part of the
transactions contemplated hereby, has full corporate and partnership power and
authority to own its properties and to carry on the business presently being
conducted by it. 360 Group are not in default under or in violation of any
provision of their partnership agreements or in default under or in violation of
their respective articles or certificates of incorporation or bylaws, which
default or violation would have a Material Adverse Effect.
4.2 No Default Effected. Except as set forth in Schedule 4.2, neither the
execution and delivery of this Agreement and the other agreements contemplated
hereby by 360, nor the consummation of the transactions contemplated hereby, nor
the fulfillment of the terms and compliance with the provisions hereof will (a)
violate, conflict with, result in a breach of or a default (or an occurrence
which with the lapse of time or action by a third party, or both, could result
in a default), or result in the termination or acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice with respect to any of the terms, conditions or provisions of any
applicable order, writ, decree, judgment, stipulation, injunction, change or
other restriction of any court or of any governmental department, commission,
board, bureau, agency, or instrumentality applicable to 360 Group, or the
certificates of incorporation, certificates of limited partnership, by-laws or
partnership agreements of 360 Group, or of any indenture, contract, agreement,
lease, or other instrument to which any of 360 Group is a party or subject or by
which 360 Group or any of their properties or assets are bound, or of any
applicable statute, law, rule, or regulation to which 360 Group or their
businesses are subject, or (b) result in the creation or imposition of any
Personalty Lien (other than Personalty Liens securing the Toronto Dominion Debt
assumed by 360 at Closing) or Permitted Exception upon the assets of 360 Group.
<PAGE>
4.3 Brokers. Except for Bulkley Capital, whose fee shall be paid by 360,
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried on by 360 without the intervention of any other Person
acting on its behalf in such manner as to give rise to any valid claim by any
such Person against Exchanging Group for a finder's fee, brokerage commission or
other similar payment based on an arrangement with 360.
4.4 Approvals and Consents. Except as set forth on Schedule 4.4, and except
for the approvals, authorizations, consents and other actions required from the
FCC and the authorization under the HSR Act, no approval, authorization, consent
or other action by, or filing with, any governmental authority, administrative
agency, court or other party is necessary for 360's execution and delivery of
this Agreement or performance of its obligations hereunder or the consummation
of the transactions contemplated hereby.
4.5 Investment Representation. The 360 Group is accepting the ICN Shares,
CCTS Shares, Cell Plus Interests and Ohio LP Interests for its own account and
without any present view to distribute, resell or otherwise transfer same.
4.6 No Material Adverse Change. Except for (i) the transactions relating to
the spin-off of 360 from Sprint Corporation, (ii) the entering into of a Credit
Agreement dated as of March 6, 1996 among 360, the other lenders referenced
therein and Citibank, N.A., as Administrative Agent, Chemical Bank, as
Syndication Agent, Toronto Dominion (Texas), Inc., as Documentation Agent, and
Bank of America Illinois, as Co-Syndication Agent, (iii) the 360 public debt
offering of the Senior Notes, (iv) the transactions contemplated by this
Agreement and (v) changes resulting from conditions affecting the
telecommunications or cellular telephone industry generally, since December 31,
1995, there has not been any change in the business, financial condition,
operations or results of operations of 360 which has had a Material Adverse
Effect.
4.7 Status of 360 Shares and 360 Notes. 360 has one 1,000,000,000
authorized shares of common capital stock, $0.01 par value, of which 116,845,871
shares were issued and outstanding as of May 21, 1996, and 100,000,000
authorized shares of preferred stock, $0.01 par value, of which no shares are
issued and outstanding. 360 has sufficient authorized shares of common stock
which are not issued or otherwise reserved for issuance in order to issue the
360 Shares in accordance with the terms of this Agreement without increasing the
number of its authorized shares or requiring any stockholder vote. The 360
Shares have voting rights commensurate with all other outstanding shares of
common capital stock of 360 and have rights to purchase 360's First Series
Junior Participating Preferred Stock under the Rights Agreement commensurate
with all other outstanding shares of common stock of 360. The 360 Shares are
validly authorized and, when issued and paid for pursuant to the terms of this
Agreement, will be fully paid and nonassessable, free of preemptive rights and
will, when so issued, not be issued in violation of federal or state securities
laws. There are no outstanding warrants, options, commitments or rights of any
kind (including, without limitation, rights of first refusal, tag-along rights
and drag-along rights) to acquire from 360 or any third party any 360 Shares.
There are no voting agreements, voting trust agreements or shareholder or
similar agreements relating to the 360 Shares. Issuance of the 360 Shares to
Exchanging Group in accordance with this Agreement, will vest good and
marketable title to all of the 360 Shares in Exchanging Group,
<PAGE>
free and clear of all liens, security interests, pledges, encumbrances,
claims and equities of every kind, other than restrictions on sale and transfer
imposed by applicable securities laws and other than liens, security interests,
pledges, encumbrances, claims and equities created or suffered to exist by
Exchanging Group. Delivery of the 360 Notes to Exchanging Group in accordance
with this Agreement, will vest good title to the 360 Notes in Exchanging Group,
free and clear of all liens, security interests, pledges, encumbrances, claims
and equities of every kind, other than (i) restrictions on sale and transfer
imposed by applicable securities laws, (ii) liens, security interests, pledges,
encumbrances, claims and equities created or suffered to exist by Exchanging
Group, and (iii) the terms of the 360 Notes.
4.8 Financial Statements. 360 has heretofore provided to Exchanging Group
true, complete and correct copies of the 360 Financial Statements. The 360
Financial Statements (other than the interim statements included in the 360
Financial Statements) have been prepared by 360 and audited by Ernst & Young LLP
in accordance with GAAP, consistently applied, and present fairly in all
material respects the financial condition, the results of operations and cash
flows of the applicable entities as of the dates and for the periods indicated
thereon. The interim statements included in the 360 Financial Statements have
been prepared by 360 in accordance with GAAP (other than normal year-end and
other adjustments and accruals which have not been included in the interim
statements), and present fairly in all material respects the financial
condition, the results of operations and cash flows of the applicable entities
as of the dates and for the periods indicated thereon.
4.9 Merger Representations.
(a) The fair market value of the 360 Shares to be received by Exchanging
Group with respect to their ICN Common Shares and CCTS Shares will be, in each
instance, approximately equal to the fair market value of the ICN Shares and
CCTS Shares surrendered in exchange therefore.
(b) 360 has no plan or intention to reacquire any of the 360 Shares issued
in the Mergers.
(c) 360 has no plan or intention to liquidate the Survivors or to merge the
Survivors with or into another corporation, or to sell or otherwise dispose of
the stock of the Survivors which 360 will own after the Mergers.
(d) Prior to the transaction, 360 will own all of the outstanding stock of
the direct subsidiaries of 360 involved in the Mergers and will be in control of
such subsidiaries within the meaning of Section 368(c) of the Code.
(e) Immediately following the Mergers, 360 will hold 100 percent of the
outstanding shares of the Survivors.
(f) Immediately following the Mergers, the Survivors will hold at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets transferred by ICN and CCTS in the
Mergers.
<PAGE>
(g) Immediately following the Mergers, the Survivors will hold at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets held immediately prior to the
transaction by the 360 subsidiaries involved in the Mergers.
(h) 360 does not own, nor has it owned during the past five years, any
shares of ICN or CCTS.
(i) 360 has no plan or intention to sell or otherwise dispose of or to
cause Survivors to dispose of any of the assets of Survivors, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code.
(j) Immediately following the Mergers, Survivors will continue ICN's and
CCTS's, as the case may be, historic business or use a significant portion of
ICN's and CCTS's, as the case may be historic business assets in a business.
(k) 360, the direct subsidiaries of 360 involved in the Mergers, ICN, CCTS,
and the Exchanging Group will pay their respective expenses, if any, incurred in
connection with the Mergers.
(l) There is no intercorporate indebtedness existing between 360 and ICN or
CCTS that was issued, acquired, or will be settled at a discount.
(m) 360 and the subsidiaries of 360 involved in the Mergers are not
investment companies as defined in Section 368(a)(2)(F)(iii) of the Code.
(n) 360 and the subsidiaries of 360 involved in the Mergers each have valid
business purpose apart from tax considerations for the Mergers.
(o) 360 sub has no present plan or intention to cause the Survivors to
issue additional shares of their common stock that would result in 360 losing
control of the Survivors within the meaning of Section 368(c) of the Code.
SECTION 5 OBLIGATIONS OF EXCHANGING GROUP AND 360 PENDING
CLOSING.
5.1 Conduct of System. Between the date hereof and the Closing Date,
Exchanging Group shall cause the Subject Entities to:
(a) keep in full force and effect their respective organizational existence
and all Licenses;
(b) maintain and keep their assets, taken as a whole, in good repair,
working order, and condition, except for obsolescence, ordinary wear and tear,
sales or replacements of equipment in the ordinary course and damage or
destruction due to casualty;
<PAGE>
(c) except as expressly permitted by the Operating Budget, not create or
allow to be created any Personalty Lien, Permitted Exception or Unpermitted
Exception, execute any guarantee, issue any debt, incur any liability or borrow
any money, except from suppliers in the ordinary course of business, or buy or
sell assets out of the usual and ordinary course of business consistent with
past custom and practice;
(d) conduct the System and their businesses in the usual and ordinary
course consistent with past practices except to the extent modified by the
Operating Budget;
(e) notify 360 immediately of any material development affecting any of the
Subject Entities of which they have knowledge, including, without limitation,
the following: (1) any material breach or violation of, default or event of
default under, or actual or threatened termination or cancellation of any
Contract or License; (2) any material loss of, damage to, or destruction of any
assets of the System; (3) any existing or threatened labor (as opposed to an
employee) dispute or written and filed grievance or claim involving any
employees of the Subject Entities; and (4) any pending or threatened claim,
demand, investigation, action, suit or other legal proceeding by or before any
court, arbitrator, governmental authority or administrative agency involving any
Subject Entity and relating to the System;
(f) maintain in full force and effect all insurance now in effect
covering the properties of the Subject Entities, not intentionally breach any
obligation under such insurance policies, and present all claims under such
insurance policies in a proper and timely manner;
(g) not change any accounting methods or practices followed by the
Subject Entities or any depreciation, amortization or inventory valuation
policies or rates currently used or adopted by Subject Entities;
(h) not take any action that would require disclosure under Schedule
3.31 hereof other than as expressly permitted by the Operating Budget;
(i) not directly or indirectly engage in any transaction with any officer,
director, partner, stockholder or other insider or Affiliate which is not at
arm's length;
(j) not make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
except as expressly permitted by the Operating Budget;
(k) not terminate any material Contract or Lease or make any amendment
or other change to any material Contract or Lease, or enter into any contract
out of the usual and ordinary course of business consistent with past custom and
practice or restricting in any way the conduct of the Subject Entities' business
or operations;
(l) not make any change to their organizational documents which might
adversely affect the operation of the System or Exchanging Parties' right to
consummate the transactions contemplated by this Agreement in accordance with
their terms.
<PAGE>
(m) not issue any shares of capital stock or partnership interests in
any Subject Entity, any securities convertible into any such shares or
partnership interests, or any options, warrants or other rights to purchase or
otherwise acquire any such shares or partnership interests, or redeem any shares
of capital stock or partnership interests in any Subject Entity or enter into
any agreement to such effect.
(n) not, without the prior written consent of 360 which will not be
unreasonably withheld or delayed, (i) enter into any new Leases of real property
or renewals of existing Leases which require the expenditure of more than $5,000
per year or more than $50,000 in the aggregate, or (ii) purchase any real
property for a price in excess of $25,000 or $100,000 in the aggregate, or (iii)
sell any Owned Real Property.
(o) not declare any distributions or dividends on or in connection with
the ICN Preferred Shares, ICN Common Shares, CCTS Shares, WCTC Shares or
Partnership Interests, which amounts are due and payable after the Closing Date
to shareholders or partners of record prior to the Closing Date.
5.2 Notice of Material Developments. Exchanging Group and 360 shall give,
or cause the appropriate party to give, the other party prompt written notice of
any development affecting the System or the 360 System, as the case may be,
which has a Material Adverse Effect or which otherwise might cause the
representations and warranties of the Exchanging Group or 360, as the case may
be, to be inaccurate in any material respect or the covenants and agreements of
Exchanging Group or 360, as the case may be, to be unfulfilled. The parties
shall negotiate in good faith to determine whether the subject matter of the
notice would entitle one party to Damages hereunder and attempt to promptly and
fairly determine the amount of such Damages, considering such factors such as
would the party who would be entitled to Damages suffer any Damages, would such
party have raised an objection and attempted to negotiate a reduction in the
consideration set forth in Section 2 hereof had such subject matter been
disclosed prior to the execution hereof, and did such party have actual
knowledge of such breach prior to the execution hereof (provided that actual
knowledge shall not be presumed merely by virtue of Exchanging Group's delivery
of due diligence documents and materials to 360), provided, however, if after
such good faith negotiation is conducted no agreement is reached, the parties
will be entitled to pursue all remedies available under this Agreement.
5.3 Information and Access. Exchanging Group will permit representatives of
360 to have full access to, and the right to inspect, at all reasonable times,
and in a manner so as not to interfere with the normal operations, all premises,
properties, books, records, contracts and documents of or pertaining to the
System upon 48 hours' notice to Exchanging Group. 360 shall provide to
Exchanging Group, within ten (10) days of filing or issuance, copies of all
press releases (to ICNP only), documents filed with the SEC and state securities
commissions subsequent to the date hereof and prior to Closing, including all
Form 10-K's, 10-Q's, 8-K's, proxy statements and any other documentation filed
by 360 with the SEC, and any other documents and materials which 360 distributes
to its stockholders. Exchanging Group agrees to cooperate with and assist 360,
to the extent reasonably requested by 360, in the preparation of any documents
required to be filed by 360 with the SEC. Exchanging Group and 360 and each of
their respective representatives will treat and hold as confidential such
information in
<PAGE>
accordance with the terms and provisions of that certain Confidentiality
Agreement executed on or about January 4, 1996, between Sprint Cellular Company
and ICNP, and that certain Confidentiality Agreement dated April 18, 1996
between 360 and ICNP (collectively, the "Confidentiality Agreements"), which
Confidentiality Agreements remain in full force and effect, as if each member of
the Exchanging Group had signed the Confidentiality Agreements.
5.4 Subscribers/Marketing Expenditures.
(a) Subsequent to the date hereof and prior to the Closing, Exchanging
Group agrees to use commercially reasonable efforts consistent with the
Operating Budget to increase the "net phones added" for the System during each
of the first three (3) quarters of each calendar year by 8,000 per quarter and
the net phones added for the fourth quarter of each calendar year by 11,000 for
such quarter (each a "Target"). Exchanging Group agrees to expend on sales and
marketing, on a quarterly basis, the amounts set forth in the Operating Budget.
Subsequent to the date hereof and prior to Closing, Exchanging Group and 360 may
mutually agree in writing to expend more on sales and marketing than the amounts
set forth in the Operating Budget ("Additional Marketing Expenditures").
Exchanging Group does not represent, warrant or guarantee that the net phones
added will be increased to such levels nor shall it be a condition to the
Closing of the transactions contemplated hereby that such net phones added will
be attained prior to Closing. For purposes hereof "net phones added" shall refer
to lines of service placed in service, minus lines of service taken out of
service, during the applicable period.
(b) In the event that net phones added subsequent to the date hereof and
prior to the Closing is not increased by at least 8,000 during each of the first
three (3) quarters of each calendar year and 11,000 during the fourth quarter of
each calendar year, 360 shall be entitled to a credit ("Subscriber Credit") to
be calculated as follows:
(1) If net phones added in the second quarter of 1996 is less
than 8,000 but greater than 6,500, the Subscriber Credit shall increase
by an amount equal to $250 multiplied by the difference between 8,000
and net phones added; If net phones added in the second quarter of 1996
is less than 6,500, the Subscriber Credit shall increase by an amount
equal to (i) $375,000, plus (ii) $500 multiplied by the difference
between 6,500 and the net phones added.
(2) If net phones added in the third quarter of 1996 is less
than 8,000 but greater than 6,750, the Subscriber Credit shall increase
by an amount equal to $250 multiplied by the difference between 8,000
and net phones added; If net phones added in the third quarter of 1996
is less than 6,750, the Subscriber Credit shall increase by an amount
equal to (i) $312,500, plus (ii) $500 multiplied by the difference
between 6,750 and the net phones added.
(3) If net phones added in the fourth quarter of 1996 is less
than 11,000, the Subscriber Credit shall increase by an amount equal to
$500 multiplied by the difference between 11,000 and the net phones
added.
<PAGE>
(4) If net phones added in the first quarter of 1997 is less
than 8,000 but greater than 6,500, the Subscriber Credit shall increase
by an amount equal to $250 multiplied by the difference between 8,000
and net phones added; If net phones added in the first quarter of 1997
is less than 6,500, the Subscriber Credit shall increase by an amount
equal to (i) $375,000, plus (ii) $500 multiplied by the difference
between 6,500 and the net phones added.
(5) If net phones added in the second quarter of 1997 is less
than 8,000 but greater than 6,500, the Subscriber Credit shall increase
by an amount equal to $250 multiplied by the difference between 8,000
and net phones added; If net phones added in the second quarter of 1997
is less than 6,500, the Subscriber Credit shall increase by an amount
equal to (i) $375,000, plus (ii) $500 multiplied by the difference
between 6,500 and the net phones added.
(6) If net phones added in the third quarter of 1997 is less
than 8,000 but greater than 6,750, the Subscriber Credit shall increase
by an amount equal to $250 multiplied by the difference between 8,000
and net phones added; If net phones added in the third quarter of 1997
is less than 6,750, the Subscriber Credit shall increase by an amount
equal to (i) $312,500, plus (ii) $500 multiplied by the difference
between 6,750 and the net phones added.
(7) If net phones added in the fourth quarter of 1997 is less
than 11,000, the Subscriber Credit shall increase by an amount equal to
$500 multiplied by the difference between 11,000 and the net phones
added.
(8) If net phones added in any quarter are in excess of the
rate targeted for such quarter, such excess shall serve to reduce the
Subscriber Credit by an amount equal to $500 per net phone added, up
until the point that all previous or subsequent Subscriber Credits of
$500 per net phone added are eliminated, and thereafter by an amount
equal to $250 per net phone added up until (but in no event exceeding)
the point that all previous Subscriber Credits of $250 per net phone
added are eliminated.
(9) The figures 6,500 and 6,750 set forth in clauses (1), (2),
(4), (5) and (6) of this Section 5.4(b) are each referred to herein as
a "Floor".
(10) In the event that the Closing occurs during, and prior to
completion of, any of the first three calendar quarters in either 1996
or 1997, the Target and Floor for such calendar quarter shall be
prorated on a per diem basis and the Subscriber Credit shall be
calculated based on the applicable formula set forth in clauses (1),
(2), (4), (5) and (6) of this Section 5.4(b) using the applicable
pro-rated Target and the applicable pro-rated Floor. In the event that
the Closing occurs during, and prior to completion of, the fourth
calendar quarter in either 1996 or 1997, 25% of the Target and Floor
shall be allocated to October (the "October Allocation"), 30% of the
Target and Floor shall be allocated to November (the "November
Allocation") and 45% of the Target and Floor shall be allocated to
December (the "December Allocation"), pro-rated within each such month
on a per diem basis. The Subscriber Credit shall be calculated based on
the applicable
<PAGE>
formula set forth in clause (3) or (7) of this Section 5.4(b),
provided, that, in lieu of the Target, the following amounts should be
used: (a) if the Closing occurs in October, the prorated October
Allocation, (b) if the Closing occurs in November, the sum of the
October Allocation and the prorated November Allocation and (c) if the
Closing occurs in December, the sum of the October Allocation, the
November Allocation and the prorated December Allocation, .
The amount of any Subscriber Credit at Closing shall be paid by Exchanging Group
to 360 in cash, by wire transfer of immediately available funds to an account or
accounts designated by 360. In addition, if Exchanging Group spends less on
sales and marketing than the levels set forth in the Operating Budget in any
given calendar quarter prior to the Closing, and such shortfall is not made up
by spending an amount on sales and marketing in excess of the levels set forth
in the Operating Budget for any calendar quarter prior to the Closing, the
Exchanging Group shall pay the amount of such cumulative sales and marketing
shortfall in cash, at Closing, by wire transfer of immediately available funds
to an account or accounts designated by 360. In the event Exchanging Group pays
any Additional Marketing Expenditures pursuant to Section 5.4(a), 360 shall pay
Exchanging Group the amount of such Additional Marketing Expenditures in cash,
at Closing, by wire transfer of immediately available funds to an account or
accounts designated by 360. In the event that the Closing occurs prior to the
completion of a calendar quarter, the levels set forth in the Operating Budget
for sales and marketing shall be pro-rated on a per-diem basis for such calendar
quarter (except if the Closing occurs in the fourth quarter in which event the
proration shall be as set forth in clause (10) above).
5.5 Capital Expenditures. Between the date hereof and the Closing Date, the
Subject Entities shall make capital expenditures on the projects identified on
Schedule 5.5 and such other projects as are mutually agreed upon in good faith
from time to time by Exchanging Group and 360. Exchanging Group and 360 shall
meet at least once per calendar month prior to Closing to review the projects on
Schedule 5.5 and to determine, in good faith, the necessity for such projects or
additional projects (all such projects identified on Schedule 5.5 and agreed
upon subsequent to the date hereof are collectively referred to as the
"Projects"). Exchanging Group will use good faith and commercially reasonable
efforts to complete all Projects in a cost efficient and timely manner.
Exchanging Group agrees that it will make capital expenditures between January
1, 1996 and December 31, 1996 on the Projects in aggregate amounts not less than
$7,000,000 and not in excess of $9,000,000. If the amounts expended by
Exchanging Group on Projects is less than $7,000,000 (the "Cap Ex Floor"), the
difference between $7,000,000 and such amount shall be the "Cap Ex Shortfall".
If Exchanging Group spends in excess of $9,000,000 (the "Cap Ex Ceiling") on
Projects, Exchanging Group must obtain the prior written consent of 360 with
respect to such amounts to be spent on Projects in excess of the Cap Ex Ceiling,
and the difference between the amount actually spent and $9,000,000 shall be
referred to as the "Cap Ex Surplus". At Closing, any Cap Ex Shortfall shall be
paid by Exchanging Group to 360, and any Cap Ex Surplus shall be paid by 360 to
Exchanging Group, in each case by wire transfer of immediately available federal
funds to an account or accounts designated by the recipient. In the event that
the Closing occurs prior to December 31, 1996,the Cap Ex Ceiling and the Cap Ex
Floor shall be adjusted based upon the following formula: the Cap Ex Ceiling or
the Cap Ex Floor, as applicable, multiplied by a fraction, the numerator of
which is the number of days from January 1, 1996 through the Closing Date and
the denominator of which is 365. In the event that the Closing does not occur in
1996, Exchanging Group and 360 shall mutually agree on a budget for capital
expenditure projects for 1997.
<PAGE>
5.6 Interim Agreements. Subsequent to the date hereof, Exchanging Group and
360 agree to negotiate in good faith for the purpose of entering into interim
management and consulting agreements (the "Management Agreement") mutually
satisfactory to the parties. If the parties enter into a Management Agreement,
the parties may, if appropriate, enter into an amendment to this Agreement,
mutually acceptable to 360 and Exchanging Group, revising appropriate
representations, warranties, covenants and agreements contained herein as a
result of 360's management of the System.
5.7 Certain Structural Changes. Notwithstanding anything contained herein
to the contrary, (a) at or prior to Closing, Cell Plus may distribute the CCTS
Shares to the partners of Cell Plus on a pro-rata basis, and such partners shall
consummate the transactions contemplated hereby by a merger of a direct
subsidiary of 360 into CCTS, provided that such partners of Cell Plus agree to
remain bound by all terms and provisions of this Agreement and/or (b) prior to
Closing, Dwyer, Winstel, QCCO and QCPC may sell their ICN Shares, Cell Plus
Interests and Ohio LP Interests to ICNP or one of its Affiliates pursuant to the
terms of that certain Florida Disposition Agreement dated as of December 15,
1995 between, ICNP, Affiliates of ICNP and Dwyer, provided that any such
purchaser of ICN Shares, Cell Plus Interests and Ohio LP Interests shall agree
to be bound by all terms and provisions of this Agreement. Any CCTS Shares or
ICN Shares sold or transferred pursuant to this Section 5.7 shall be stamped or
otherwise imprinted with a legend in substantially the following form: "The
shares represented by this certificate are subject to the terms and conditions
of an Exchange and Merger Agreement dated as of May 31, 1996 and may not be
offered for sale, sold, transferred or otherwise disposed of except in
accordance with such agreement."
SECTION 6 OTHER AGREEMENTS.
6.1 Hart-Scott-Rodino. As promptly as practicable, and in any event within
ten (10) business days following the execution and delivery of this Agreement by
the parties, Exchanging Group and 360 shall each prepare and file any required
notification and report form under the HSR Act, in connection with the
transactions contemplated hereby. Exchanging Group and 360 shall request early
termination of the waiting period thereunder. Exchanging Group and 360 shall
respond with reasonable diligence to any request for additional information made
in response to such filings. 360 and Exchanging Group shall each pay one-half of
any filing fee for the notification and report form required under the HSR Act.
6.2 Other Consents. Promptly, and in any event within ten (10) business
days after the execution hereof, Exchanging Group and 360 shall prepare and
file, and cooperate with each other in so doing, the necessary transfer and
consent to assignment applications with the FCC and any other relevant state
public service or utilities commission to transfer the Licenses from Subject
Entities to 360. Exchanging Group will use commercially reasonable efforts to
obtain all consents and approvals of other third parties required to permit the
transfer of the ICN Shares, the CCTS Shares and Partnership Interests to 360 or
its designees, including all consents, if any, required in connection with the
Contracts and Leases. Exchanging Group shall pay all costs(including the
transactional costs of its advisors) in obtaining such consents, provided,
however, that subsequent to Closing, if any consents were unable to be obtained
prior to Closing, 360 shall not agree, on behalf of themselves, Exchanging Group
or the Subject Entities, to pay any costs in connection with the obtaining of
such consents without the prior written approval of Exchanging Group, which
approval shall not be unreasonably withheld.
<PAGE>
6.3 Certain Agreements Regarding Consents. To the extent that the transfer
of the CCTS Shares, the ICN Shares and Partnership Interests pursuant to this
Agreement is prohibited without the consent of a third party (including a
governmental entity) to any Contract and such consent is not obtained prior to
Closing, or if such transfer or attempted transfer would constitute a breach of
any Contract, nothing in this Agreement will constitute a transfer or an
attempted transfer thereof. In the event that any consent is not obtained on or
prior to the Closing Date, Exchanging Group will (i) provide to 360 the benefits
of the applicable Contract, (ii) cooperate in any reasonable and lawful
arrangement designed to provide such benefits to 360 and (iii) enforce at the
request of 360 and for the account of 360, any rights of Exchanging Group
arising from any such Contract (including the right to elect to terminate such
Contract in accordance with the terms thereof upon the request of 360). If any
member of the 360 Group incurs additional costs or expenses after the Closing as
a result of the failure to obtain any consents, such additional costs or
expenses shall be eligible for indemnification pursuant to Section 10.2 hereof.
6.4 FCC Compliance. The parties agree that, notwithstanding any provision
of this Agreement, 360 shall not, prior to the Closing Date, directly or
indirectly control, supervise, or direct the operation of the System other than
as contemplated by the interim management and switching agreements contemplated
hereby. The parties further agree to cooperate in good faith and shall take all
steps as may be necessary or proper to expeditiously and diligently prosecute
the assignment application filed with the FCC to a favorable conclusion
including, but not limited to, the following: (a) appealing or seeking
reconsideration of any FCC denial of such assignment application or conditional
grant; (b) satisfying any conditions imposed upon such grant to the extent that
such conditions require actions which do not materially alter the benefits or
burdens of either party under this Agreement; and (c) taking all other actions
necessary or appropriate to bring about the transactions contemplated by this
Agreement; provided, however, such actions do not materially alter the benefits
or burdens of either party under this Agreement.
6.5 Exclusivity. Until termination of this Agreement, Exchanging Group
will not solicit, initiate or encourage the submission of any proposal or offer
from any Person, or negotiate any unsolicited offer or proposal, relating to any
(a) liquidation, dissolution, reorganization or recapitalization, (b) merger,
consolidation or business combination, (c) acquisition or purchase of securities
or assets or (d) similar transaction or business combination involving the
System, Exchanging Group or Subject Entities (except for sales of assets in the
ordinary course of business).
6.6 Real Property Title Information. 360 may desire to procure title
insurance policies and surveys for certain of the Owned Real Property and Leased
Real Property. The procurement of such policies and surveys shall not be a
condition to the Closing of the transactions contemplated hereby. 360 may
procure, at its sole expense, such title insurance and surveys from such
<PAGE>
companies, in amounts and with levels of coverage and endorsements as 360 shall
determine. Exchanging Group shall assist and cooperate with 360, but shall not
be required to incur any costs in the procurement of all such policies and
surveys.
6.7 Environmental Assessments. Exchanging Group has provided 360 with
complete and correct copies of any environmental assessments of which it is
aware with respect to the Owned Real Property and Leased Real Property. 360 may,
but shall not be required to, at its sole cost and expense, inspect any parcel
of Owned Real Property or Leased Real Property, and engage an environmental
consulting firm of good reputation in the industry to conduct an environmental
inspection or Phase I environmental site assessment and if 360 so reasonably
desires, a Phase II environmental assessment of any parcel of Owned Real
Property or Leased Real Property (the "Environmental Assessment"). During the
course of the Environmental Assessments, Exchanging Group shall make available
to 360's consultants and agents for interviews people knowledgeable about the
use and condition of the Owned Real Property and Leased Real Property and
operations conducted thereon. Within a reasonable time after receiving a written
request from 360 for information, Exchanging Group shall provide 360 with
additional information, to the extent that the same is available to Exchanging
Group. 360 shall promptly furnish to Exchanging Group all copies of
Environmental Assessments. The parties shall reasonably cooperate and consult
with each other to determine whether any Phase II Environmental Assessment is
reasonably required and the extent and scope of any testing. In the event there
is a dispute between 360 and Exchanging Group regarding any aspect of the
Environmental Assessment, such dispute shall be resolved by an independent
consultant mutually chosen by Exchanging Group and 360, or if they cannot agree
on an independent consultant, a consultant mutually selected by their respective
consultants, the cost of such independent consultant to be equally split between
the parties and whose determination shall be final and binding. To the extent
that 360 and Exchanging Group agree on sampling on Leased Real Property,
Exchanging Group shall use its commercially reasonable efforts to secure access
from the lessors for 360's authorized employees and representatives for such
activities (subject to such employees' and representatives' execution of
customary indemnification agreements for property damage). If any Environmental
Assessment discloses the presence of any Hazardous Materials at any of the Owned
Real Property or Leased Real Property, which Hazardous Materials require
remediation under applicable Environmental Laws, 360 shall promptly notify
Exchanging Group in writing of the remedial action proposed by its consultants
and the estimated cost of such actions as reasonably determined by 360 and 360's
consultant. Exchanging Group, and any consultants engaged by Exchanging Group
shall review 360's estimates and reasonably assess the required remedial action
and the costs therefor. In the event there is a dispute between 360 and
Exchanging Group regarding the required remedial action and Remediation Costs
(as defined herein), such dispute shall be resolved by an independent consultant
mutually chosen by Exchanging Group and 360, or, if they cannot agree on an
independent consultant, a consultant mutually selected by their respective
consultants, the cost of such independent consultant to be equally split between
the parties and whose determination shall be final and binding. Upon final
determination of the required remedial action and the Remediation Costs,
Exchanging Group and its consultants shall undertake to perform all required
remedial action, and shall keep 360 fully informed of the status and progress of
such remediation, and provide 360 with the full opportunity to oversee and
participate (at its expense) in such remediation. All remediation costs,
including, but not limited to, costs for planning, designing and implementing
the agreed upon
<PAGE>
remedial work, costs incurred in testing as required to design the clean-up
and confirm its completion, and any required monitoring (but excluding any
costs, fees and expenses associated with or relating to the Environmental
Assessments, Phase I and Phase II and all testing and analyzing related thereto)
("Remediation Costs") that, when combined with all other Damages suffered by any
360 Indemnified Party resulting from, arising from, arising out of, relating to,
in the nature of or caused by any breach of any representation or warranty
contained in this Agreement or in any closing certificate delivered by
Exchanging Group or Subject Entities pursuant to this Agreement (other than the
representations and warranties contained in Sections 3.1, 3.2, 3.7, 3.8, 3.9,
3.10, 3.11, 3.14 (subject to the last sentence of Section 10.2(a)), 3.16
(subject to the last sentence of Section 10.2(a)), 3.17 (fourth sentence only),
3.26, 3.30, 3.32 and 3.36) are less than or equal to the Cushion and greater
than the Cap shall be paid by 360 and all other Remediation Costs shall be paid
promptly by Exchanging Group; provided, however, that if the total Remediation
Costs are determined prior to the Closing and these costs are projected to
exceed $10,000,000, either Exchanging Group or 360 shall have the option to
terminate this Agreement and its obligations hereunder without any liability,
cost or penalty whatsoever within ten (10) business days of determination of the
need for such expenditures, which termination shall be set forth in a writing
delivered by the terminating party to the non-terminating party. For remediation
which is not completed prior to Closing, 360 agrees to provide reasonable access
to Exchanging Group's contractor for completion of the work. The remedial action
shall be deemed complete upon the receipt of any governmental approvals for the
remedial work, if applicable. If no governmental approval is sought, the
remedial action shall be deemed complete upon written confirmation by Exchanging
Group's consultant or an independent consultant, as applicable, provided,
however, that if 360 does not concur with that confirmation, an independent
consultant mutually chosen by Exchanging Group and 360 shall be selected to
determine whether the remedial work is complete. In the event that Exchanging
Group and 360 cannot agree upon an independent consultant, a consultant will be
mutually selected by their respective consultants. The cost of such independent
consultant shall be equally split between the parties. The determination of the
independent consultant shall be final and binding. Notwithstanding anything
contained herein to the contrary, to the extent that any Environmental
Assessment, sampling, remediation or any testing or analysis related thereto
covered by this section is mandated by the government or is in response to any
claim by a third party, 360 may conduct such Environmental Assessment, sampling,
remediation, testing or analysis in its sole discretion in order to satisfy such
mandate or claim, and the Remediation Costs related thereto shall be paid in
accordance with this Section 6.7, provided that Exchanging Group and its
consultant may participate in (at Exchanging Group's sole cost and expense) and
be kept apprised of all material developments regarding any such Environmental
Assessment, sampling, remediation, testing or analysis. Nothing in this Section
6.7 shall be construed to affect any right of the 360 Indemnified Parties to
seek indemnification for breach of any representation or warranty set forth in
Section 3.29 of this Agreement.
6.8 Transition Services Agreements. Promptly after execution of this
Agreement, Exchanging Group and 360 shall jointly determine in good faith the
post-closing services that will be required of 360, for Exchanging Group's
benefit, or Exchanging Group, for 360's benefit, and will use their reasonable
efforts to agree on the terms and provisions of agreements embodying such
services, including, without limitation, a tax sharing agreement, a financial
services agreement, an insurance services agreement, an interim billing services
agreement and a limited license agreement whereby 360 will be granted a
non-exclusive, non-transferable,
<PAGE>
royalty-free, limited license to use the Trademarks for a period not to
exceed one (1) year after Closing in connection with the integration of the
System into 360's operations and all of such agreements shall provide for
Exchanging Group's reasonable post-Closing cooperation with 360 for such period.
6.9 Financial Statements. Between the date hereof and the Closing Date,
Exchanging Group shall provide 360 within thirty (30) days following the end of
each calendar month unaudited balance sheets and related statements (for the
month ended and year-to-date) of income, cash flow and partners' or
stockholder's equity for the Subject Entities prepared in accordance with GAAP
(other than normal year-end and other adjustments and accruals which will not be
included in such statements), which statements shall include a detailed
breakdown of accounts payable and accounts receivable. In addition and at such
times, Exchanging Group shall provide a supplemental schedule indicating the
aging of accounts receivables. In addition, Exchanging Group shall set forth in
writing (a) the number of new customers to the System added in such calendar
month, (b) the number of customers terminating their agreements with Subject
Entities during such calendar month, and (c) the net increase or decrease in
customers in the System as of the end of such calendar month. Between the date
hereof and the Closing Date, the Exchanging Group shall provide 360, within 30
days of receipt, copies of all financial statements and other partnership
records relating to the Minority Partnerships received by any member of the
Exchanging Group.
6.10 System Employees.
(a) On and as of the Closing Date, Exchanging Group will cause the
employment of the employees of the ICN Group to be terminated. The employees to
be terminated pursuant to the preceding sentence are herein called the
"Terminated Employees."
(b) Between 90 and 75 days prior to the projected Closing, Exchanging
Group shall cause to be delivered to 360 a complete list of ICN Group Employees
("ICN Group Employee List") employed in the System. The ICN Group Employee List
shall include name, social security number, position, location and compensation
of each person on the list, and shall indicate which such employees are on
disability, layoff or leave of absence, and which are actively at work as of the
date the ICN Group Employee List is delivered. The Exchanging Group may, but
shall not be required to, include on the ICN Group Employee List any employee
whose principal place of employment is in the State of Florida and shall so
designate such status by such employee's name on the ICN Group Employee List
(any such employees not included on the ICN Group Employee List are herein
called "Excluded ICN Employees").
(c) Except as set forth in Section 10(f) below, 360 may, in its sole
discretion and without obligation, commencing at any time, but not later than
ten (10) days prior to the Closing, offer employment to such persons on the ICN
Group Employee List as it may determine, on terms and conditions unilaterally
proposed by 360, to be effective on the Closing Date. Any Terminated Employees
who accept such employment as of the Closing Date are hereinafter referred to as
"New System 360 Employees." Within thirty days after the Closing, 360 shall
provide Exchanging Group with a list of New System 360 Employees.
Notwithstanding the foregoing, except as otherwise agreed in writing by
Exchanging Group and ICN Group, 360 shall
<PAGE>
not solicit any Excluded ICN Employees while employed by the ICN Group for
the purpose of offering employment with 360 Group for a period of one year
following the Closing Date. For this purpose, Exchanging Group shall provide 360
at Closing with a list of Excluded ICN Employees.
(d) The Exchanging Group shall be responsible for and discharge all
liabilities to, claims of, and employment obligations with respect to all
Terminated Employees and all former ICN Group Employees arising out of their
employment with or termination of employment from the ICN Group, including
without limitation, all vacation pay, severance, annual or long-term incentives,
commissions, and any benefits due them under Employee Benefit Plans. Without
limiting the generality of the foregoing, Exchanging Group shall be responsible
for and discharge any and all severance obligations to ICN Group employees prior
to the Closing so that any subsequent termination from employment by 360 of a
former ICN Group employee will not cause 360 to incur any obligations for
severance related to service as an ICN Group employee. 360 shall not be
responsible for any liabilities to, claims of, or employment obligations with
respect to Terminated Employees or any former ICN Group Employees arising out of
their employment with or termination of employment from the ICN Group.
Exchanging Group shall cause the ICN Group members to comply with WARN (other
than as contemplated by Section 6.10(f)), to the extent applicable, and to
comply with the requirements of ERISA Sections 601- 607 and Code Section 4980B
with respect to the Terminated Employees. Exchanging Group will retain all
assets of and be responsible for all liabilities arising through the Closing
under the Employee Benefit Plans (whether or not terminated) with respect to ICN
Group employees and former ICN Group employees. 360 shall not acquire any rights
or interests of Exchanging Group or any Subject Entity in, or assume or have any
obligations or liabilities of Exchanging Group or any Subject Entity under, any
Employee Benefit Plan.
(e) Any New System 360 Employees shall be employees at will and shall not
be credited for any purpose at 360 with any service with the ICN Group, except
as provided in the following sentence. New System 360 Employees (i) shall be
credited under 360's Retirement Savings Plan, solely for purposes of initial
eligibility to participate with continuous service with the ICN Group
immediately prior to the Closing Date; and (ii) shall be eligible to participate
as of the Closing Date in 360 medical and dental plans (other than for benefits
payable in retirement) for which they are otherwise eligible without any waiting
periods, without any evidence of insurability and without application of any
preexisting physical or mental condition restrictions except to the extent
applicable under the System Welfare Plans, but counting, for the year in which
the Closing occurs, claims incurred prior to the Closing Date for purposes of
applying deductibles, out of pocket maximums and other benefit maximums to the
extent such amounts were so counted under the System Welfare Plans. Exchanging
Group shall cause the ICN Group to provide, promptly after Closing, to 360 or
its designees, such information as 360 shall reasonably request to count such
claims incurred for such purposes.
(f) 360 agrees to assume all liability and obligation under WARN in
connection with the termination of the employment of employees at the Avoca,
Pennsylvania location pursuant to Section 6.10(a) or by 360 thereafter
(hereafter referred to as 6.10(a) termination) and agrees to indemnify and hold
Exchanging Group harmless of and from any liabilities, claims, costs or expenses
asserted against, or required to be paid by, Exchanging Group in connection with
the
<PAGE>
failure to comply with WARN at the Avoca, Pennsylvania location as a result
of such 6.10(a) termination, provided, however, 360 shall not be liable for any
WARN liability, or obligation incurred as a result of any other plant closing,
termination, or mass layoff as defined in WARN, provided, further, if 360 so
directs, the Exchanging Group shall provide WARN notices to employees at the
Avoca, Pennsylvania location and appropriate government officials in the form
provided by 360 within 5 days of receipt of such direction.
6.11 Effective Date for Partnership Allocations and Distributions.
(a) 360 and Exchanging Group acknowledge and agree that all allocations of
profits, losses or other such items under the Partnership Agreements which
relate solely to any Minority Partnerships' ordinary income or loss for any such
Minority Partnership's fiscal year 1996 (the "Closing Fiscal Year")
(specifically excluding therefrom any gain, profit, loss or other items relating
to the sale or other disposition of any capital asset), shall be allocated for
purposes of the prorations by allocating to Exchanging Group 1/365th of the
distributive share of such items each member of Exchanging Group, as the case
may be, would have received had it remained a general or limited partner, as the
case may be, in the Minority Partnerships for the entire Closing Fiscal Year
multiplied by the number of days during the Closing Fiscal Year up to and
including the Closing Date that each member of Exchanging Group, as the case may
be, was a partner of the Minority Partnerships and allocate to 360 the balance.
360 and Exchanging Group acknowledge and agree that all allocations of profits,
losses or other such items under the Partnership Agreement which relate to any
Partnerships' (other than the Minority Partnerships') income or loss for any
such Partnership's Closing Fiscal Year shall be allocated using the closing of
the books method as of the Closing Date.
(b) Exchanging Group and 360 acknowledge and agree that all allocations of
profits, losses and other such items under the Partnership Agreements which
relate to the sale or other disposition of any capital asset by any Minority
Partnerships shall be allocated to Exchanging Group if such sale or disposition
occurred prior to the Closing Date and shall be allocated to 360 if such sale or
disposition occurred subsequent to the Closing Date.
(c) All calculations and determinations for the Closing Fiscal Year of
ordinary income and loss and the gain or loss from the sale or disposition of
capital assets shall be made by each Partnership's accountants (subject to the
review of 360's accountants) on the basis of each Partnership's past practices,
consistently applied, and such calculations and determinations shall be final
and binding on Exchanging Group and 360, and the cost thereof shall be borne
jointly and severally by Exchanging Group.
(d) Except for any distributions from the Minority Partnerships made in
1996 which shall be for the account of Exchanging Group, from and after the
Closing Date, all distributions made by the Partnerships in respect of the
Partnership Interests shall be for the account of 360 whether such distribution
relates to profits earned prior to the Closing Date or otherwise.
(e) Exchanging Group agrees that if any Partnership distributes any
cash directly to Exchanging Group which cash distribution was intended to be or
should have been made to 360,
<PAGE>
then Exchanging Group shall promptly, but in any event within 5 business days,
forward such distribution to 360.
(f) After the Closing, the parties shall cooperate as reasonably necessary
to effect a smooth accounting transition of ICN, the Controlled PA Partnerships,
CCTS and WCTC to 360's accountants and agents. The parties will cause the
financial books and records of said entities to be closed as close as possible
to the Closing Date to in effect reflect two short years, one from January 1,
1996 to the Closing Date and the other from the Closing Date to December 31,
1996. Accounting methods shall be used in closing such books which shall be
consistent with those methods used in prior years and which do not have the
effect of distorting income or expenses, except that state, local and other
taxes based on items other than income or sales (such as real estate taxes)
shall be computed for the twelve (12) months beginning January 1, 1996 and
prorated on a time basis for the different short years.
6.12 Welfare Benefit Plans.
(a) Prior to or as of the Closing Date, Exchanging Group shall cause
the ICN Group to cease participation as participating employers effective as of
the Closing in all System Employee Plans that are Employee Welfare Benefit Plans
(the "System Welfare Plans").
(b) With respect to any Employee Welfare Benefit Plan under which a Subject
Entity is a plan administrator, plan sponsor or contributing employer,
Exchanging Group shall cause, effective no later than the Closing, such member
to withdraw as plan administrator or contributing employer, and to transfer plan
sponsor responsibilities or obligations to Exchanging Group or an entity or
entities designated by Exchanging Group and reasonably acceptable to 360, which
entity or entities will thereby assume and become fully responsible for all such
responsibilities.
6.13 Pension Benefit Plans.
(a) Prior to or as of the Closing Date, Exchanging Group shall cause
the ICN Group to cease participation as participating employers effective as of
the Closing in all System Employee Benefit Plans that are Employee Pension
Benefit Plans (the "System Pension Plans").
(b) With respect to any Employee Pension Benefit Plan under which a Subject
Entity is a plan administrator, plan sponsor or contributing employer,
Exchanging Group shall cause, effective no later than the Closing, such member
to withdraw as plan administrator or contributing employer, and to transfer plan
sponsor responsibilities or obligations to Exchanging Group or an entity or
entities designated by Exchanging Group and reasonably acceptable to 360, which
entity or entities will thereby assume and become fully responsible for all such
responsibilities.
6.14 Restrictive Legends. Unless and until otherwise permitted by this
Section 6.14, each certificate for 360 Shares issued pursuant to this Agreement
or to any subsequent transferee of such certificate shall be stamped or
otherwise imprinted with a legend in substantially the following form:
<PAGE>
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and thus may not be
offered for sale, sold, transferred or otherwise disposed of unless
registered under the Securities Act of 1933, as amended, or unless an
exemption from such registration is available."
6.15 Standstill Provision. From the date hereof until the end of the
Standstill Period, the Exchanging Group, together with their respective
directors, officers, stockholders, partners and Affiliates, shall not, without
the prior written consent of the Board of Directors of 360, directly or
indirectly, acquire or offer to acquire any Equity Securities of 360, any
interest therein or voting rights with respect thereto which would cause their
Beneficial Ownership interest to exceed, in the aggregate, 10% of the issued and
outstanding shares of 360 Voting Stock. Notwithstanding the foregoing, (a)
Exchanging Group shall not be in breach of this provision if their Beneficial
Ownership exceeds 10% as a result of buy-backs, redemptions, cancellations or
other retirements of 360 Voting Stock but may not increase its Beneficial
Ownership to an amount more than the greater of (i) 10% or (ii) the percentage
resulting from such buy-back, redemption, cancellation or other retirement of
360 Voting Stock, and (b) Exchanging Group shall be entitled to increase its
Beneficial Ownership to an amount not greater than 10% of the issued and
outstanding shares of 360 Voting Stock in the event that there are additional
issuances of 360 Voting Stock.
6.16 Registration Rights. At Closing, Exchanging Group and 360 shall enter
into a Registration Rights Agreement permitting the Exchanging Group to have,
during the first three (3) years following the Closing, (a) two (2) piggyback
registration rights with respect to the 360 Shares subject to normal underwriter
restrictions, provided that Exchanging Group may exercise such rights only if
(i) there is room for Exchanging Group in such registration after 360's
determination of the amount of shares it desires to register, after any Person
with demand registration rights exercises such rights and pro-rata with any
other Persons with piggyback registration rights, (ii) such rights may be
exercised only with respect to registration statements for which 360 has
registered Voting Stock, and (iii) Exchanging Group shall pay the incremental
cost of including its shares in such registration, and (b) one (1) demand
registration right with respect to the 360 Shares in the event of a Change of
Control Triggering Event, provided that Exchanging Group shall pay all costs and
expenses in connection with such demand registration. Exchanging Group shall not
exercise any piggyback or demand registration rights in connection with a
"shelf" registration. The Registration Rights Agreement shall also contain
customary provisions relating to information blackout periods and financial
statement blackout periods during which times 360 shall not be obligated to
register the 360 Shares.
SECTION 7 CONDITIONS TO OBLIGATION OF EXCHANGING GROUP TO CLOSE. The
obligation of Exchanging Group to consummate the transactions contemplated by
this Agreement is subject to the satisfaction (unless waived in writing by
Exchanging Group) of each of the following conditions on or prior to the Closing
Date:
7.1 Representations and Warranties. The representations and warranties of
360 contained in this Agreement shall have been true on and as of the date of
this Agreement and shall be true on and as of the Closing Date in all material
respects as though such representations and
<PAGE>
warranties are made on and as of the Closing Date, and 360 shall have
delivered to Exchanging Group a certificate of its President or a Vice
President, dated the Closing Date, to the foregoing effect.
7.2 Compliance with Agreement. 360 shall have performed and complied in all
material respects with all covenants and conditions to be performed or complied
with by it on or prior to the Closing Date, and 360 shall have delivered to
Exchanging Group a certificate of its President or a Vice President, dated the
Closing Date, to the foregoing effect.
7.3 No Adverse Proceeding. As of the Closing Date, there shall not be
pending any suit, action or other proceeding by any governmental agency,
commission, bureau, or body in which it is sought to restrain or prohibit the
transactions contemplated by this Agreement.
7.4 Necessary Consents. At the Closing, (i) Exchanging Group and 360 shall
have obtained all FCC and HSR consents and approvals required for the transfer
of the ICN Shares, the CCTS Shares, and the Partnership Interests to 360 or its
designees, (ii) the waiting periods under the HSR Act shall have expired or been
otherwise terminated without objection or upon satisfaction of any of the
relevant federal authorities ("HSR Termination"), (iii) the Final Approval shall
have been received, and (iv) all FCC Licenses necessary to own and operate the
System as it is now conducted shall have been obtained.
7.5 Material Adverse Change/Change of Control. Since the date hereof, no
change in the business, financial condition, operations or results of operations
of 360 which has had a Material Adverse Effect shall have occurred or be
continuing with respect to the 360 System and no Change of Control, which has
resulted in any of the Rating Agencies to rate the Senior Notes below a rating
of BB (or equivalent designation), shall have occurred.
7.6 Legal Opinion. Exchanging Group shall have received the opinion of
Sonnenschein Nath & Rosenthal, outside legal counsel for 360, and/or the opinion
of Kevin C. Gallagher, Vice President and Senior General Counsel of 360, each
dated the Closing Date, substantially to the effect that:
(a) 360 is duly organized, validly existing in good standing under the laws
of the State of Delaware and qualified to do business as a foreign corporation
where applicable, except for jurisdictions where the failure to so qualify would
not have a Material Adverse Effect.
(b) All requisite corporate action has been taken by 360 to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including, the issuance and delivery of the
360 Shares and 360 Notes, and this Agreement and the 360 Notes have been duly
executed and delivered by 360 and are the legal, valid and binding obligations
of 360 enforceable in accordance with their respective terms, subject to the
Enforceability Exceptions.
(c) The execution and delivery of this Agreement by 360 does not, and the
consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof will not, (a) violate, conflict with or result in a
breach of default under the
<PAGE>
Amended and Restated Certificate of Incorporation, as amended, or Amended and
Restated By-Laws of 360, (b) violate, conflict with or result in a violation or
breach of, or constitute a default (with or without due notice or lapse of time
or both) under, or permit the termination or acceleration of any material
contract, agreement, indenture, mortgage, loan agreement, lease, sublease,
license, sublicense, franchise, permit, obligation or instrument to which 360
(or any Affiliate) is a party or by which 360 o or any Affiliate is bound or
affected or to which any of their respective assets are bound or affected or
result in the creation or imposition of any Lien upon any of their respective
assets; or (c) to such counsel's knowledge, violate or require any consent or
notice under any law, statute, regulation, rule, judgment, decree, order,
stipulation, injunction, charge or other restriction of any government,
governmental agency or court to which 360 or any Affiliate or any of their
respective assets are subject,or by which 360 or any Affiliate or any of their
respective assets are bound or affected.
(d) No material consent, approval, order, or authorization of, or
registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement by 360
or the performance by 360 of the transactions as provided herein, excepting such
filings and consents as have been duly made or obtained by 360 or are required
to be made or obtained by Exchanging Group with respect to the assignment of
Licenses, Contracts and Leases, as to which no opinion need be expressed.
(e) The 360 Shares are validly authorized and issued and are fully paid and
nonassessable, free of preemptive rights and have not been issued in violation
of federal or state securities laws and are free and clear of all Personalty
Liens other than Personalty Liens created or suffered to exist by Exchanging
Group. To the knowledge of counsel, there are no outstanding warrants, options,
commitments or rights of any kind to acquire from 360 or any third party any 360
Shares and there are no voting agreements, voting trust agreements or
shareholder or similar agreements relating to the 360 Shares.
(f) Upon the delivery of the 360 Notes to Exchanging Group at Closing in
accordance with the terms of this Agreement, Exchanging Group will have good
title to the 360 Notes, free and clear of all Personalty Liens other than
Personalty Liens created or suffered to exist by Exchanging Group.
In rendering such opinion, such counsel may rely on certificates of
officers of 360 with respect to factual matters and opinions of other counsel
(including in-house counsel at 360). The scope of the knowledge of counsel shall
be set forth in such opinion and shall be subject to the ABA Accord on Legal
Opinions.
SECTION 8 CONDITIONS TO OBLIGATION OF 360 TO CLOSE. The obligation of 360
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction (unless waived in writing by 360) of each of the following
conditions on or prior to the Closing Date:
8.1 Representations and Warranties. The representations and warranties of
Exchanging Group contained in this Agreement shall be true on and as of the date
of this Agreement and shall be true on and as of the Closing Date in all
material respects as though such
<PAGE>
representations and warranties are made on and as of the Closing Date, and each
member of the Exchanging Group shall have delivered to 360 a certificate
executed by the member of the Exchanging Group or on behalf of such member by
its President or a Vice President or its General Partner, dated the Closing
Date, to the foregoing effect.
8.2 Compliance with Agreement. Exchanging Group shall have performed and
complied in all material respects with all covenants and conditions to be
performed or complied with by them on or prior to the Closing Date, and each
member of Exchanging Group shall have delivered to 360 a certificate executed by
the member of Exchanging Group or on behalf of such member by its President or a
Vice President or its General Partner, dated the Closing Date, to the foregoing
effect.
8.3 No Adverse Proceeding. As of the Closing Date, there shall not be
pending any suit, action or other proceeding by any governmental agency,
commission, bureau, or body in which it is sought to restrain or prohibit the
transactions contemplated by this Agreement.
8.4 Necessary Consents. At the Closing, (i) Exchanging Group and 360 shall
have obtained all FCC and HSR consents and approvals required for the transfer
of the ICN Shares, the CCTS Shares and the Partnership Interests to 360 or its
designees and all material consents and approvals from third parties to the
Contracts and Leases, (ii) the HSR Termination shall have occurred, (iii) the
Final Approval shall have been received and (iv) all Licenses necessary for the
360 Group to own and operate the System as it is now conducted shall have been
obtained. For purposes hereof "material consents and approvals from third
parties to the Contracts and Leases" shall mean all consents and approvals, the
failure of which to obtain would have a Material Adverse Effect on (i) the
business or operations of the System or (ii) the coverage provided by any
Subject Entity in each portion of the Market that it serves.
8.5 No Material Adverse Change.
(a) Other than changes resulting from conditions affecting the
telecommunications or cellular telephone industry generally and except for the
transactions contemplated by this Agreement, since the date hereof, there has
not been any change that has occurred and is continuing in the financial
condition or results of operations of the Subject Entities or the System which
has had a Material Adverse Effect.
(b) Other than changes resulting from conditions affecting the
telecommunications or cellular telephone industry generally and except for the
transactions contemplated by this Agreement, since the date hereof, there has
not been any change that has occurred and is continuing which has had a Material
Adverse Effect on (i) the operations of the Subject Entities or the System or
(ii) the coverage provided by any Subject Entity in each portion of the Market
that it serves.
8.6 Opinion of FCC Counsel. Exchanging Group shall have delivered to 360 an
opinion of FCC counsel for Exchanging Group ("FCC Counsel") reasonably
acceptable to 360, in form and substance reasonably satisfactory to 360 (which
opinion shall expressly provide that it may be relied upon by any assignee
permitted pursuant to Section 12.4), to the effect that:
<PAGE>
(a) Subject Entities have been issued and hold the FCC Licenses listed
on Annex A to the opinion. All FCC Licenses are in full force and effect. Except
as disclosed on Annex B to the opinion, all applicable administrative and
judicial appeal, review and reconsideration periods have expired without the
timely filing of any such appeal or request for review or reconsideration and
without the FCC having instituted review of the grant of any of the FCC Licenses
on its own motion; and
(b) There is no issued or outstanding notice of violation, order to
show cause, material complaint or investigation by or before the FCC regarding
any of the FCC Licenses, and no such notice, order, complaint or investigation
threatens or might adversely affect any of the FCC Licenses or result in any
substantial adverse effect on the 360 's ownership or operation of the Exchanged
Assets or assets of the Subject Entities, nor is there any pending or, to the
best knowledge of such counsel, threatened action or matter that would lead
counsel to believe that any of the FCC Licenses will not be renewed in the
ordinary course. To the best knowledge of such counsel, after reviewing the
records on public file with the FCC, Exchanging Group has filed with the FCC all
reports, documents, instruments and information required to be filed pursuant to
the rules and regulations of the FCC.
(c) The necessary FCC consents to the assignment of the FCC Licenses to
360 are in full force and effect and have become a Final Order.
8.7 Legal Opinion. 360 shall have received the opinion of Gould & Ratner,
outside legal counsel to Exchanging Group, dated the Closing Date, substantially
to the effect that:
(a) ICN is duly incorporated, validly existing, and in good standing
under the laws of the State of Delaware and qualified to do business as a
foreign corporation in the States of Pennsylvania, Kentucky, West Virginia and
Ohio which is each jurisdiction where the ownership of its assets or the conduct
of its operations requires such qualification except for jurisdictions where the
failure to so qualify would not have a Material Adverse Effect. Ohio LP, Cell
Plus and ICNP are duly organized and validly existing under the laws of the
State of Illinois and qualified to do business as a foreign limited partnership
in each jurisdiction where the ownership of their respective assets or the
conduct of their respective operations requires such qualification except for
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect. CCI, Ohio RSA, QCCO, C-Plus and QCPC are duly incorporated, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation. The Subject Entities and the Minority Partnerships are duly
organized and validly existing under the laws of their respective jurisdictions
of organization and qualified to do business in each jurisdiction where the
ownership of their respective assets or the conduct of their respective
operations requires such qualification except for jurisdictions where the
failure to so qualify would not have a Material Adverse Effect. HCNI is a
limited partnership duly formed and validly existing under the laws of the State
of Illinois. The Subject Entities have all requisite power and authority and all
licenses, permits and authorizations necessary to own, lease and operate their
respective properties and carry on their respective businesses as now conducted.
(b) All requisite corporate or partnership action, as the case may be,
has been taken by Exchanging Group and HCNI to authorize the execution and
delivery of this Agreement and
<PAGE>
the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby, and this Agreement and the other
agreements contemplated hereby have been duly executed and delivered by
Exchanging Group and HCNI and constitute the legal, valid and binding
obligations of Exchanging Group and HCNI, enforceable against each member of
Exchanging Group and HCNI in accordance with its terms, except for the
Enforceability Exceptions.
(c) The execution, delivery and performance by the Exchanging Group,
the Subject Entities and HCNI of the Agreement and the other agreements
contemplated thereby to which such Person is a party and the consummation of the
transactions contemplated thereby do not and will not (a) violate, conflict with
or result in any breach of any provision of their respective articles of
incorporation or bylaws or partnership agreements, as the case may be; (b)
violate, conflict with or result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under, or permit
the termination or acceleration of any contract, agreement, indenture, mortgage,
loan agreement, lease, sublease, license, sublicense, franchise, permit,
obligation or instrument to which the Exchanging Group, any Subject Entity or
HCNI is a party or by which the Exchanging Group, any Subject Entity or HCNI is
bound or affected or to which any of their respective assets are bound or
affected or result in the creation or imposition of any Lien upon any of their
respective assets; (c) require any authorization, consent, approval, exemption
or other action by or notice to any court, other governmental body or other
Person or entity under, the provisions of any law, statute, rule, regulation,
judgment, order or decree or any contract, agreement, lease, sublease, license,
sublicense, franchise, permit, indenture, mortgage, obligation or instrument to
which the Exchanging Group, any Subject Entity or HCNI is subject, or by which
the Exchanging Group, any Subject Entity or HCNI is bound or affected or to
which any of their respective assets are bound or affected and of which counsel
has knowledge, except such filings and consents as have been duly made or
obtained by Exchanging Group or (d) violate or require any consent or notice
under any law, statute, regulation, rule, judgment, decree, order, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Exchanging Group, any Subject Entity or HCNI or any of
their respective assets are subject, or by which the Exchanging Group, any
Subject Entity or HCNI or any of their respective assets are bound or affected.
(d) Except as disclosed in Schedule 3.28 of this Agreement, there are
no actions, suits, proceedings, hearings, orders, charges, complaints or claims
pending or, to the knowledge of such counsel, threatened against or affecting
the Subject Entity or its assets (or pending or, to the knowledge of such
counsel, threatened against or affecting any of the officers, directors,
employees, stockholders or partners of any Subject Entity, in their capacity as
such), or to which any Subject Entity or its assets may be bound or affected, at
law or in equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign; nor are there any pending or, to the
knowledge of such counsel, threatened investigations; no Subject Entity is
subject to any judgment, order or decree of any court or governmental agency; to
our knowledge, neither Exchanging Group nor any Subject Entity has received any
opinion or memorandum or legal advice from legal counsel to the effect that any
Subject Entity is exposed, from a legal standpoint, to any material liability or
disadvantage and no Subject Entity is engaged in any legal action to recover
monies due it or for damages sustained by it which would have a Material Adverse
Effect.
<PAGE>
(e) The ICN Shares, the CCTS Shares and the WCTC Shares are validly
authorized, issued, fully paid and nonassessable, free of preemptive rights and
have not been issued in violation of federal or state securities laws. The
Partnership Interests (other than the Minority Partnership Interests) are
validly authorized, issued, fully paid and nonassessable, free of preemptive
rights and have not been issued in violation of federal or state securities
laws. To its knowledge based solely on a review of the stock record books and
inquiry of those Persons set forth on Schedule 1.1 to the Agreement, the ICN
Shares, the CCTS Shares and the WCTC Shares are owned of record and beneficially
by, (i) the Persons listed on Schedule I to the Agreement, with respect to the
ICN Shares, (ii) Cell Plus, with respect to the CCTS Shares, and (iii) CCTS and
the Persons listed on Schedule 3.9 to the Agreement, with respect to the WCTC
Shares, free and clear of all Personalty Liens and other restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws or created or suffered to be caused by 360 ). No other classes of capital
stock of ICN, CCTS or WCTC are issued or outstanding; except as disclosed in
Schedule 3.7 of this Agreement and the Partnership Agreements, counsel does not
know of any outstanding or authorized warrants, options, commitments or rights
of any kind to acquire from any Subject Entity or any third party any ICN
Shares, CCTS Shares, WCTC Shares or Partnership Interests; except as disclosed
in Schedule 3.7 of this Agreement, counsel does not know of any outstanding or
authorized options, warrants, contracts, calls, puts, rights to subscribe,
conversion rights, or other agreements to which ICN, CCTS or WCTC is a party or
which are binding upon ICN, CCTS or WCTC providing for the issuance, disposition
or acquisition of any of its capital stock or any securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock or any other security of ICN, CCTS or WCTC; to its knowledge,
there are no outstanding or authorized stock appreciation, phantom stock or
other similar rights with respect to ICN, CCTS or WCTC; except as disclosed in
the Agreement, counsel knows of no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the capital stock of
ICN, CCTS or WCTC; and except as disclosed in this Agreement, ICN, CCTS or WCTC
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock.
(f) To counsel's knowledge, no Subject Entity owns or controls
(directly or indirectly) any stock, partnership interest, joint venture
interest, equity participation or other security or interest in any other
Person, except as set forth on Schedule 3.3 to the Agreement.
(g) The instruments for the transfer of the ICN Shares, the CCTS Shares and
the Partnership Interests delivered to 360 at the Closing are sufficient to
transfer and vest in 360 title to the ICN Shares, the CCTS Shares and the
Partnership Interests, free and clear of all Personalty Liens and other
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws and liens created or suffered to exist by 360). Based
solely on a review of the Partnership Agreements, the ownership of the
Partnership Interests is as set forth in the Partnership Agreements.
In rendering such opinion, such counsel may rely on certificates of
officers of Exchanging Group with respect to factual matters and opinions of
other counsel. The scope of the knowledge of counsel shall be set forth in such
opinion and shall be subject to the ABA Accord on Legal Opinions.
<PAGE>
8.8 Other Documentation. 360 shall have received all of the documents and
showings required to be delivered by Exchanging Group at the Closing pursuant to
this Agreement, and such other documentation reasonably requested by counsel to
360 and necessary and appropriate to complete the transactions contemplated
hereby.
SECTION 9 THE CLOSING; TERMINATION OF AGREEMENT.
9.1 The Closing. The completion of the transfer ("Closing") of the ICN
Shares, the CCTS Shares and Partnership Interests shall be on a date as may be
agreed upon by 360 and Exchanging Group within ten (10) Business Days after the
later of the date of the HSR Termination and the date of Final Approval, unless
such time is extended or shortened as may be agreed upon by 360 and Exchanging
Group, provided that each of the conditions precedent set forth in Sections 7
and 8 have been satisfied ("Closing Date"). The Closing shall be held at the
offices of Gould & Ratner, 222 N. LaSalle Street, Chicago, Illinois 60601, or if
so requested and agreed by Exchanging Group, at the offices of 360 or its
counsel. At the Closing, all of the transactions provided for in Section 2
hereof shall be consummated on a substantially concurrent basis.
9.2 Termination. Anything in this Agreement to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby may be
terminated in any of the following ways at any time before the Closing:
(a) At any time prior to Closing, by mutual written consent of 360 and
Exchanging Group;
(b) By either 360, on the one hand, or the Exchanging Group, on the other
hand, if there has been a material misrepresentation or breach of warranty or
breach of covenant on the part of the other party with respect to the
representations and warranties or covenants set forth in this Agreement and the
non-breaching party has provided written notice thereof to the breaching party
and a reasonable opportunity to cure (which cure period shall not extend beyond
March 31, 1997) or if events have occurred which have made it impossible to
satisfy a condition precedent to the terminating party's obligation to
consummate the transactions contemplated hereby, unless such terminating party's
breach of this Agreement has caused the condition to be unsatisfied;
(c) By 360, if any of the conditions set forth in Article 8 of this
Agreement have not been satisfied on or before March 31, 1997, and such
condition or conditions have not been waived by 360, provided, however, (i) in
the case of a third party protest in connection with the Licenses, the parties
agree to contest the protest in good faith notwithstanding the dates set forth
in this Section 9.2(c) for a period not to extend beyond November 30, 1997 and
(ii) 360 is not then in default of any obligation hereunder; or
(d) By Exchanging Group, if any of the conditions set forth in Article
7 of this Agreement have not been satisfied on or before March 31, 1997, and
such condition or conditions have not been waived by Exchanging Group, provided,
however, (i) in the case of a third party protest in connection with the
Licenses, the parties agree to contest the protest in good faith
<PAGE>
notwithstanding the dates set forth in this Section 9.2(d) for a period not to
extend beyond November 30, 1997 and (ii) Exchanging Group is not then in default
of any obligation hereunder.
In the event this Agreement is terminated pursuant to this Section 9.2,
all further obligations of the parties hereunder shall terminate, except for the
obligations set forth in Sections 12.6 and 12.8, except that nothing in this
Section 9.2 shall relieve any party hereto of any liability for such party's
breach of this Agreement.
9.3 Risk of Loss. The risk of any loss to the System Assets or the
Subject Entities and all liability with respect to injury and damage occurring
in connection therewith shall be the sole responsibility of Exchanging Group
until the completion of the Closing. If any material part of such properties
shall be damaged by fire, other casualty or other Force Majeure Event prior to
the Closing hereunder, 360 shall have the right and option:
(a) if the Closing would be delayed by thirty (30) days or more in
order to repair the damaged property (but not beyond March 31, 1997), to
terminate this Agreement, without liability to Exchanging Group; or
(b) to proceed with Closing hereunder, in which event such casualty shall
not constitute a breach by Exchanging Group of any representation, warranty or
covenant in this Agreement, and, at the election of 360, Exchanging Group shall
either (i) provide 360 with a credit against the Working Capital, (ii) if
Working Capital is or would become negative after application of this Section
9.3, pay such amount in cash to 360, (iii) if such cash is unavailable, offset
against the principal portion of the 360 Notes, an amount equal to the
replacement value of the property so damaged, (iv) pay to 360 the insurance
proceeds arising from such casualty, or (v) have the right to extend the Closing
for a reasonable period (not to exceed November 30, 1997) in order for
Exchanging Group to cause the repair and replacement of the System Assets
damaged or destroyed by such casualty to the reasonable satisfaction of 360. As
used in this Section 9.3, "Force Majeure Event" shall mean acts of God or
weather related events.
9.4 Deliveries by Exchanging Group at the Closing. At the Closing,
Exchanging Group shall deliver, or cause to be delivered, to 360, the following
items:
(a) The duly executed officer's certificate referred to in Section
8.1 and 8.2.
(b) The consents referred to in Section 8.4.
(c) Certificates representing the ICN Shares registered in the name of
Exchanging Group, duly endorsed by the applicable members of Exchanging Group
for transfer, and/or accompanied by an assignment of the ICN Shares duly
executed by the applicable members of Exchanging Group.
(d) Certificates representing the CCTS Shares registered in the name of
Cell Plus, duly endorsed by Cell Plus (or the applicable stockholders of CCTS)
for transfer, and/or accompanied by an assignment of the CCTS Shares duly
executed by Cell Plus (or the applicable stockholders of CCTS).
<PAGE>
(e) The Partnership Interest Assignment Agreement executed by the
partners of Ohio LP and Cell Plus conveying the Ohio LP Interests and Cell Plus
Interests to direct subsidiaries of 360 .
(f) The duly executed Exchanging Group Assumption Agreement and such
other agreements, each dated the date immediately prior to the Closing Date, as
are reasonably necessary to evidence the joint and several assumption by the
Exchanging Group of the Non-Retained Liabilities.
(g) Articles and Agreements of Merger, in the form reasonably approved
by 360 , in connection with the merger of ICN into direct subsidiaries of 360
and direct subsidiaries of 360 into CCTS.
(h) Amended partnership agreements of Ohio LP and Cell Plus, effective
as of the Closing Date, in a form satisfactory to 360 .
(i) Resignations of all officers and directors of ICN, CCTS, WCTC and
the Controlled Partnerships and the resignations of all Tax Matters Partners of
the Controlled Partnerships (other than Cell Plus, Ohio LP and WPCLP, the
resignations of Tax Matters Partners for taxable years beginning after the
Closing which shall be provided after filing of the income tax returns for such
partnerships pursuant to Section 11 hereof).
(j) Terminations of all agreements with Affiliates dated the date prior to
the Closing Date (other than those agreements with Affiliates which 360 may
expressly agree to assume in writing at or prior to Closing), including, a
termination executed by all ICN Shareholders terminating that certain Second
Amended and Restated Stockholder Agreement of ICN dated September 1, 1994 and a
termination of the Partnership Interest and Stock Priority Agreement dated
August 22, 1994 among Exchanging Group, Subject Entities and certain of their
Affiliates.
(k) Certificates of the Secretary or an Assistant Secretary or a
General Partner of each member of Exchanging Group dated the Closing Date: (i)
as to the incumbency and signatures of the officers or representatives of each
member of Exchanging Group executing this Agreement and each of the ancillary
agreements and any other certificate or other document to be delivered pursuant
hereto or thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary or General Partner; and (ii) certifying attached resolutions
of the Board of Directors and shareholders and or Partners of such member of
Exchanging Group, which authorize and approve the execution and delivery of this
Agreement and each of the ancillary agreements to which Exchanging Group is a
party and the consummation of the transactions contemplated hereby and thereby.
(l) The legal opinions referred to in Sections 8.6 and 8.8.
(m) Releases by (i) the lenders (including UCC-3 termination
statements) under that certain Loan Agreement dated as of September 9, 1994, as
amended, by and among ICNP and Toronto Dominion (Texas), Inc., as Administrative
Agent for the lenders, of all the security interests (including subsidiary
guarantees) and other Personalty Liens held by such parties in
<PAGE>
connection with the Toronto Dominion Debt, and (ii) releases (including UCC-3
termination statements) of any other Personalty Liens.
(n) An assignment of the Swaps, if all requisite consents are obtained in
accordance with Section 2.1 hereof.
(o) Evidence in the form of a letter from The First National Bank of
Chicago that Henry Crown and Company (Not Incorporated), an Illinois limited
partnership ("HCNI"), has a tangible net worth equal to or in excess of the Cap.
(p) Evidence that any Inventories not on hand at locations within the
System have been, shipped F.O.B. shipping point.
(q) An Inventory List updated as of the Closing (including description,
number, carrying value and description of locations where held).
(r) Wire transfers to 360 of any amounts due under Sections 5.4 and 5.5
hereof and wire transfers to Toronto Dominion Bank of any amounts by which the
Toronto Dominion Debt exceeds $240,000,000.
(s) The Registration Rights Agreement duly executed by Exchanging Group.
(t) Evidence of cancellation or assumption of all intercompany notes
included in Non-Retained Assets or Non-Retained Liabilities.
(u) Sublease, and related consent, or new lease on terms and conditions
reasonably acceptable to 360, in connection with any leased motor vehicles
included in the System Assets.
(v) Assignment by ICNP of its rights under all insurance policies relating
to claims made for occurrences prior to Closing.
(w) A waiver executed by CCI in connection with any rights of CCI to
received accrued dividends or any other payments on or in connection with the
ICN Preferred Shares and either (i) an acknowledgment by CCI that it has
received at Closing consideration with a value in excess of $14.9 million for
the ICN Preferred Shares, or (ii) a waiver executed by CCI in connection with
the applicable provision of ICN's Certificate of Incorporation.
(x) An assignment of the ICNP notes receivable relating to the Toronto
Dominion debt to 360 or its designee.
(y) The Escrow Agreement as set forth in Section 10.6(a).
(z) Evidence of termination of the Stock Pledge and Security Agreement dated
July 12, 1994 among the Subject Entities and ICNP.
<PAGE>
(aa) A License granted by Exchanging Group to 360 to use the Trademarks
as contemplated by Section 6.8 hereof.
(ab) A list of Excluded ICN Employees as contemplated by Section 6.10
(c) hereof.
(ac) A letter of direction executed by the partners of Cell Plus as
contemplated by Section 2.6(a)(1) hereof.
(ad) A letter of direction executed by the partners of Ohio LP as
contemplated by Section 2.6(b) hereof.
(ae) Such other documents as counsel for 360 may reasonably request.
9.5 Deliveries by 360 at the Closing. At the Closing, 360 shall
deliver, or cause to be delivered, to Exchanging Group, the following items:
(a) The duly executed officer's certificates referred to in Sections
7.1 and 7.2.
(b) Certificates representing the 360Shares registered in the name of
each member of Exchanging Group in accordance with Section 2 hereof.
(c) The 360 Notes payable to each member of Exchanging Group in
accordance with Section 2 hereof.
(d) Certificates of the Secretary or an Assistant Secretary of 360 and such
direct subsidiaries of 360 that are part of the subject transactions, dated the
Closing Date: (i) as to the incumbency and signatures of the officers or
representatives of 360 and such direct subsidiaries of 360 that are part of the
subject transactions executing this Agreement and each of the ancillary
agreements and any other certificate or other document to be delivered pursuant
hereto or thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary; and (ii) certifying attached resolutions of the Board of
Directors of 360 and such direct subsidiaries of 360 that are part of the
subject transactions, which authorize and approve the execution and delivery of
this Agreement and each of the ancillary agreements to which 360 and such direct
subsidiaries of 360 that are part of the subject transactions are a party and
the consummation of the transactions contemplated hereby and thereby.
(e) A bill of sale, assignments of Trademarks and any other instruments
and documents necessary to convey the Non-Retained Assets to an entity or
entities designated by Exchanging Group pursuant to Section 2.8, each of which
shall be dated the date prior to closing.
(f) General releases of all former shareholders, officers and directors
of ICN, CCTS and WCTC in connection with any and all actions they may have taken
in such capacity on behalf of such entities (other than those actions which
would constitute a breach of the representations, warranties, covenants and
agreements contained herein), but excluding any and all actions constituting
fraud or wilful misconduct, provided, however, that this release is conditioned
upon compliance by HCNI with the terms and conditions of this Agreement.
<PAGE>
(g) The legal opinion referred to in Section 7.6.
(h) The Registration Rights Agreement contemplated by Section 6.16.
(i) An assumption of the Toronto Dominion Debt and the Swaps (if all
requisite consents are obtained in accordance with Section 2.1 hereof).
(j) The Escrow Agreement as set forth in Section 10.6(a).
(k) Such other documents as counsel for the Exchanging Parties may
reasonably request.
SECTION 10 REMEDIES UNDER THIS AGREEMENT.
10.1 Survival of Representations and Warranties.
(a) All of the representations and warranties of Exchanging Group set forth
in this Agreement or in any document delivered by Exchanging Group or the
Subject Entities pursuant to this Agreement will survive the Closing, and
continue in full force effect until the date which is two years after the
Closing Date except (i) in the case of the representations and warranties of
Exchanging Group contained in Sections 3.1, 3.2, 3.26, 3.30 and 3.32, until 30
days after the expiration of the applicable statute of limitations or any
extensions thereof with respect to the matter to which the claim relates, (ii)
in the case of breaches of representations and warranties set forth in Sections
3.7, 3.8, 3.9, 3.10, 3.11, 3.14 (fourth sentence only), 3.16, 3.17 (fourth
sentence only), 3.29 and 3.36, as to which claims may be made at any time, and
(iii) in the case of breaches of representations and warranties set forth in
Section 3.6, as to which claims may be made for a period of ten (10) years
following the Closing; it being understood that so long as the written notice
referenced in Section 10.2(a), is provided on or prior to the expiration of the
relevant time period, the 360 Indemnified Parties' rights to pursue
indemnification for the applicable representation or warranty shall continue to
survive until such matter is resolved.
(b) All of the representations and warranties of 360 contained in Section 4
of this Agreement or in any certificate delivered by 360 pursuant to this
Agreement will survive the Closing, and continue in full force effect until the
date which is two years after the Closing Date except (i) in the case of the
representations and warranties of 360 contained in Sections 4.1, 4.2, 4.3, and
4.7, until 30 days after the expiration of the applicable statute of limitations
with respect to the matter to which the claim relates, and (ii) in the case of
the representations and warranties of 360 contained in Section 4.9, as to which
claims may be made at any time; it being understood that so long as the written
notice referenced in Section 10.3 is provided on or prior to the expiration of
the relevant time period, the Exchanging Group Indemnitees' rights to pursue
indemnification for the applicable representation or warranty shall continue to
survive until such matter is resolved.
<PAGE>
10.2 Indemnification Provisions for Benefit of the 360 .
(a) In the event Exchanging Group breaches (or in the event a third party
alleges facts that, if true, would mean Exchanging Group has breached) any of
its representations or warranties contained in this Agreement or in any
certificate delivered by Exchanging Group or Subject Entities pursuant to this
Agreement and provided that a written claim for indemnification is made against
Exchanging Group within the applicable survival period, then Exchanging Group
agrees to indemnify 360, its Affiliates, and all of their respective directors,
officers, employees and agents and assigns and such directors', officers',
employees' and agents' heirs and assigns, (collectively, the "360 Indemnified
Parties") from and against all Damages any 360 Indemnified Party suffers
resulting from, arising from, arising out of, relating to, in the nature of or
caused by such breach; provided, however, Exchanging Group will not have any
obligation to indemnify any 360 Indemnified Party from and against any Damages
resulting from, arising out of, relating to, in the nature of or caused by the
breach of any representation or warranty of Exchanging Group contained in
Section 3 of this Agreement (other than the representations and warranties
contained in Sections 3.1, 3.2, 3.7, 3.8, 3.9, 3.10, 3.11, 3.14 (subject to the
last sentence of this section), 3.16 (subject to the last sentence of this
section), 3.17 (fourth sentence only), 3.26, 3.30, 3.32 and 3.36) (i) until 360
has suffered aggregate Damages by reason of all such breaches in excess of
$1,000,000 (the "Cushion") (after which point Exchanging Group will be obligated
only to indemnify the 360 Indemnified Party from and against one-half of further
Damages in excess of $1,000,000 and less than or equal to $2,000,000 and from
and against further Damages in excess of $2,000,000) or (ii) notwithstanding
anything to the contrary contained in this Agreement, to the extent that the
aggregate Damages which the 360 Indemnified Parties have suffered by reason of
all such breaches for which Exchanging Group has an indemnification obligation
under Section 10.2(a) exceed $250,000,000 (after which point Exchanging Group
will have no obligation to indemnify the 360 Indemnified Parties from and
against further Damages in excess of $250,000,000) (the "Cap"). In the event
that a claim for Damages is made by 360 against Exchanging Group pursuant to
Section 3.14 hereunder, 360 agrees to pursue such claim for Damages first
against any title insurance company which may be responsible for such Damages.
Notwithstanding anything contained herein to the contrary, Exchanging Group
shall not be liable for any breach of the representations and warranties
contained in Sections 3.14 or 3.16 solely as such breach relates to any parcel
of Owned Real Property or Leased Real Property until (1) the aggregate Damages
affecting a parcel of Owned Real Property or Leased Real Property as a result of
such breaches exceed $1,000 (after which occurrence Exchanging Group shall be
liable for the first dollar of Damages with respect to such parcel), or (2) the
aggregate Damages affecting all parcels of Owned Real Property and Leased Real
Property as a result of such breaches exceed $95,000 (after which occurrence
Exchanging Group shall be liable for the first dollar of Damages with respect to
all such parcels).
(b) In addition, and notwithstanding the above limitations, Exchanging
Group agrees to indemnify the 360 Indemnified Parties from and against any and
all Damages which any 360 Indemnified Party suffers resulting from, arising
from, arising out of, relating to, in the nature of or caused by any
Non-Retained Liability (except to the extent the Cap and Cushion apply to the
Non-Retained Liabilities set forth in clause (i) of the definition of
Non-Retained Liabilities (other than to the extent that such Cap and Cushion are
limited and inapplicable in certain cases as set forth in Section 10.2(a)) or
the breach of any covenant or agreement of Exchanging Group
<PAGE>
contained herein or in the documents ancillary hereto, as to which claims
may be made at any time. All of the covenants and agreements of Exchanging Group
set forth in this Agreement or in any document delivered by Exchanging Group or
the Subject Entities pursuant to this Agreement will survive the Closing. Any
360 Indemnified Party shall have the right to indemnity from Exchanging Group
under this clause (b) for any matter covered hereby whether or not the claim for
indemnity also may also be covered under clause (a) hereof.
10.3 Indemnification Provisions for Benefit of Exchanging Group. In the
event 360 breaches (or in the event any third party alleges facts that, if true,
would mean 360 has breached) any of its representations, warranties or covenants
contained in this Agreement or in any certificate delivered by 360 pursuant to
this Agreement and provided that Exchanging Group makes a written claim for
indemnification against 360 within the applicable survival period, then 360
agrees to indemnify Exchanging Group (including all partners, Affiliates, and
all of their respective partners, directors, officers, employees and agents and
such partners' directors', officers', employees' and agents' heirs and assigns)
(the "Exchanging Group Indemnitees") from and against all Damages any Exchanging
Group Indemnitee suffers resulting from, arising out of, relating to, in the
nature of or caused by such breach; provided, however, 360 will not have any
obligation to indemnify any Exchanging Group Indemnitee from and against any
Damages resulting from, arising out of, relating to, in the nature of or caused
by the breach of any representation or warranty of 360 contained in Section 4 of
this Agreement (other than the representations and warranties contained in
Sections 4.1, 4.2, 4.3, 4.7 and 4.9) (i) until Exchanging Group has suffered
aggregate Damages by reason of all such breaches in excess of the Cushion (after
which point 360 will be obligated only to indemnify the Exchanging Group
Indemnitee from and against one-half of further Damages in excess of $1,000,000
and less than or equal to $2,000,000 and from and against further Damages in
excess of $2,000,000) or (ii) notwithstanding anything to the contrary contained
in this Agreement, to the extent that the aggregate Damages which the Exchanging
Group Indemnitees have suffered by reason of all such breaches for which 360 has
an indemnification obligation under this Section 10.3 exceed the Cap (after
which point 360 will have no obligation to indemnify the Exchanging Group
Indemnitee from and against further Damages in excess of the Cap.
Notwithstanding the foregoing, nothing contained herein shall be construed as a
waiver or limitation of any rights that Exchanging Group may have as a
stockholder in 360. 360 further agrees to indemnify the Exchanging Group
Indemnitees from and against any and all Damages which any Exchanging Group
Indemnitee suffers resulting from, arising from, arising out of, relating to, in
the nature of or caused by any Retained Liability or the breach of any covenant
or agreement of 360 contained herein or in the documents ancillary hereto, as to
which claims may be made at any time. All of the covenants and agreements of 360
set forth in this Agreement or in any document delivered by 360 pursuant to this
Agreement will survive the Closing.
10.4 Notice; Right to Defend. Each party shall give prompt written
notice to the other of the assertion or commencement of any claim, demand,
investigation, action, suit or other legal proceeding in respect of which
indemnity is or may be sought hereunder; provided, however, that this notice
requirement shall not apply to any claim, demand, investigation, action, suit or
other legal proceeding in which the parties are litigating claims against each
other. Any claim, demand, investigation, action, suit or legal proceeding
brought by one party against the other shall state with reasonable specificity
the basis of such claim, including the section of this Agreement
<PAGE>
allegedly breached or inaccurate. The failure by any party to give such notice
to the other party shall relieve such other party of its obligations under this
Section 10 if and only to the extent that it has been prejudiced by the lack of
timely and adequate notice.
The indemnifying party shall have the right and obligation to assume the
defense or settlement of any third-party claim, demand, investigation, action,
suit or other legal proceeding in respect of which it is obligated to provide
indemnity hereunder; provided, however, that the indemnifying party shall not
settle or compromise any such claim, demand, investigation, action, suit or
other legal proceeding without the indemnified party's prior written consent
thereto, unless the terms of such settlement or compromise discharge and release
the indemnified party from any and all liabilities and obligations thereunder
and do not involve a remedy other than the payment of money by the indemnifying
party; and provided further that if the Damages in connection with such claim
(from such claim alone or from aggregating such claim with all other Damages
actually paid) will exceed the Cap, the indemnified party shall have the right
to assume the defense or settlement of such claim, provided, however, that the
indemnified party shall not settle or compromise such claim for any amount, all
or a portion of which would be included under the Cap, without the indemnifying
party's prior written consent. Notwithstanding the foregoing, (i) the
indemnified party at all times shall have the right, at its option and expense,
to participate fully in the defense or settlement of such claim, demand,
investigation, action, suit or other legal proceeding; and (ii) if the
indemnifying party does not proceed diligently to defend or settle such claim,
demand, investigation, action, suit or other legal proceeding within a
reasonable time after its receipt of notice of the assertion or commencement
thereof, then (a) the indemnified party shall have the right, but not the
obligation, to undertake at the expense of the indemnifying party the defense or
settlement of such claim, demand, investigation, action, suit or other legal
proceeding for the account and at the risk of the indemnifying party, and (b)
the indemnifying party shall be bound by any defense or settlement that the
indemnified party may make as to such claim, demand, investigation, action, suit
or other legal proceeding. Exchanging Group and 360 agree that, for the purpose
of enforcing any right of indemnity hereunder, the indemnified party may join
the indemnifying party in any third-party claim, demand, investigation, action,
suit or other legal proceeding as to which such right of indemnity would or
might apply. Exchanging Group and 360 shall cooperate fully in defending or
settling any third-party claim, demand, investigation, action, suit or other
legal proceeding, and the defending or settling party shall have reasonable
access to the books and records and personnel of the other party that are
relevant to such claim, demand, investigation, action, suit or other legal
proceeding.
10.5 Adjustment for Insurance. The amount payable by the indemnifying
party to the indemnified party hereunder shall be reduced (but not below zero)
by any insurance proceeds actually collected (not subject to any retroactive
adjustment or other reimbursement) by the indemnified party from unaffiliated
third parties (net of the expenses of recovery) for the matter that is the
subject of the indemnity (net of any insurance premium adjustments, and any
subrogation or similar claims payable). If the indemnified party both collects
any such insurance proceeds and receives a payment from the indemnifying party
hereunder, and the sum of such proceeds and payment is in excess of the amount
payable with respect to the matter that is the subject of the indemnity, then
the indemnified party shall promptly refund to the indemnifying party the amount
of such excess. The parties agree to make reasonable efforts to make claims
against, and collect proceeds from, applicable insurance companies. Except as
otherwise provided
<PAGE>
in the preceding sentences, the indemnified party's receipt of any such
insurance proceeds shall not eliminate or reduce the obligations of the
indemnifying party or the rights of the indemnified party hereunder.
10.6 Payment of Damages.
(a) Except as set forth in this Section 10.6, all Damages owed by any party
shall be paid in cash. Upon written notice by the 360 Indemnified Parties to
Exchanging Group of a claim for Damages for which the 360 Indemnified Parties
would be entitled to a payment from Exchanging Group pursuant to Section 10.2
after the application of the Cushion, Cap and the other terms and provisions of
such Section 10.2 (the "Disputed Amount"), 360 may, in its discretion, deliver
the Disputed Amount from the next payments of Interest or Principal, as the case
may be, due and owing under the 360 Notes (the "Holdback") to an escrow agent
mutually agreeable to the parties ("Escrow Agent"), under and pursuant to the
terms of a Holdback Escrow Agreement ("Escrow Agreement") to be entered into at
Closing by 360, Exchanging Group and Escrow Agent ("Holdback Escrow"). The
amount of any Holdback paid into the Holdback Escrow shall consist and be
comprised of Principal, if applicable, and Interest consisting of 50% cash
("Cash Portion") and 50% capitalized Principal ("PIK Portion") pursuant to the
terms of the 360 Notes. The amounts held in the Holdback Escrow shall be held by
Escrow Agent until the dispute regarding Damages is resolved, in which case, 360
and Exchanging Group shall execute a joint order directing Escrow Agent to
release the amounts held in the Holdback Escrow pursuant to such resolution.
Interest accrued on the Principal and the Cash Portion shall be paid to the
party(ies) receiving the distributions from the Holdback Escrow in the same
proportion as the Principal and the Cash Portion of the Holdback are distributed
to such party(ies). In the event that all or any portion of the Holdback Escrow
is distributed to Exchanging Group, Interest that would have accrued on the
applicable portion of the PIK Portion under the 360 Notes and been paid in cash
or capitalized Principal on the next Interest Payment Date had the PIK Portion
not been delivered into the Holdback Escrow shall be due and payable in full on
the next applicable Interest Payment Date. In the event that all or a portion of
the Holdback Escrow is distributed to 360 or 360 is paid in cash in lieu thereof
by Exchanging Group in accordance with the following sentence, the applicable
portion of the PIK Portion shall not be capitalized or become part of the
Principal due and owing under the 360 Notes and no Interest shall be due or
owing Exchanging Group on account thereof. Notwithstanding the foregoing, in the
event that the dispute is resolved such that 360 is entitled to all or a portion
of the amounts held in the Holdback Escrow, Exchanging Group may pay 360 cash in
an amount equal to the amounts in the Holdback Escrow to which 360 is entitled
in lieu of distribution of such amounts to 360 from the Holdback Escrow and,
upon such cash payment, the parties shall execute a joint order directing the
Escrow Agent to release all amounts held in the Holdback Escrow to Exchanging
Group. The Escrow Agreement shall be in a form and contain such other terms and
provisions as are reasonably acceptable to 360, Exchanging Group, Escrow Agent
and their respective counsel.
(b) In the event that the Exchanging Group Indemnitees would be entitled to
a payment of Damages from 360 pursuant to Section 10.3 after the application of
the Cushion, Cap and the other terms and provisions of such Section 10.3 or as a
result of an Event of Default (as defined in the 360 Notes) under the 360 Notes,
after the expiration of all applicable cure periods, Exchanging Group shall not
be obligated to execute any joint order releasing amounts held in the
<PAGE>
Holdback Escrow to 360 (but only to the extent of the Exchanging Group
Indemnitees' claim) and 360 and Exchanging Group agree that such amounts shall
remain in the Holdback Escrow until such claim of the Exchanging Group
Indemnitees is resolved at which time 360 and Exchanging Group agree to execute
a joint order directing the Escrow Agent to release such amounts accordingly.
10.7 Exclusive Remedy. In the absence of intentional or fraudulent
misrepresentation or wilful misconduct, the indemnification provisions set forth
in this Section 10.2 and 10.3 will constitute the sole and exclusive recourse
and remedy for monetary damages available to the parties hereto with respect to
the breach of any representation, warranty or covenant contained in this
Agreement or in any certificate delivered pursuant to this Agreement.
SECTION 11 POST-CLOSING MATTERS GENERALLY.
11.1 Preparation of Tax Returns for Acquired Corporations and Certain
Partnerships.
(a) As soon as practicable after the Closing, 360 shall prepare proposed
federal, state and local tax returns for the Acquired Corporations for the
period ending on the Closing Date in a manner consistent with accounting methods
used in prior years. 360 shall provide the proposed federal tax returns for the
Acquired Corporations to the Exchanging Group, which shall review the proposed
tax returns and provide 360 with comments concerning the proposed tax returns.
After the parties have agreed to the form and content of the federal tax returns
for the period ending on the Closing Date, 360 will sign and file such returns.
If the parties are not able to agree as to the form or content of the tax
returns for any Acquired Corporations, such dispute shall be resolved pursuant
to Section 11.1(e). Any delays caused by 360 in the preparation and delivery of
such tax returns which result in penalties or interest being imposed on
Exchanging Group shall be borne solely by 360.
(b) Exchanging Group will cause appropriate personnel to prepare usual and
customary tax return packages for the tax period beginning January 1, 1996 and
ending as of the Closing Date for Cell Plus, Ohio LP and WPCLP ("Exchanging
Group Tax Controlled Partnerships"). These returns will be prepared in a manner
consistent with accounting methods used in prior years. 360 will provide
Exchanging Group with any necessary records attributable to the period prior to
the Closing Date necessary for the preparation of such tax returns. Such tax
return packages will be delivered to 360 upon completion. Exchanging Group
agrees to include Section 754 elections with these final Federal returns.
Exchanging Group will sign and file such returns.
(c) For purposes of applying Section 6.11 hereof, 360 will cause
appropriate personnel to calculate, using the closing of the books method, the
taxable income, gain, loss, deductions and credits of ICN-Charleston and the
Controlled PA Partnerships for the period beginning January 1, 1996, and ending
as if the taxable year for such entities closed as of the Closing Date ("Mock
Tax Returns"). 360 shall provide such Mock Tax Returns to the Exchanging Group,
which shall review the proposed Mock Tax Returns and provide 360 with comments
concerning such Mock Tax Returns within thirty days of receipt of the Mock Tax
<PAGE>
Returns. If the parties are not able to agree as to the form or content of the
Mock Tax Returns, such dispute shall be resolved pursuant to Section 11.1(e).
Any delays caused by 360 in the preparation and delivery of such tax returns
which result in penalties or interest being imposed on Exchanging Group shall be
borne solely by 360.
(d) If any state or local jurisdiction in which any of the Acquired
Corporations conducts business does not require or permit 360 to close the
taxable year for any of the Acquired Corporations as of the Closing Date, then
360 shall (i) prepare and file state and local tax returns for such
jurisdictions for the applicable taxable year in the manner determined
appropriate by 360 in its discretion after consultation with Exchanging Group,
and (ii) use the Federal returns as prepared under Section 11.1(a) to prepare
hypothetical state and local tax returns (the "Hypothetical Returns") in order
to determine the liability for Pre-Closing Tax in such jurisdictions which is to
be paid by the Exchanging Group. 360 shall provide the Hypothetical Returns to
the Exchanging Group, which shall review the proposed Hypothetical Returns and
provide 360 with comments concerning the proposed Hypothetical Returns within
thirty days of receipt of the Hypothetical Returns. If any tax liability is
indicated on any Hypothetical Return, Exchanging Group shall pay such amount to
360 promptly upon agreement as to the amount of such liability. If the parties
are not able to agree as to the calculation of the tax liability set forth on
any Hypothetical Returns, such dispute shall be resolved pursuant to Section
11.1(e).
(e) If the parties are unable to reach agreement with respect to any of the
matters set forth in Sections 11.1(a), (c) or (d) above (but not Section
11.1(b)), the dispute shall be referred for binding resolution to the
Accountants, which shall be selected and shall resolve the dispute in the manner
prescribed in Section 2.7(e). The written decision of the Accountants shall be
final and binding on the parties hereto and shall not be subject to dispute or
review. Any fees or expenses payable to the Accountants shall be shared equally
between Exchanging Group and 360. This procedure does not apply to the returns
of the Exchanging Group Tax Controlled Partnerships described in Section 11.1(b)
above.
11.2 Ongoing Cooperation.
(a) Exchanging Group and 360 shall cooperate fully with each other and make
available or cause to be made available to each other in a timely fashion such
tax data, prior tax returns and filings and other information as may be
reasonably required for the preparation by 360 or Exchanging Group of any tax
returns, elections, consents or certificates required to be prepared and filed
by 360 or Exchanging Group and any audit or other examination by any taxing
authority, or judicial or administrative proceeding relating to liability for
Taxes including, without limitation, sales taxes and sales tax audits. 360 and
Exchanging Group will each retain for the applicable statute of limitations
period or any extensions thereof, provide to the other party all records and
other information which may be relevant to any such Tax Return, audit or
examination, proceeding or determination, consult with the other party regarding
all audits and examinations so as to permit each party to provide reasonable
input and will each provide the other party with any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax Return of the other party for any period.
Without limiting the generality of the foregoing, each of 360 and Exchanging
Group will retain, for the applicable statute of limitations period or any
extensions thereof, copies
<PAGE>
of all Tax Returns, supporting work schedules and other records relating to tax
periods or portions thereof ending prior to or on the Closing Date. 360 shall
cooperate with Exchanging Group, and Exchanging Group shall cooperate with 360,
to the extent reasonably necessary for each party's preparation of its financial
statements and Tax Returns and in the sharing of financial and accounting
information with respect thereto or with respect to any audit, examination, or
other proceeding with respect thereto.
(b) 360 will notify the Exchanging Group as soon as practicable after
receipt by 360 of notification that any Federal, state or local taxing authority
intends to audit the tax returns for the Acquired Corporations or the Controlled
Partnerships for any period which could result in a determination which
increases the amount of Pre-Closing Taxes. Exchanging Group will control such
audit (i) to the extent to which the audit includes issues arising out of the
transactions consummated under this Agreement, or (ii) when the issue involves
solely Exchanging Group Pre-Closing Taxes. The determination by Exchanging Group
to contest such adjustment with respect to Pre-Closing Taxes described in the
preceding sentence shall be made by Exchanging Group at Exchanging Group's
discretion. Exchanging Group shall bear all costs and expenses related to any
such audit. In all other instances, 360 shall control the audit and shall
provide relevant information to the Exchanging Group concerning the status and
substance of any such audit and consult with Exchanging Group as to the handling
of such audit. If 360 receives a notice of proposed adjustment in Taxes as a
result of such audit which includes an increase in the amount of Pre-Closing
Taxes, 360 shall consult with the Exchanging Group concerning the manner, if
any, in which such adjustment shall be contested and if such contest is
appropriate. The determination by 360 to contest any proposed adjustment with
respect to Taxes (including Pre-Closing Taxes (with the exception of the second
sentence of this Section 11.2(b)) shall be made by 360 at 360's discretion after
consultation with Exchanging Group. 360 shall bear all costs and expenses
related to such contest unless 360, at the written request of the Exchanging
Group, contests a proposed adjustment with respect to Pre-Closing Taxes, in
which event the Exchanging Group shall bear the portion of the costs of such
contest (including reasonable attorneys' fees) determined in the manner agreed
to in advance in writing by the parties. The parties will make reasonable
efforts to cooperate with each other and coordinate all audits of the
pre-Closing periods with audits of post-Closing periods regardless of which
party is conducting the audit.
11.3 Litigation Support. In the event and for so long as any party
actively is contesting or defending against any third party charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand in connection
with (a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity practice, plan, occurrence,
event, incident, action, failure to act or transaction on or prior to the
Closing Date involving Exchanging Group, the other party will cooperate with the
contesting or defending party and its counsel in such contest or defense, make
available its personnel, and provide such testimony and access to its books and
records as may be necessary in connection with the contest or defense, at the
sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under
Section 10), provided that this provision shall not apply to any claim by any
member of the Exchanging Group against any member of the 360 Group.
<PAGE>
11.4 Confidential Information. For a period of two years after the Closing
Date, Exchanging Group and its Affiliates will treat and hold as such, and will
not use for the benefit of themselves or others, any confidential information
regarding the System, except that the Exchanging Group and its Affiliates may
use the confidential information subject to the confidentiality obligations
provided herein to the extent such confidential information is included with the
Non-Retained Assets and provided the same is not used in any manner to compete
with the business of the System. Upon the request of the 360 , Exchanging Group
after the Closing Date will deliver to 360 or destroy, at the option of 360, all
tangible embodiments and copies of such information which are in Exchanging
Group's or its representatives possession, except to the extent such
confidential information is included with the Non-Retained Assets and provided
the same is not used in any manner to compete with the business of the System.
In the event the Exchanging Group is requested or required (by oral request or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any such information, then Exchanging Group will notify 360 promptly in
writing of the request or requirement so that the 360 may at its expense seek an
appropriate protective order or waive compliance with this Section 11.4. If, in
the absence of a protective order or receipt of a waiver hereunder, Exchanging
Group is compelled to disclose any such information to any governmental entity,
then Exchanging Group may disclose such information to such governmental entity,
provided that Exchanging Group will use its best efforts to obtain at the
request of 360 an order or other assurance that confidential treatment will be
accorded to such information.
11.5 Further Assurance. Exchanging Group and 360 agree that, from time to
time, at or after the Closing, each of them will execute and deliver such
further instruments of conveyance and transfer and take such other actions as
may be reasonably necessary to carry out the purposes and intent of this
Agreement. Exchanging Group and 360 shall cooperate fully with each other,
provide assistance to each other, and make available or cause to be made
available to each other in a timely fashion such data and other information as
may be reasonably required, in order to effect an orderly transition of the
Subject Entities and the operations and administrative functions related
thereto.
11.6 Books and Records. Exchanging Group will deliver all books and records
of the Subject Entities to 360 at Closing. Exchanging Group, at its expense, may
make copies of any books and records related to the System and its operation
before the Closing Date. After the Closing Date, 360 shall give Exchanging Group
reasonable access to such books and records and the opportunity to make copies
thereof, at Exchanging Group's expense, during normal business hours for
reasonable and lawful business purposes relating to post-Closing events or
circumstances affecting Exchanging Group and pertaining to the System. 360 shall
keep all such books and records safe and in good order for a reasonable period
after the Closing Date and, at Exchanging Group's expense, for such further
periods as Exchanging Group may reasonably request in writing.
11.7 Securities Filings. Exchanging Group acknowledges that 360 or one or
more of its Affiliates may file registration statements, applications, reports
and other documents under the federal and various state securities laws, rules
and regulations and the rules and regulations of one or more securities
exchanges in connection with the public offering or private placement of certain
<PAGE>
securities of 360 or any such Affiliate. Upon request in writing by 360 after
the Closing Date, Exchanging Group shall provide to 360 or any such Affiliate,
at 360 's expense, any and all audited and unaudited financial statements and
other information (including, without limitation, any opinions, certificates,
consents or schedules related thereto) relating to the System which may be
required (a) by 360 or any such Affiliate, its or their lenders, underwriters or
placement agents, or the SEC, any state securities authority, or any securities
exchange for inclusion in such registration statements, applications, reports
and other documents, or (b) by 360 or any such Affiliate, its or their lenders,
underwriters, placement agents or equity participants, or any other person in
connection with the financing or refinancing of all or any portion of the
transaction contemplated hereby.
11.8 Specific Performance. Exchanging Group and 360 each acknowledge and
agree that the other parties would be damaged irreparably in the event any of
the material provisions of this Agreement are not substantially performed in
accordance with their specific terms or are otherwise breached. Accordingly,
Exchanging Group and 360 each agree that the other parties shall be entitled to
an injunction or injunctions to prevent breaches of the material provisions of
this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court in the United States or
in any state having jurisdiction over the parties and the matter in addition to
any other remedy to which they may be entitled pursuant hereto.
11.9 Toronto Dominion Debt. Subsequent to the signing of this Agreement,
360 may determine to fully pay the Toronto Dominion Debt. In the event that 360
so determines to fully pay the Toronto Dominion Debt, Exchanging Group and 360
shall, at or prior to Closing, obtain from Toronto Dominion (Texas), Inc., at
Closing, a payoff letter in connection with the Toronto Dominion Debt, which
payoff letter shall include a waiver of any technical defaults under the Loan
Agreement as a result of the transactions contemplated hereby and a statement of
all amounts, including principal, interest and fees to be paid in order to
satisfy in full all obligations under the Loan Agreement and release all
security interests and other Personalty Liens held in connection with the
Toronto Dominion Debt.
SECTION 12 MISCELLANEOUS PROVISIONS.
12.1 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to the
recipient or when sent to the recipient by telecopy (receipt confirmed), and one
Business Day after the date when sent to the recipient by reputable express
courier service (charges prepaid). Such notices, demands and other
communications will be sent to Exchanging Group and to 360 at the addresses
indicated below:
If to 360 : 360 Communications Company
8725 W. Higgins Road
Chicago, Illinois 60631
Attention: Kevin Gallagher, Senior Vice
President and General Counsel
Facsimile No.: 312-693-7432
<PAGE>
With a copy Sonnenschein Nath & Rosenthal
(which shall not 8000 Sears Tower
constitute notice) to: Chicago, Illinois 60606
Attention: Donald G. Lubin
Facsimile No.: 312-876-7934
If to Exchanging Independent Cellular Network, Inc.
Group: 2100 Electronics Lane
Fort Myers, Florida 33912
Attention: James A. Dwyer
Facsimile No.: 813-480-1928
c/o Henry Crown and Company
222 N. LaSalle St.
Chicago, Illinois 60601
Attention: General Partner
Facsimile No.: 312/899-5038
With a copy Gould & Ratner
(which shall not 222 N. LaSalle St., Suite 800
constitute notice) to: Chicago, Illinois 60601
Attention: Fredric D. Tannenbaum
Facsimile No.: 312/236-3241
or to such other address as either party hereto may, from time to time,
designate in writing delivered in a like manner.
12.2 Amendments. The terms, provisions, and conditions of this
Agreement may not be changed, modified, or amended in any manner except by an
instrument in writing duly executed by all of the parties hereto.
12.3 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. No waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
12.4 Assignment and Parties in Interest. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of 360,
Exchanging Group, HCNI and their respective successors and permitted assigns. No
party shall assign, convey, transfer or otherwise dispose of all or any portion
of its interest in, or its rights and obligations under, this Agreement or any
other document or instrument executed and delivered in connection herewith
without the
<PAGE>
prior written consent of the other parties, which consent shall not be
unreasonably withheld, provided, however, that 360 may assign such rights and
obligations to its Affiliates, provided that any such assignment shall not
relieve 360 of any of its liabilities or obligations hereunder and no such
assignment shall be effectuated prior to Closing if, in the reasonable
determination of FCC Counsel, such assignment would cause a material delay at
the FCC in connection with the obtaining of consents to the transfer of the
Licenses hereunder.
12.5 Third-Party Beneficiaries. Except to the extent that the 360
Indemnified Parties and Exchanging Group Indemnitees shall be entitled to the
benefits of the indemnities set forth herein, no person not a party to this
Agreement shall have any rights under this Agreement as a third-party
beneficiary or otherwise.
12.6 Announcements. All press releases, notices to customers and suppliers
and other announcements prior to the Closing Date (and, solely with respect to
press releases by Exchanging Parties, press releases, notices to customers and
suppliers and other announcements subsequent to the Closing Date) with respect
to this Agreement and the transactions contemplated by this Agreement shall be
approved by both 360 and Exchanging Group prior to the issuance thereof,
provided that either party may make any public disclosure it believes in good
faith is required by law or regulation (in which case the disclosing party will
use its best efforts to advise the other parties prior to making such disclosure
and provide the other party an opportunity to review the proposed disclosure).
12.7 Taxes, Recording Charges.
(a) The applicable party as designated by prevailing statutory law in
the applicable jurisdiction shall be responsible for, as and when due, all
transfer, documentary, sales, use, stamp, registration, conveyance or similar
Taxes and fees (except for Non-Retained Liabilities) arising out of the
transactions contemplated by this Agreement (including any New York State Gains
Tax, New York City Transfer Tax and any similar tax imposed in all other states
and subdivisions) or the consummation of the transactions contemplated hereby
and all charges for or in connection with the recording of any document or
instrument contemplated hereby. The party required to pay such amounts shall, at
its own expense, file all necessary Tax Returns and other documentation in
connection with the Taxes and fees encompassed in this Section 12.7. The
foregoing notwithstanding, Exchanging Group shall be solely responsible for, as
and when due, all transfer, documentary, sales, use, stamp, registration,
conveyance or similar Taxes and fees arising out of the merger of a direct
subsidiary of 360 into CCTS.
(b) Exchanging Group shall pay (i) all federal, state and local income tax
with respect to any gain recognized on the sale of the Cell Plus Interests and
the Ohio LP Interests, (ii) all federal, state and local income tax, if any,
imposed on ICN, its shareholders, 360 and the ICN Merger Survivor with respect
to the merger of ICN into a direct subsidiary of 360 (except to the extent such
tax has been caused by a breach of 360's representations and warranties set
forth in Section 4.9) and (iii) all federal, state and local income tax, if any,
imposed on CCTS, its shareholders, 360 and the CCTS Merger Survivor with respect
to the merger of a direct subsidiary of 360 into CCTS (except to the extent such
tax has been caused by a breach of 360's representations and warranties set
forth in Section 4.9).
<PAGE>
(c) The parties described in Sections 12.7(a) and (b) above shall pay all
Taxes resulting from the completion of the exchanges contemplated in Article 2
of this Agreement. It is the parties' intention, expectation and belief that the
mergers involving ICN and CCTS contemplated in this Agreement ("Mergers") are
nontaxable reorganizations within the meaning of Section 368 of the Code, and
any indemnification for income tax liability, if any, which is imposed upon the
Exchanging Parties, ICN, CCTS or the Survivors (the "Merger Parties") shall be
determined in accordance with this expectation. Accordingly, Exchanging Group
shall not be responsible for any Tax which is imposed upon the Merger Parties to
the extent that the Tax is incurred because of any act or failure to act by 360
or its controlled subsidiaries in connection with the Mergers or any breach by
360 of its representations and warranties set forth in Section 4.9, and 360
shall indemnify, defend and hold Exchanging Group and the Merger Parties
harmless for indemnifiable damages incurred in connection with the payment of
such Tax and such Tax shall be a Retained Liability.
12.8 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement will bear all of its legal, accounting, investment
banking, and other expenses incurred by it or on its behalf in connection with
the transactions contemplated by this Agreement, whether or not such
transactions are consummated.
12.9 Entire Agreement. This Agreement and the Confidentiality
Agreements constitute the entire agreement among the parties hereto with respect
to the subject matter hereof, supersede and are in full substitution for any and
all prior agreements and understandings among them relating to such subject
matter, and no party shall be liable or bound to any other party hereto in any
manner with respect to such subject matter by any warranties, representations,
indemnities, covenants, or agreements except as specifically set forth herein or
in an amendment hereto executed in accordance with Section 12.2 hereof. The
Schedules to this Agreement are hereby incorporated and made a part hereof and
are an integral part of this Agreement.
12.10 Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
12.11 Counterparts. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by any one or more parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
12.12 Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Illinois, and any litigation concerning this Agreement or the
transactions contemplated hereby or any other matters relating hereto shall be
cited in a court of competent jurisdiction located in Cook County, Illinois.
12.13 Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any references to
any federal, state, local or foreign statute or law will also refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
<PAGE>
12.14 No Recourse.
(a) Except (i) with respect to distributions made to stockholders of 360 in
violation of law or 360's Certificate of Incorporation, By-Laws or any other
agreement to which 360 is a party or by which 360 is bound or (ii) with respect
to liability for fraud or wilful misconduct, no recourse for the payment of any
amounts due hereunder or any claim based on this Agreement, the transactions
contemplated hereby, or otherwise, and no recourse upon any representation,
warranty, covenant or agreement in this Agreement shall be had against any past,
present or future incorporators, organizers, promoters, stockholders, directors,
officers, employees or partners of the 360 Group, or any lenders, underwriters
or placement agents of the 360 Group or any of their respective stockholders,
directors, officers, partners or employees.
(b) Except (i) with respect to and to the extent of distributions made
to stockholders or partners, as the case may be, of any member of Exchanging
Group, (ii) with respect to the signatories hereto as members of the Exchanging
Group or HCNI, all of which shall remain liable hereunder for all obligations of
Exchanging Group and (iii) with respect to liability for fraud or wilful
misconduct, no recourse for the payment of any amounts due hereunder or any
claim based on this Agreement, the transactions contemplated hereby, or
otherwise, and no recourse upon any representation, warranty, covenant or
agreement in this Agreement shall be had against any past, present or future
incorporators, organizers, promoters, stockholders, directors, officers,
partners or employees of Exchanging Group, or any lenders, underwriters or
placement agents of Exchanging Group or any of their respective stockholders,
directors, officers, partners or employees.
12.15 Guaranty. By its execution hereof in its own capacity, HCNI hereby
irrevocably and unconditionally guarantees to 360 Group the prompt and full
payment of all monetary obligations of Exchanging Group under this Agreement due
and owing to 360 Group. HCNI hereby represents and warrants that as of the date
hereof it has a tangible net worth equal to or in excess of the Cap. Prior to
execution hereof, HCNI shall provide to 360 a letter confirming that it has
tangible net worth in excess of the Cap. HCNI agrees that for a period of five
(5) years following the Closing, it shall maintain a tangible net worth equal to
or in excess of the Cap. In each of years six (6) through (10) following the
Closing, HCNI's tangible net worth requirement shall reduce by $37,500,000 per
year, provided, however, that the tangible net worth requirement shall not be
reduced in the event that there are pending claims for Damages pursuant to
Section 10.2 which, in the aggregate, exceed the tangible net worth requirement.
After the tenth (10) anniversary of the Closing, HCNI shall no longer be
required to maintain a specified tangible net worth. During the first ten (10)
years following the Closing, HCNI agrees that it will not make any distribution
which would cause its tangible net worth to fall below the tangible net worth
requirement as set forth in this Section 12.15. Within sixty (60) days after the
end of each calendar year during the first ten (10) years following the Closing,
HCNI shall deliver to 360 a letter from The First National Bank of Chicago or
its successors (or a major financial institution of comparable size) confirming
such level of tangible net worth as of such date in the form consistent with
that letter from The First National Bank of Chicago delivered at Closing. For
<PAGE>
purposes hereof, "tangible net worth" shall mean (a) the book value of all
assets, both real and personal, of HCNI as of the applicable date (after
deducting appropriate amounts for reserves for depreciation, depletion,
obsolescence and similar items as shown on the books and records of HCNI), minus
(b) all indebtedness and liabilities of HCNI which are classified on a balance
sheet of HCNI as liabilities. The obligations under this Section 12.15 shall be
binding on any successor entity or any assignee of HCNI, provided that HCNI
shall not be relieved of any liability hereunder by virtue of such succession or
assignment. HCNI shall not be obligated to make any payment under this Section
12.15 with respect to, and only to the extent of, the disputed portion of a
Disputed Amount, which has been contributed by 360 to the Holdback Escrow in
accordance with Section 10.6, until such time as the dispute is resolved.
<PAGE>
IN WITNESS WHEREOF, Exchanging Group and 360 have executed and
delivered this Agreement as of the day and year first written above.
EXCHANGING GROUP:
INDEPENDENT CELLULAR NETWORK PARTNERS
By: HENRY CROWN AND COMPANY
(NOT INCORPORATED)
By:
General Partner
By: INDEPENDENT CELLULAR NETWORK
INVESTORS
By:
Geoffrey F. Grossman, Not Personally but
Solely as Trustee of the Trusts that are
Partners
CC INDUSTRIES, INC.
By:
William Crown, President
James A. Dwyer, Jr.
David Winstel
<PAGE>
CELLULAR PLUS, L.P.
By: QUALITY CELLULAR PLUS
COMMUNICATIONS, INC.
By:
James A. Dwyer, President
OHIO CELLULAR RSA, L.P.
By: QUALITY CELLULAR COMMUNICATIONS OF
OHIO, INC.
By:
James A. Dwyer, President
OHIO RSA CORPORATION
By:
Its:
QUALITY CELLULAR COMMUNICATIONS
OF OHIO, INC.
By:
James A. Dwyer, President
<PAGE>
QUALITY CELLULAR PLUS
COMMUNICATIONS, INC.
By:
James A. Dwyer, President
C-PLUS, INC.
By:
Its:
360 :
360 COMMUNICATIONS COMPANY
By:
Its ______ President
For the sole purpose of being bound by
Sections 3.1, 3.2, 12.14 and 12.15 of
the foregoing Agreement:
HENRY CROWN AND COMPANY (NOT
INCORPORATED)
By:
A General Partner
<PAGE>
EXHIBIT 1
FORM OF SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS, IF ANY. EXCEPT AS OTHERWISE PROVIDED
HEREIN, THIS NOTE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS (l) 360 CONSENTS IN WRITING TO SUCH SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER DISPOSITION PURSUANT TO SECTION 8 HEREOF AND (2)
EITHER THIS NOTE IS THE SUBJECT OF AN EFFECTIVE REGISTRATION STATEMENT FILED
UNDER SUCH ACT OR THE HOLDER DELIVERS TO 360 AN OPINION IN FORM AND FROM COUNSEL
REASONABLY SATISFACTORY TO 360 THAT THE PROPOSED DISPOSITION WILL NOT VIOLATE
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR APPLICABLE STATE SECURITIES LAWS OR
THE RULES AND REGULATIONS THEREUNDER. BY ACCEPTANCE HEREOF, THE HOLDER OF THIS
NOTE AGREES TO THIS RESTRICTION ON TRANSFER AND REPRESENTS THAT SUCH HOLDER IS
ACQUIRING THIS NOTE FOR INVESTMENT AND NOT WITH A VIEW TOWARDS ITS DISTRIBUTION.
SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
$122,000,000.00 [in the aggregate-- ________________, 1996
there will be separate notes]
1. Issuance of Subordinated Note. This Subordinated Non-Negotiable
Promissory Note ("Note") has been issued for consideration set forth in, and is
subject to the terms and conditions of, that certain Exchange and Merger
Agreement (the "Exchange Agreement"), made and entered into as of May ___, 1996,
by and among INDEPENDENT CELLULAR NETWORK PARTNERS, an Illinois partnership
("ICNP"), JAMES A. DWYER, JR. ("Dwyer"), DAVID WINSTEL ("Winstel"), CC
INDUSTRIES, INC., a Delaware corporation ("CCI"), OHIO CELLULAR RSA, L.P., an
Illinois limited partnership ("Ohio LP"), Ohio RSA Corporation, a Delaware
corporation and a general partner of Ohio LP ("Ohio RSA"), Quality Cellular
Communications of Ohio, Inc., an Ohio corporation and a general partner of Ohio
LP ("QCCO"), CELLULAR PLUS, L.P., an Illinois limited partnership ("Cell Plus"),
C-Plus, Inc., a Delaware corporation and a general partner of Cell Plus
("C-Plus"), Quality Cellular Plus Communications, Inc., a Delaware corporation
and a general partner of Cell Plus ("QCPC") (ICNP, CCI, Dwyer, Winstel, Ohio LP,
C-Plus, QCPC, Ohio RSA, QCCO and Cell Plus are sometimes referred to hereinafter
collectively as the "Exchanging Group"), Henry Crown and Company (Not
Incorporated), an Illinois limited partnership ("HCNI") and 360 COMMUNICATIONS
COMPANY, a Delaware corporation ("360 "). Pursuant to the terms of the Exchange
Agreement, 360 is issuing this Note to the Holder hereof together with notes
containing substantially similar terms to certain other members of the
Exchanging Group and HCNI (together with the Holder, collectively, the
"Holders") in the initial aggregate principal amount of One Hundred Twenty Two
Million Dollars ($122,000,000.00) (collectively, the "Notes"). All capitalized
terms are defined either in the text hereof or in Section 18 hereof.
<PAGE>
2. Principal and Interest. 360 hereby promises to pay to_______________
(the "Holder") the principal amount outstanding hereunder (the "Principal") on
___________, 2006 or on such earlier date the Principal is required to be paid
pursuant to the terms contained in this Note (the "Principal Payment Date").
360 shall pay interest (the "Interest") on the Principal amount
outstanding hereunder from time to time at a rate of nine and one-half percent
(9.5%) per annum (the "Rate"), subject to a Rating Change Adjustment,
semiannually on _________ and ________ of each year (each, an "Interest Payment
Date"), commencing on ____________, 1997, to the Holder hereof until the
Principal and all other amounts due hereunder are paid in full. Fifty percent
(50%) of the Interest due and owing hereunder per annum shall be paid on each
Interest Payment Date and the remaining fifty percent (50%) of Interest due and
owing hereunder per annum shall be capitalized and become part of the Principal
amount due and owing hereunder. The term "Rating Change Adjustment" is set forth
in the balance of this paragraph. The Rate shall be reduced to nine percent (9%)
per annum during the period that the Senior Notes (or any notes which refinance
the Senior Notes) have an Investment Grade Rating by at least any two (2) of the
Rating Agencies. Upon the attainment of an Investment Grade Rating by at least
two (2) Rating Agencies, 360 shall provide written notice and evidence thereof
to the Holder. The change in Rate shall be effective as of the date that the
Investment Grade Rating by the second Rating Agency goes into effect. In the
event that at any time there are not at least two (2) Rating Agencies providing
the Senior Notes (or any notes which refinance the Senior Notes) with an
Investment Grade Rating, the Rate shall return to nine and one-half percent
(9.5%) per annum during any such period.
In the event that any payment of the Principal, the Interest or any
other fees, costs and expenses contemplated in connection with the enforcement
of this Note (such as reasonable costs of collection including court costs and
reasonable attorneys' fees) ("Costs") are (a) not paid within fifteen days after
the Principal Payment Date or the Interest Payment Date, as the case may be
(either date, a "Record Date"), or, with respect to Costs, when due and payable,
or (b) become otherwise payable upon the occurrence of an Event of Default set
forth in Section 5 hereof, then the Rate shall increase by 1% per annum (the
"Default Rate") until all amounts due and owing hereunder are paid in full;
provided, however, that if any Event of Default is cured in full or the Holders
waive in writing such Event of Default and/or the right to accelerate payment of
the Principal under the terms hereof, then the Default Rate shall no longer be
in effect and the Rate in effect immediately prior to the Record Date shall be
re-instated. Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
<PAGE>
Each payment of Interest in respect of an Interest Payment Date will
include Interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the Interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional Interest will accrue as a result of
such delayed payment.
3. Method of Payment. 360 shall pay the Principal, the Interest, Costs
and Make-Whole Premium to the Holder in immediately available funds in money of
the United States of America that at the time of payment is legal tender for
payment of all debts public and private at the last address provided in writing
to 360 by the Holder.
4. Covenants.
(a) Suspended Covenants. 360 further covenants and agrees with the
Holder that during the period that any amounts are due and owing hereunder, 360
shall comply with the limitations and restrictions set forth in this Section 4.
Notwithstanding the foregoing, during any period of time that:
(i) the ratings assigned to the Senior Notes (or any notes
which refinance the Senior Notes) by at least two of the three Rating Agencies
are Investment Grade Rating; and
(ii) no Event of Default has occurred and is continuing,
360 and its Restricted Subsidiaries will not be subject to the provisions of
this Note described in this Section 4 (collectively, the "Suspended Covenants").
In the event that 360 and its Restricted Subsidiaries are not subject to the
Suspended Covenants with respect to the Note or Notes for any period of time as
a result of the preceding sentence and, subsequently, at least two of the three
Rating Agencies assign to the Senior Notes (or any notes which refinance the
Senior Notes) a rating below the required Investment Grade Ratings, then 360 and
its Restricted Subsidiaries will thereafter again be subject to the Suspended
Covenants for the benefit of this Note.
(b) Interest Coverage Ratio. 360 shall maintain at the end of each
fiscal quarter of 360 a ratio of Consolidated EBITDA of 360 and its Restricted
Subsidiaries to interest payable on, and amortization of debt discount in
respect of, all Debt during such period, in each case, by 360 and its Restricted
Subsidiaries of not less than 1.00:1.00 for each Rolling Period; provided that
in the event that 360 or any of its Restricted Subsidiaries shall have acquired
a Restricted Subsidiary or sold or otherwise disposed of Restricted Subsidiaries
that, at the time of such sale or disposition, were individually, or if taken in
the aggregate would have been, a Material Subsidiary during any Rolling Period,
the ratio described above shall be calculated on a historical pro forma basis
for such Rolling Period as though such Restricted Subsidiary had been acquired,
sold or otherwise disposed of on the first day of such Rolling Period.
(c) Leverage Ratio. 360 shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, incur any Liabilities unless either (i)
after giving effect to the Incurrence of such Liabilities and the receipt and
application of the proceeds thereof, 360 's Leverage Ratio would not exceed
10.00:1.00 or (ii) such Liabilities are Permitted Indebtedness.
(d) Limitation on Liens. 360 shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property or assets, whether
now owned or hereafter acquired, or any interest therein or any income or
profits therefrom, that secures Subordinated Indebtedness unless it has made or
will make effective provision whereby the Notes will be secured by such Lien
equally and ratably with (or prior to) all other Subordinated Indebtedness of
360 or any Restricted Subsidiary secured by such Lien for so long as any such
other Subordinated Indebtedness of 360 or any Restricted Subsidiary shall be so
secured.
(e) Limitation on Asset Sales. (i) 360 shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
after the Issue Date unless (A) 360 or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the shares and assets subject to such Asset Sale and
(B) (i) at least 60% of the consideration paid to 360 or such Restricted
Subsidiary in connection with such Asset Sale is in the form of cash, cash
equivalents, or the assumption by the purchaser of liabilities of 360 (other
than liabilities of 360 that are by their terms subordinate to the Notes) or any
Restricted Subsidiary as a result of which 360 and its remaining Restricted
Subsidiaries are no longer liable or (ii) the consideration paid to 360 or such
Restricted Subsidiary is determined in good faith by the Board of Directors of
360 , as evidenced by a Board Resolution, to be substantially comparable in type
to the assets being sold. The Net Available Cash (or any portion thereof) from
Asset Sales may be applied by 360 or a Restricted Subsidiary, to the extent 360
or such Restricted Subsidiary elects, (a) to prepay, repay or purchase
Liabilities of 360 under the Credit Agreement, the Senior Notes or other
Liabilities which are not subordinate to the Notes or Liabilities of a
Restricted Subsidiary (in each case excluding Liabilities owed to 360 or an
Affiliate of 360 ); or (b) to reinvest in Additional Assets (including by means
of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by 360 or another Restricted Subsidiary).
<PAGE>
5. Defaults and Remedies.
(a) Events of Default. An "Event of Default" occurs with respect
to this Note if:
(1) 360 fails to make any payment of the Interest on this Note,
or any reimbursement of Costs, when the same becomes due and payable,
and such failure continues for a period of 45 consecutive days;
(2) 360 fails to make the payment of the Principal of this Note
when the same becomes due and payable on the Principal Payment Date,
upon acceleration or otherwise;
(3) 360 fails to comply with any of the covenants set forth in
Section 4 and such failure continues for 60 days after the notice
specified below;
(4) 360 pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it
in an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against 360 in an involuntary case;
<PAGE>
(B) appoints a Custodian of 360 or for any substantial part
of its Property; or
(C) orders the winding up or liquidation of 360;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(6) any final judgment or decree for the payment of money in an
uninsured in excess of $100 million in the aggregate is entered
against 360 and is not waived, satisfied or discharged and there is a
period of 60 consecutive days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived,
satisfied or the execution thereof stayed; or
(7) an event of default as defined in any instrument, indenture
or agreement under which there may be issued, or by which there may be
secured or evidenced, any Senior Indebtedness (including the Senior
Notes and the indebtedness outstanding under the Credit Agreement)
shall have occurred which results in such Senior Indebtedness in an
amount in excess of $25,000,000 becoming or being declared due and
payable prior to maturity and such acceleration shall not have been
rescinded or annulled or such Senior Indebtedness shall not have been
otherwise discharged, within 30 days after notice shall have been given
as provided in such instrument, indenture or agreement.
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
360 shall deliver to the Holder, within 60 days after the occurrence
thereof, written notice in the form of an Officers' Certificate of any event
which with the giving of notice and the lapse of time would become an Event of
Default under clause (3) or (6), its status and what action 360 is taking or
proposes to take with respect thereto.
<PAGE>
(b) Optional Acceleration. If an Event of Default (other than
an Event of Default specified in clause (4) or (5) occurs and is continuing, the
Holders of at least 51% in aggregate principal amount of the Notes then
outstanding may, at their option, declare at any time the Principal plus accrued
but unpaid Interest to the date of acceleration, to be immediately due and
payable. Upon such a declaration, such Principal and Interest shall be due and
payable immediately. If an Event of Default specified in clause (4) or (5)
occurs, the Principal of and accrued but unpaid Interest on this Note shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Holder. The Holder shall rescind and annul an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of Principal, accrued but unpaid Interest, Make-Whole
Premium or Costs that have become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In the event that an Event of Default occurs and Holder chooses to
waive its right to accelerate this Note, the Holder may, at its option, require
that 100% of the Interest be due and payable semi-annually, instead of the
deferral of 50% of the Interest as set forth in Section 2 hereof, until such
time as the Event of Default is cured.
(c) Other Remedies. If an Event of Default occurs and is
continuing, the Holder may pursue any available remedy by proceeding at law or
in equity to collect the payment of the Principal, the Interest or the
Make-Whole Premium, if any, or to enforce the performance of any provision of
this Note. A delay or omission by the Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All remedies are cumulative to the extent
permitted by law.
(d) Limitation on Suits. The Holder of this Note may not
pursue a remedy or institute a proceeding with respect to this Note unless the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding make a written request to pursue the remedy or institute the
proceeding to pursue the Event of Default. The Holder may not use this Note to
prejudice the rights of another Holder of the Notes or to obtain a preference or
priority over another Holder of the Notes. Notwithstanding any other provision
of this Note, the right of any other Holder of the Notes to receive payment of
the Principal or the Interest on the Notes on or after the respective due dates
expressed or provided for in such Notes, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
<PAGE>
(e) Costs. The Holder shall be entitled to prompt
reimbursement by 360 of all Costs incurred by the Holder in connection with an
Event of Default.
(f) Holder May File Proofs of Claim. The Holder may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Holder allowed in any judicial proceeding
relative to 360 or any other obligor upon the Notes, its creditors or its
property under any Bankruptcy Law, and shall be entitled and empowered to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same.
(g) Application of Moneys Collected by Holder. Any moneys
collected by the Holder with respect to this Note pursuant to this Section 5
shall be applied in the following order: (i) first, to Costs, (ii) then to
accrued and unpaid Interest, (iii) then to the Make-Whole Premium, if any, (iv)
then to the Principal and (iv) any remaining amounts to 360 .
(h) Parties May Be Restored to Former Position and Rights in
Certain Circumstances. In the event the Holder shall have proceeded to enforce
any right under this Note by suit, foreclosure or otherwise and such proceedings
shall have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Holder, then in every such case, 360 and the Holder
shall be restored without further act to their respective former positions and
rights hereunder, and all rights, remedies and powers of the Holder shall
continue as though no such proceedings had been taken, except to the extent
determined in litigation adversely to the Holder, as the case may be.
(i) Waiver of Past Defaults. The Holders of at least a
majority in principal amount of the Notes then outstanding by notice to 360 may
waive in writing an existing Default or Event of Default and its consequences,
except a Default in the nonpayment of the Principal of or accrued but unpaid
Interest on any Note. When a Default or Event of Default with respect to a Note
is so waived, it is cured and ceases with respect to such Note.
6. No Prepayment; Make-Whole Premium. 360 hereby agrees not to prepay
the Principal, in whole or in part, prior to the Principal Payment Date, except
pursuant an acceleration of this Note in accordance with Section 5(b) hereof.
360 understands and agrees that the Holder agreed to accept this Note in
furtherance of the Holder's intent to obtain installment sale treatment of any
gain resulting from the receipt of the Principal. As a result, any acceleration
prior to the Principal Payment Date pursuant to the terms of Section 5(b) hereof
may cause a loss to the Holder. To compensate the Holder for any such loss, 360
hereby agrees to immediately pay to the Holder upon such acceleration the
amount, if any (the "Make-Whole Premium"), obtained by: taking the difference
between (a) the amount of federal and State of Illinois income tax liability of
<PAGE>
the Holder for the year in which the acceleration occurs solely in connection
with the acceleration of such Principal portion (applying the highest applicable
marginal federal (as adjusted to reflect the deduction of state income tax for
federal income tax purposes) and Illinois income tax rates), and (b) the amount
of federal and State of Illinois income tax for which the Holder would be liable
in connection with such Principal portion in the year in which the Principal
portion would have been paid in accordance with the terms of this Note had there
been no acceleration (applying the highest marginal federal (as adjusted to
reflect the deduction of state income tax for federal income tax purposes) and
Illinois income tax rates in the year of actual acceleration of the Principal
portion), discounted to the year of actual acceleration of the Principal portion
using a discount rate equal to the "Treasury Rate" (which shall mean the yield
to maturity on United States Treasury obligations with a constant maturity most
nearly equal to the life to maturity of the Principal amount then being prepaid)
and dividing the difference by (c) the difference between one and the highest
marginal Federal and State of Illinois income tax rates in effect in the year of
such acceleration.
In calculating the Make-Whole Premium, the Holder will cooperate with
360 and furnish 360 with appropriate information regarding the Holder's tax
basis in this Note.
7. Subordination.
(a) General. 360 , for itself, its successors and assigns,
covenants and agrees, and the Holder by acceptance hereof likewise covenants and
agrees, that all payments under this Note shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of the Senior Indebtedness. In turn, the Holder of this
Note agrees that for purposes of payment under this Note, and the ranking
provisions of this Section 7, this Note shall rank equal with the other Notes
and shall be paid on a basis which is pari passu with the other Notes.
(b) Payments to Holders. If any principal under any Senior
Indebtedness becomes due and payable (whether at maturity, upon acceleration, by
optional or mandatory prepayment, or otherwise), all principal thereof and
interest thereon and other amounts due in connection therewith shall first be
paid in full in cash before any payment is made, if permitted or required
pursuant to the terms hereof, on account of principal of or interest on this
Note.
<PAGE>
(i) If any event shall occur (or would result from any payment
with respect to this Note) which constitutes, or which with the giving
of notice or lapse of time (or both) would constitute, an event which,
pursuant to any instrument, indenture or agreement governing the Senior
Indebtedness, would permit any holder of Senior Indebtedness to
accelerate the maturity thereof, then, notwithstanding any provision
herein to the contrary, unless and until (i) such event shall have been
cured or waived in conformity with the terms of the Senior
Indebtedness, or (ii) 365 days shall have elapsed after the occurrence
of such event, no payment shall be made by 360 with respect to the
Principal or the Interest on this Note, and the Holder agrees that it
will not ask for, demand, sue for, take or receive from 360 , by
set-off or in any other manner, any money which may now or hereafter be
owing by 360 under this Note.
(ii) Upon any payment or distribution of assets of 360 of any kind
or character, from any source whatsoever, whether in cash, property or
securities, to creditors upon any dissolution, winding-up, total or
partial liquidation, reorganization, composition, arrangement or
adjustment of 360 or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings or upon an assignment for the benefit of
creditors or any other marshalling of the assets and liabilities of 360
, all amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in cash before any payment is made on account of
or applied on this Note. Upon any such dissolution, winding-up, total
or partial liquidation, reorganization, composition, arrangement or
adjustment, any payment by 360 , or distribution of assets of 360 of
any kind or character, from any source whatsoever, whether in cash,
property or securities, to which the Holder would be entitled, except
for the provisions of this clause (iii), shall be paid by 360 or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution directly to the holders of
the Senior Indebtedness to the extent necessary to pay all Senior
Indebtedness in full before any payment or distribution is made to the
Holder.
(iii) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of 360 of any kind or character, from
any source whatsoever, whether in cash, property or securities,
prohibited by the foregoing shall be received by the Holder in
violation of clause (iii) above before all Senior Indebtedness is paid
in full, such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to the holders of the
Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for such
holders of Senior Indebtedness.
<PAGE>
(iv) It is understood that the provisions of this Section 7
are and are intended solely for the purpose of defining the relative
rights of the Holders of the Notes, on the one hand, and the holders of
the Senior Indebtedness, on the other hand. Nothing contained in this
Section 7 is intended to or shall impair, as between 360 and the
Holders of the Notes, the obligation of 360 , which, subject to Section
9 hereof, is absolute and unconditional, to pay to the Holders of the
Notes the amounts required under the Notes as and when the same shall
become due and payable in accordance with their terms, nor shall
anything herein or therein prevent any Holder of the Notes from
exercising all remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if any, under this
Section 7 of the holders of Senior Indebtedness in respect of cash,
property or securities of 360 received upon the exercise of any such
remedy.
(d) Authorization by Holders. If the Holders do not file a
proper claim or proof of debt in the form required in the event of any
dissolution, winding up, total or partial liquidation or reorganization,
composition, arrangement or adjustment of 360 or its securities, whether
voluntary or involuntary or in bankruptcy, insolvency, reorganization,
liquidation or receivership proceedings, or upon an assignment for the benefit
of creditors or any other marshalling of the assets and liabilities of 360 or
otherwise, tending towards liquidation of the business and assets of 360 , prior
to 30 days before the expiration of the time to file such claim or claims, then
the holders of Senior Indebtedness are hereby authorized to have the right to
file and are hereby authorized to file an appropriate claim for and on behalf of
the Holders.
(e) Notice to Holder. (i) 360 shall give notice to the Holder
of any fact known to 360 which would prohibit the making of any payment of
moneys to the Holder with respect to this Note pursuant to the provisions of
this Section 7.
(i) The Holder shall be entitled to rely upon any order or
decree made by the court of competent jurisdiction in which any
dissolution, winding-up, liquidation or reorganization proceedings are
pending, or a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, delivered to the Holder, for the purpose of ascertaining
the persons entitled to participate in such distribution, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto.
<PAGE>
8. No Transfer. This Note may not be sold, assigned, transferred,
pledged or otherwise disposed of to any Person unless (a) 360 consents in
writing to such sale, assignment, transfer, pledge or other disposition in its
sole discretion and (b) either this Note is the subject of an effective
registration statement under the Securities Act or the Holder delivers to 360 an
opinion in form and from counsel reasonably satisfactory to 360 that the
proposed disposition will not violate the registration requirements of the
Securities Act or any applicable state securities law or the rules and
regulations thereunder; provided, however, that clause (a) shall not apply to
any sale, assignment, pledge or other disposition to any Affiliate of the Holder
or to any member of the Exchanging Group.
9. Right of Offset. 360 shall have the right to offset against payments
required under this Note any amounts owed by any member of the Exchanging Group
to 360 pursuant to the Exchange Agreement in accordance with the terms and
conditions thereof. Notwithstanding anything to the contrary contained herein,
the failure of 360 to pay to Exchanging Group any Principal, Interest, Costs or
Make-Whole Premium when due and payable upon the exercise by 360 of its offset
rights in accordance with this Section 9 shall not constitute an Event of
Default.
10. Waivers of Presentment Etc. 360 hereby waives presentment, demand,
notice of nonpayment and protest and all other demands or notices in connection
with the acceptance, performance or enforcement of this Note.
11. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Note will be in
writing and will be deemed to have been given when delivered personally to the
recipient or when sent to the recipient by telecopy (receipt confirmed) or one
Business Day after the date when sent to the recipient by reputable express
courier service (charges prepaid). Such notices, demands and other
communications will be sent to the Holder and to 360 at the addresses indicated
below:
If to 360 : 360 Communications Company
8725 W. Higgins Road
Chicago, Illinois 60631
Attention: General Counsel
Facsimile No.: 312-693-7432
<PAGE>
With a copy Sonnenschein Nath & Rosenthal
(which shall not 8000 Sears Tower
constitute notice) Chicago, Illinois 60606
Attention: Donald G. Lubin
Facsimile No.: 312-876-7934
If to Holder: ________________________________
With a copy Gould & Ratner
(which shall not 222 N. LaSalle St., Suite 800
constitute notice) Chicago, Illinois 60601
to: Attention: Fredric D. Tannenbaum
Facsimile No. 312-236-3241
or to such other address as either party hereto may, from time to time,
designate in writing delivered in a like manner.
12. Amendments. The terms, provisions, and conditions of this Note may
not be changed, modified, or amended in any manner except by an instrument in
writing duly executed by 360 and the Holders of at least 51% in aggregate
Principal amount of the Notes then outstanding.
13. Descriptive Headings. The descriptive headings of the several
sections of this Note are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
14. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Illinois, applicable to contracts made
and performed therein, and any litigation concerning this Note or the
transactions contemplated hereby or any other matters relating hereto shall be
cited in a court of competent jurisdiction located in Cook County, Illinois.
15. Construction. The language used in this Note will be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party. Any references to any
federal, state, local or foreign statute or law will also refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
16. Successors. All agreements of 360 in this Note shall bind its
successors.
17. Severability. In case any provision in this Note shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
18. Definitions and Incorporation by Reference. The terms defined in
this Section 18 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Note shall have the
respective meanings specified in this Section 18.
"Additional Assets" mean (i) any Property or assets (other than cash,
cash equivalents or securities) to be owned by 360 or a Restricted Subsidiary
and used in a Related Business, (ii) the costs of improving or developing any
Property or assets owned by 360 or a Restricted Subsidiary which are used in a
Related Business or (iii) Investments in any other Person engaged primarily in a
Related Business (including the acquisition from third parties of Capital Stock
of such Person) as a result of which such other Person becomes a Restricted
Subsidiary.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or officer (a) of such specified Person, (b) of any Subsidiary of such
specified Person or (c) of any Person described in clause (i) above. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. "Affiliate" shall also mean any beneficial owner
of shares representing 10% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of 360 or of rights or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
With respect to the Holder, the term "Affiliate" shall also include (x) any
lineal descendant of the Holder or any spouse or adopted child of any such
descendant or any child of any such spouse, any trust or trusts for the benefit
of any of the Persons named in clause (x), (y) the executors, administrators,
conservators or personal representatives of any Person referred to in clause (x)
or (y), or (z) any Person which, directly or indirectly, is owned and controlled
by one or more of the Persons referred to in clauses (x), (y) and (z).
"Asset Sale" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger or a Sale and Leaseback
Transaction) by such Person or any of its Restricted Subsidiaries in any single
transaction or series of transactions of (a) shares of Capital Stock or other
ownership interests of another Person (including Capital Stock of Unrestricted
Subsidiaries) or (b) any other Property of such Person or any of its Restricted
Subsidiaries; provided, however, that the term "Asset Sale" shall not include:
(i) the sale or transfer of Temporary Cash Investments, inventory, accounts
receivable or other Property in the ordinary course of business; (ii) the
liquidation of Property received in settlement of debts owing to 360 or any
Restricted Subsidiary as a result of foreclosure, perfection or enforcement of
any Lien or debt, which debts were owing to 360 or any Restricted Subsidiary in
the ordinary course of business of 360 or such Restricted Subsidiary; (iii) when
used with respect to 360 , any asset disposition permitted pursuant to Section
6.01 of the Senior Note Indenture which constitutes a disposition of all or
substantially all of 360 's Property or assets; (iv) the sale or transfer of any
Property by 360 or a Restricted Subsidiary of 360 or a Restricted Subsidiary;
(v) a disposition in the form of a Restricted Payment; or (vi) a disposition
with a Fair Market Value and a sale price of less than $5 million.
<PAGE>
"Attributable Indebtedness" means Liabilities deemed to be incurred in
respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest and
compounding frequency implicit in such transaction), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended).
"Board of Directors" means, with respect to any Person, the board of
directors (or equivalent body) of such Person or any duly authorized committee
of such board of directors (or equivalent body).
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of 360 to have been duly adopted by the
Board of Directors of 360 , to be in full force and effect on the date of such
certification.
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the City of Chicago are authorized or obligated by
law or executive order to remain closed.
"Capital Expenditure Indebtedness" means Liabilities Incurred by any
Person to finance a capital expenditure so long as (i) such capital expenditure
is or should be included as an addition to "Property, Plant and Equipment, net"
or "Property, Plant and Equipment" in accordance with GAAP, and (ii) such
Liabilities are Incurred within 180 days of the date such capital expenditure is
made.
"Capital Lease Obligations" means Liabilities represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Liabilities
shall be the capitalized amount of such obligations determined in accordance
with GAAP. For purposes of Section 4(d), a Capital Lease Obligation shall be
deemed secured by a Lien on the property being leased. <PAGE>
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right, warrant, option or other interest
in the nature of an equity interest in such Person, but excluding any debt
security convertible or exchangeable into such equity interest.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Credit Agreement" means the Credit Agreement dated as of March 6, 1996
(as amended, supplemented or otherwise modified from time to time) among 360 ,
the Lenders (as defined therein) and Citibank, N.A., as Administrative Agent,
Chemical Bank, as Syndication Agent, Toronto Dominion (Texas), Inc., as
Documentation Agent, and Bank of America Illinois, as Co-Syndication Agent.
"Currency Agreement" means, for any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Debt" of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money (including, without limitation, indebtedness
incurred in connection with securitizations, whether or not any such
securitization is reflected on the balance sheet of such Person), (b) all
payment Obligations of such Person for the deferred purchase price of property
or services (other than trade payables and other accounts payable not overdue by
more than 60 days incurred in the ordinary course of such Person's business),
(c) all payment Obligations of such Person evidenced by notes, bonds, debentures
or other similar instruments, (d) all payment Obligations of such Person created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) all payment Obligations of such
Person as lessee under leases that have been or should be, in accordance with
GAAP, recorded as capital leases, (f) all payment Obligations, contingent or
otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit which are or should be, in accordance with GAAP,
set forth in the consolidated financial statements of such Person, (g) all
payment Obligations, contingent or otherwise, of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any capital
stock of or other ownership or profit interest in such Person or any other
Person or any warrants, rights or options to acquire such capital stock, valued,
in the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h) all
payment Obligations, contingent or otherwise, of such Person in respect of Hedge
Agreements, (i) all Debt of others referred to in clauses (a) through (h) above
or clause (j) below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (1) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (3) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or (4)
otherwise to assure a creditor against loss, and (j) all Debt referred to in
clauses (a) through (i) above secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Debt. <PAGE>
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"EBITDA" means, for any period, net income (or net loss) plus the sum
of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d)
amortization expense and (e) non-cash losses (to the extent deducted in the
calculation of net income), minus (f) non-cash gains (to the extent added in the
calculation of net income), in each case determined in accordance with GAAP for
such period.
"Fair Market Value" means with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (i) if such property or asset has a
Fair Market Value of less than $15 million, by any Officer of 360 or (ii) if
such property or asset has a Fair Market Value in excess of $15 million, by a
majority of the Board of Directors of 360 and evidenced by a Board Resolution,
dated within 30 days of the relevant transaction.
"GAAP" means generally accepted accounting principles consistently
applied.
<PAGE>
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Liability of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Liability of such Person (whether arising by virtue of partnership arrangements,
or by agreements to keep-well, to purchase assets, goods, securities or
services, to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements, currency
future or option contracts and other similar agreements.
"Incur" means, with respect to any Liabilities or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Liabilities or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Liabilities or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Liabilities, becoming Liabilities shall not be deemed
an Incurrence of such Liabilities.
"Indebtedness" of any person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property (other than Trade Credit);
(c) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or business; (d) all indebtedness created or
arising under any conditional sale or other title retention agreement, or
property acquired by the person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (e) all obligations which under
generally accepted accounting practices would be classified as capital leases;
(f) all contingent obligations in the nature of guarantees, take-or-pay
contracts and similar commitments to assure a third party of payment or
performance by another person; and (g) the notional principal amount of
non-speculative derivatives contracts. <PAGE>
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement, including, but not limited to, the swap agreements assumed by
360 pursuant to the Exchange Agreement.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other Property to others or payments for Property or services for the
account or use of others, or otherwise) to, or Incurrence of a Guarantee of any
obligation of, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Liabilities issued by, any other
Person. In determining the amount of any Investment in respect of any Property
or assets other than cash, such Property or asset shall be valued at its Fair
Market Value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher than Baa3
(or the equivalent) by Moody's Investors Service, Inc. (or any successor to the
rating agency business thereof), BBB-(or the equivalent) by Standard & Poors
Ratings Group (or any successor to the rating agency business thereof) and
BBB-(or the equivalent) by Duff & Phelps Credit Rating Co. (or any successor to
the rating agency business thereof).
"Issue Date" means the date on which the Notes are initially issued.
"Leverage Ratio" means the ratio of (i) the outstanding Liabilities of
a Person and its Subsidiaries (or in the case of 360 , its Restricted
Subsidiaries) divided by (ii) the LTM Pro Forma EBITDA of such Person.
"Liabilities" means (without duplication), with respect to any Person,
any indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any property (excluding any balances that
constitute customer advance payments and deposits, accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included (i) any
Capital Lease Obligations, (ii) Liabilities of other Persons secured by a Lien
<PAGE>
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed
(the amount of such Liabilities being deemed to be the lesser of the value of
such property or assets or the amount of the Liabilities so secured), (iii)
Guarantees of Liabilities of other Persons, (iv) any Redeemable Stock, (v) any
Attributable Indebtedness, (vi) all reimbursement obligations of such Person in
respect of letters of credit, bankers' acceptances or other similar instruments
or credit transactions issued for the account of such Person, (vii) in the case
of 360 , Preferred Stock of its Restricted Subsidiaries and (viii) obligations
of any such Person under any Interest Rate Agreement or Currency Agreement
applicable to any of the foregoing. For purposes of this definition, the maximum
fixed repurchase price of any Redeemable Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Liabilities shall be required to be determined pursuant to the Senior Note
Indenture; provided, however, that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Liabilities of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any other obligations described in
clauses (i) through (viii) above in respect thereof at such date.
"Lien" means, with respect to any Property of any Person, any mortgage
or deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement (other than any easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any Capital
Lease Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"LTM Pro Forma EBITDA" means, with respect to any Person, the product
of such Person's Pro Forma EBITDA for the most recent four consecutive fiscal
quarters for which financial statements are available.
"Make-Whole Premium" shall have the meaning assigned to that term in
Section 6 hereof.
"Material Subsidiary" means, at any time, a Subsidiary of 360 having at
least 5% of the total Consolidated assets of 360 and its Subsidiaries
(determined as of the last day of the most recent fiscal quarter of 360 ) or at
least 5% of the total Consolidated revenues or net income of 360 and its
Subsidiaries for the 12-month period ending on the last day of the most recent
fiscal quarter of 360 . <PAGE>
"Net Available Cash" from an Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Liabilities or other obligations relating
to such Properties or assets or received in any other noncash form) in each case
net of all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP, as a consequence of such
Asset Sale, and in each case net of all payments made on any Liabilities which
are secured by any assets subject to such Asset Sale, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by their terms, or in order to obtain a necessary
consent to such Asset Sale, or by applicable law be repaid out of the proceeds
from such Asset Sale, and net of all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Sale.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including, without
limitation, any liability of such Person on such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured.
"Officer" means the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer, or the General Counsel of 360 .
"Officers' Certificate" means a certificate signed by two Officers at
least one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of 360 and delivered to the Holder.
"Permitted Indebtedness" means any and all of the following: (i)
Liabilities pursuant to the Credit Agreement (or any credit facility which
replaces the Credit Agreement) Incurred after the Issue Date in an aggregate
amount outstanding at any time not to exceed $300 million; (ii) Liabilities in
respect of Capital Lease Obligations or Capital Expenditure Indebtedness,
provided, that (a) the aggregate principal amount of such Liabilities do not
exceed the Fair Market Value of the property or asset acquired or constructed
and (b) the aggregate principal amount of all Liabilities Incurred under this
clause (ii) during any 12-month period, beginning with the 12-month period
<PAGE>
commencing on January 1, 1996, does not exceed $50 million, except that any
portion of such $50 million which is not fully utilized in any such 12-month
period may be utilized in the subsequent such 12-month period; (iii) Liabilities
evidenced by the Senior Notes and the Notes; (iv) Liabilities of 360 owing to
and held by a Wholly Owned Subsidiary and Liabilities of a Restricted Subsidiary
owing to and held by 360 or any Wholly Owned Subsidiary; provided, however, that
any event that results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of any such Liabilities
(except to 360 or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Liabilities by the issuer thereof; (v)
Liabilities under Interest Rate Agreements entered into for the purpose of
limiting interest rate risks and Currency Agreements entered into for
non-speculative purposes and designed to hedge against fluctuations in foreign
exchange rates incurred in the ordinary course of business and consistent with
prudent business practice, provided, that the obligations under such agreements
are related to payment obligations on Liabilities otherwise permitted by the
terms of Section 4(c) hereof or clauses (i) through (viii) of this paragraph,
provided, further, that such Interest Rate Agreements and Currency Agreements do
not increase the Liabilities of 360 outstanding at any time other than as a
result of fluctuations in interest rates or foreign exchange rates or by reason
of customary fees, indemnities and compensation payable thereunder; (vi)
Liabilities in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or pursuant to
self-insurance obligations and not in connection with the borrowing of money or
the obtaining of advances or credit; (vii) Liabilities outstanding on the Issue
Date not otherwise described in clauses (i) through (vi) of this paragraph,
including, but not limited to, the Toronto Dominion Debt (as defined in the
Exchange Agreement); and (viii) Permitted Refinancing Indebtedness Incurred in
respect of Liabilities Incurred pursuant to clause (i) of Section 4(c) hereof
and clauses (i), (ii), (iii) and (vii) of this paragraph.
"Permitted Liens" means (i) Liens Incurred by 360 or any Restricted
Subsidiary if, after giving effect to such Incurrence on a pro forma basis, the
amount of the total Liabilities of 360 and its Restricted Subsidiaries that are
secured by a Lien do not exceed 15% of the product of the LTM Pro Forma EBITDA
of 360 multiplied by 10.00; (ii) Liens on the Property of 360 or any Restricted
Subsidiary existing on the Issue Date, including, but not limited to, the Liens
securing the Toronto Dominion Debt; (iii) Liens on the Property of 360 or any
Restricted Subsidiary to secure any extension, renewal, refinancing, replacement
or refunding (or successive extensions, renewals, refinancings, replacements or
refundings), in whole or in part, of any Liabilities secured by Liens referred
to in any of clauses (i), (ii), (viii) or (xi); provided, however, that any such
Lien will be limited to all or part of the same Property that secured the
original Lien (plus improvements on such Property) and the aggregate principal
amount of Liabilities that are secured by such Lien will not be increased to an
amount greater than the sum of (A) the outstanding principal amount, or, if
greater, the committed amount, of the Liabilities secured by Liens described
under clauses (i), (ii), (viii) and (xi) at the time the original Lien became a
<PAGE>
Permitted Lien and (B) an amount necessary to pay any premiums, fees and other
expenses incurred by 360 in connection with such refinancing, refunding,
extension, renewal or replacement; (iv) Liens for taxes, assessments or
governmental charges or levies on the Property of 360 or any Restricted
Subsidiary if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings; (v) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens on the Property of 360 or any
Restricted Subsidiary arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or are being contested in
good faith and by appropriate proceedings; (vi) Liens on the Property of 360 or
any Restricted Subsidiary Incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory requirements,
performance or return-of-money bonds, surety bonds or other obligations of a
like nature and Incurred in a manner consistent with industry practice; (vii)
Liens Incurred to secure appeal bonds and judgment and attachment Liens, in each
case in connection with litigation or legal proceedings which are being
contested in good faith by appropriate proceedings so long as reserves have been
established to the extent required by GAAP as in effect at such time and so long
as such Liens do not encumber assets by an amount in excess of $25 million;
(viii) Liens on Property at the time 360 or any Restricted Subsidiary acquired
or constructed such Property, including any acquisition by means of a merger or
consolidation with or into 360 or such Restricted Subsidiary; (ix) other Liens
on the Property of 360 or any Restricted Subsidiary incidental to the conduct of
their respective businesses or the ownership of their respective Properties
which were not created in connection with the Incurrence of Indebtedness or the
obtaining of advances or credit and which do not in the aggregate materially
detract from the value of their respective Properties or materially impair the
use thereof in the operation of their respective businesses; (x) pledges or
deposits by 360
or any Restricted Subsidiary under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Liabilities) or leases
to which 360 or any Restricted Subsidiary is party, or deposits to secure public
or statutory obligations of 360 or any Restricted Subsidiary, or deposits for
the payment of rent, in each case Incurred in the ordinary course of business,
(xi) Liens on the Property of a Person at the time such Person becomes a
Restricted Subsidiary; provided, however, that any such Lien may not extend to
any other Property of 360 or any other Restricted Subsidiary which is not a
direct Subsidiary of such Person; provided further, however, that any such Lien
was not Incurred in anticipation of or in connection with the transaction or
series of related transactions pursuant to which such Person became a Restricted
Subsidiary, (xii) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character, or (xiii) Liens
created pursuant to Section 8.07 of the Senior Note Indenture.
<PAGE>
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Liabilities, including any
successive extensions, renewals, substitutions, refinancings or replacements so
long as (i) the aggregate amount of Liabilities represented thereby is not
increased (except with respect to fees and expenses Incurred in connection
therewith) by such renewal, extension, substitution, refinancing or replacement,
(ii) the average life and the date such Liabilities is scheduled to mature is
not shortened and (iii) the new Liabilities shall not be senior in right of
payment to the Liabilities that are being extended, renewed, substituted,
refinanced or replaced; provided, that Permitted Refinancing Indebtedness shall
not include (a) Liabilities of a Subsidiary that refinances Liabilities of 360
or (b) Liabilities of 360 or a Restricted Subsidiary that refinances Liabilities
of an Unrestricted Subsidiary. In addition to the foregoing, Permitted
Refinancing Indebtedness shall include reborrowings under the Credit Agreement
(or any credit facility which replaces the Credit Agreement).
"Person" means any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of
such Person as determined on a consolidated basis in accordance with GAAP
consistently applied after giving effect to the following: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have made any
Asset Sale, Pro Forma EBITDA of such Person and its Subsidiaries for such period
shall be reduced by an amount equal to the Pro Forma EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset Sale for
the period or increased by an amount equal to the Pro Forma EBITDA (if negative)
directly attributable thereto for such period and (ii) if, during or after such
period, such Person or any of its Subsidiaries completes an acquisition of any
Person or business which immediately after such acquisition is a Subsidiary of
such Person or whose assets are held directly by such Person or a Subsidiary of
such Person, Pro Forma EBITDA shall be computed so as to give pro forma effect
to the acquisition of such Person or business; provided, however, that, with
respect to 360 , all of the foregoing references to "Subsidiary" or
"Subsidiaries" shall be deemed to refer only to the "Restricted Subsidiaries" of
360 . <PAGE>
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
first mentioned Person).
"Rating Agencies" mean Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., Duff & Phelps Credit Rating Co.and Moody's Investors Service,
Inc. or any successor to the respective rating agency businesses thereof.
"Rating Date" means the date which is 90 days prior to the earlier of
(i) a Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of 360 to effect a Change of Control.
"Rating Decline" means, with respect to the Senior Notes, the
occurrence of the following on, or within 90 days after, the date of public
notice of the occurrence of a Change of Control or of the intention by 360 to
effect a Change of Control (which period shall be extended so long as the rating
of the Senior Notes is under publicly announced consideration for possible
downgrade by any of the Rating Agencies): (a) in the event the Senior Notes are
assigned an Investment Grade Rating by at least two of the three Rating Agencies
on the Rating Date, the rating of the Senior Notes by at least two of the three
Rating Agencies shall be below an Investment Grade Rating; or (b) in the event
the Senior Notes are rated below an Investment Grade Rating by at least two of
the three Rating Agencies on the Rating Date, the rating of the Senior Notes by
at least two of the three Rating Agencies shall be decreased by one or more
gradations (including gradations within rating categories as well as between
rating categories).
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is
redeemable at the option of the holder thereof, in whole or in part, or (iii) is
convertible or exchangeable for Liabilities mandatorily or at the option of the
holder thereof. <PAGE>
"Related Business" means any business directly related to the
ownership, development, operation and acquisition of telecommunications systems.
"Restricted Payment" means (i) any dividend or distribution (whether
made in cash, property or securities) declared or paid on or with respect to any
shares of Capital Stock of 360 or Capital Stock of any Restricted Subsidiary
except for any dividend or distribution which is made solely to 360 or a
Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned
Subsidiary, to the other shareholders of such Restricted Subsidiary on a pro
rata basis) or dividends or distributions payable solely in shares of Capital
Stock (other than Redeemable Stock) of 360 ; (ii) a payment made by 360 or any
Restricted Subsidiary to purchase, redeem, acquire or retire any Capital Stock
of 360 or Capital Stock of any Affiliate of 360 (other than a Restricted
Subsidiary) or any warrants, rights or options to directly or indirectly
purchase or acquire any such Capital Stock or any securities exchangeable for or
convertible into any such Capital Stock; (iii) a payment made by 360 or any
Restricted Subsidiary to redeem, repurchase, defease or otherwise acquire or
retire for value, prior to any scheduled maturity, scheduled sinking fund or
mandatory redemption payment (other than the purchase, repurchase, or other
acquisition of any Liabilities subordinate in right of payment to the Senior
Notes purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition), Liabilities of 360 which is subordinate (whether pursuant
to its terms or by operation of law) in right of payment to the Senior Notes; or
(iv) an Investment (other than Permitted Investments) in any Person.
"Restricted Subsidiary" means (i) any Subsidiary of 360 after the Issue
Date unless such Subsidiary shall have been designated an Unrestricted
Subsidiary and (ii) an Unrestricted Subsidiary which is redesignated as a
Restricted Subsidiary. Unless otherwise designated in writing by 360 to the
Holder, a Subsidiary of 360 designated as a "Restricted Subsidiary" or an
"Unrestricted Subsidiary" for purposes of the Senior Note Indenture shall be
deemed a Restricted Subsidiary or an Unrestricted Subsidiary, as the case may
be, for purposes of this Note.
"Rolling Period" means, as at any date of determination, the period of
the four fiscal quarters of the 360 then most recently ended.
<PAGE>
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a Restricted Subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its Restricted Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the Senior Notes, the indebtedness
outstanding under the Credit Agreement, any indebtedness of 360 that is pari
passu in right of payment with the Senior Notes (or any notes which refinance
the Senior Notes) or the indebtedness outstanding under the Credit Agreement,
and, at any date, all other obligations in respect of Indebtedness owed by 360 ,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or reorganization relating to
360 , whether or not a claim for post-filing interest is allowed in such
proceeding), fees, charges, expenses reimbursement obligations, indemnities and
all other amounts payable thereunder or in respect thereof and interest rate
protection agreements with respect to interest payable thereunder, whether, in
each case, existing on the date of this Note or thereafter incurred, other than
the Notes and Indebtedness which is subordinate and junior by its terms to the
Notes.
"Senior Note Indenture" means the Indenture dated as of March 7, 1996
between 360 and Citibank, N.A., as trustee, as amended, supplemented or modified
from time to time and relating to the Senior Notes.
"Senior Notes" means the 7 % Senior Notes Due 2003 and 7 1/2% Senior
Notes Due 2006 issued by 360 under the Senior Note Indenture.
"Subordinated Indebtedness" means all Indebtedness that is pari passu
in right of payment with the Notes or is subordinate and junior by its terms to
the Notes.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which at least 50% of the total voting power of the Voting Stock is held by
such first-named Person or any of its Subsidiaries and such first-named Person
or any of its Subsidiaries has the power to direct the management, policies and
affairs thereof; or (ii) in the case of partnership, joint venture, association,
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise if in accordance
with generally accepted accounting principles such entity is consolidated with
the first-named Person for financial statement purposes.
<PAGE>
"Temporary Cash Investments" means any of the following: (i)
Investments in U.S. Government Obligations maturing within 90 days of the date
of acquisition thereof, (ii) Investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 90 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America or any state thereof having capital,
surplus and undivided profits aggregating in excess of $500,000,000 and whose
long-term debt is rated "A-3" or higher, "A-" or higher or "A-" or higher
according to Moody's Investors Service, Inc., Standard & Poor's Ratings Group or
Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at least
one "nationally recognized statistical rating organization" (as defined in Rule
436 under the Securities Act)), respectively, (iii) repurchase obligations with
a term of not more than 7 days for underlying securities of the types described
in clause (i) entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more than
90 days after the date of acquisition, issued by a corporation (other than the
360 or an Affiliate of the 360 ) organized and in existence under the laws of
the United States of America with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc., "A-1" (or higher) according to Standard & Poor's Ratings Group or
"A-1" (or higher) according to Duff & Phelps Credit Rating Co. (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)), and (v)
Investments in money market or mutual funds that invest primarily in Investments
of the types described in clauses (i), (ii), (iii) and (iv).
"Trade Credit" means, at any date, all accounts payable or other
liabilities to trade creditors owed by 360 in the ordinary course of business.
"Unrestricted Subsidiary" means (a) any Subsidiary of 360 in existence
on the Issue Date that is not a Restricted Subsidiary, (b) any Subsidiary of an
Unrestricted Subsidiary and (c) any Subsidiary of 360 which is designated after
the Issue Date as an Unrestricted Subsidiary and not thereafter redesignated as
a Restricted Subsidiary. Unless otherwise designated in writing by 360 to the
Holder, a Subsidiary of 360 designated as a "Restricted Subsidiary" or an
"Unrestricted Subsidiary" for purposes of the Senior Note Indenture shall be
deemed a Restricted Subsidiary or an Unrestricted Subsidiary, as the case may
be, for purposes of this Note.
<PAGE>
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary
all of the Voting Stock of which (except directors' qualifying shares) is at the
time owned, directly or indirectly, by 360 and its other Wholly Owned
Subsidiaries.
IN WITNESS WHEREOF, 360 has executed and delivered this Note as of the
day and year first written above.
360 :
360 COMMUNICATIONS COMPANY
By:______________________________
Its _____________ President
ACCEPTED:
Date: _____________, 1996
164907.06
[The Schedules identified on pages (v) and (vi) of this Agreement have been
omitted in reliance on Item 601(b)(2) of Regulation S-K of the Securities and
Exchange Commission (the "Commission"). The Company agrees to furnish the
Commission with a copy of any omitted Schedules upoun request.]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINICAL DATA
FROM THE FINANCIAL STATEMENTS INCLUDED AS PART
OF 360 COMMUNICATIONS' SECOND QUARTER 10Q
</LEGEND>
<CIK> 0001003959
<NAME> 360 COMMUNICATIONS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 28,607
<SECURITIES> 0
<RECEIVABLES> 90,055
<ALLOWANCES> 3,780
<INVENTORY> 16,731
<CURRENT-ASSETS> 202,780
<PP&E> 1,315,369
<DEPRECIATION> 364,580
<TOTAL-ASSETS> 2,216,993
<CURRENT-LIABILITIES> 261,456
<BONDS> 1,387,662
0
0
<COMMON> 1,168
<OTHER-SE> 285,499
<TOTAL-LIABILITY-AND-EQUITY> 2,216,993
<SALES> 19,554
<TOTAL-REVENUES> 513,868
<CGS> 41,667
<TOTAL-COSTS> 44,344
<OTHER-EXPENSES> 92,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,102
<INCOME-PRETAX> 60,119
<INCOME-TAX> 28,855
<INCOME-CONTINUING> 31,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,264
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0
</TABLE>
